DAIMLER AG (FORMERLY KNOWN AS MERCEDES BENZ AG) v. HELGE HERBERT LEIDUCK, APPOINTED BY ORDER TO REPRESENT THE ESTATE OF HERBERT HEINZ HORST LEIDUCK, DECEASED AND ANOTHER

HCA 4089/1994

[2023] HKCFI 3099

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 4089 of 1994

__________________

__________________

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D E C I S I O N

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1.  In this decision, unless otherwise stated, (1) the definitions and abbreviations adopted in my earlier decision herein dated 31 March 2023 (“31.3.2023 Decision”) shall continue to be used and (2) references to numbered paragraphs in square parentheses are to those of the 31.3.2023 Decision.

2.  To recap, by the 31.3.2023 Decision:

(1)  I dismissed the (defendants’) Inquiry Summons (“Dismissal Order”) (see [91]) and further ordered the defendants to pay the plaintiff all the costs of and occasioned by the Inquiry Summons save for the costs incurred after 16 April 2014 and before 23 February 2016, which costs shall (a) include the costs of the VCF application before both the Court of First Instance and the Court of Appeal and the costs of the Dismissal Application and (b) be taxed, if not agreed, on an indemnity basis with certificate for 2 counsel (“CostsOrder”) (see [94], [96] and [97]).

(2)  I also allowed the (plaintiff’s) Disclosure Application (“Disclosure Order”) with party and party costs. The Disclosure Order obligates the defendants to disclose the identity and certain other specified details of the third party funding the defendants’ costs of the proceedings under the Inquiry Summons (see [105]).

(3)  I further made an order nisi that there be no order on the New Evidence Application, the Hearsay/Expungement Applications and the Security for Costs Application (“NoOrder Order”) (see [106]).

3.  The defendants have since appealed against the Dismissal Order and the Costs Order, without any leave requirement, by notice of appeal filed on 9 May 2023 under CACV 140/2023 (“Dismissal Appeal”).

4.  Aside from the Dismissal Appeal, the 31.3.2023 Decision has also given rise to the following applications made by 4 summonses between the parties:

(1)  by the defendants by their first summons dated 13 April 2023 for leave (“Disclosure Leave Application”) to appeal against the Disclosure Order (“Proposed Disclosure Appeal”);

(2)  by the defendants by a second summons dated 13 April 2023 for variation of the No Order Order to orders in favour of the defendants on the New Evidence Application, the Hearsay/Expungement Applications and the Security for Costs Application;

(3)  by the defendants by a third summons dated 13 April 2023 for:

(a)  stay of execution of the Disclosure Order pending the final determination of both the Dismissal Appeal and the Proposed Disclosure Appeal (if leave is granted); and

(b)  adjournment of the hearing of the Disclosure Leave Application and the Defendants’ application to vary the No Order Order pending the final determination of the Dismissal Appeal;

(4)  by the plaintiff by summons also dated 13 April 2023 and, as subsequently amended by consent pursuant to the court’s direction given on 9 May 2023, for, inter alia[1]:

(a)  in the event of an unsuccessful Dismissal Appeal, variation of the No Order Order to an order for costs of the New Evidence Application, the Hearsay/ Expungement Applications and the Security for Costs Application on an indemnity basis and with certificate for 2 counsel in favour of the plaintiff;

(b)  in the event of a successful Dismissal Appeal, variation of the No Order Order to orders on the New Evidence Application, the Hearsay/Expungement Applications and the Security for Costs Application in the plaintiff’s favour with costs against the defendants on an indemnity basis and with certificate for 2 counsel; and

(c)  an order for compliance with the Disclosure Order by the defendants and/or their solicitors within 28 days.

5.  The first matter that is hotly contested between the parties is whether the said post-31.3.2023 Decision applications should be determined now or later, if necessary, after the Court of Appeal’s decision on the Dismissal Appeal.

6.  After giving this matter my very anxious consideration, particularly the tortuous procedural history of the Inquiry Summons and the acrimonious litigation behaviour displayed by the parties, I am reluctantly persuaded by Mr Horace Wong SC (with him Mr Clark Wang), counsel for the defendants, that my rulings on the Disclosure Leave Application and, if necessary, the New Evidence Application, the Hearsay/Expungement Applications and the Security for Costs Application should be reserved until after the resolution of the Dismissal Appeal.

7.  First, it is apparent that the outcome of the Dismissal Appeal, depending on which way it goes, may impact upon the necessity of a ruling on each of the Disclosure Leave Application and the New Evidence Application, the Hearsay/Expungement Applications and the Security for Costs Application.

8.  Second, having regard to the conduct of the proceedings under the Inquiry Summons since February 2013 when the matter first came before, I think it is not unfair for me to describe the parties as overly trigger-happy and antagonistic. I certainly anticipate the unsuccessful party to seek leave to appeal, firstly from me and then (if necessary) from the Court of Appeal, against my decision on each of the New Evidence Application, the Hearsay/Expungement Applications and the Security for Costs Application. Likewise, I would not at all be surprised if the defendants should renew the Disclosure Leave Application before the Court of Appeal, if leave is not granted by me.

9.  That being the case, an orderly disposal of the various post-31.3.2023 applications is, for them to be determined altogether after the outcome of the Dismissal Appeal is known so that, if necessary, all applications for leave to appeal before the Court of Instance and thereafter the Court of Appeal can be made and dealt with in one go.

10.  For the above reasons, I rule as follows:

(1)  There shall be an order in terms of paragraphs 3 and 4 of the plaintiff’s summons dated 13 April 2023.

(2)  This court’s decisions on the Disclosure Leave Application and the parties’ said respective application to vary the No Order Order, including costs, shall be reserved for 4 weeks from the determination of the Dismissal Appeal.

(3)  Execution of the Disclosure Order shall be stayed pending the determination of the Dismissal Appeal.

11.  On the material already made available by the parties, it is unlikely that they would be required to return for another oral hearing before this court.

12.  Needless to say, the parties should proceed with the Dismissal Appeal expeditiously.

Mr Bernard Man SC and Mr Thomas Wong, instructed by Georgiou Payne Stewien LLP, for the plaintiff

Mr Horace Wong SC and Mr Clark Wang, instructed by Robertsons, for the 1^st and 2^nd defendants

HCA 4089/1994

[2020] HKCFI 1437

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 4089 OF 1994

________________________

________________________

_______________

DECISION

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1.  On 2 December 2016, I handed down judgment (“Judgment”) on what has become known in these proceedings as the “competency issue”, finding that:

(1)     The defendants had discharged the burden of proving that the late Mr Herbert Leiduck (“Mr Leiduck”) (who was, until his death on 23 March 2014, the 1^st defendant and one of the witnesses for the defendants in this action) was not of unsound mind and, therefore, not incompetent to give evidence in these proceedings within the meaning of s 3(b) of the Evidence Ordinance (Cap 8) (“EO”) on 7 January 2008, 9 December 2008, 25 June 2009, 30 March 2010 and 6 April 2010 when he swore his 1^st, 2^nd, 3^rd, 4^th and (1^st) 5^th affidavits.

(2)     Mr Leiduck’s 1^st, 2^nd, 3^rd, 4^th and (1^st) 5^th affidavits are admissible.

(3)     The defendants had not discharged the burden of proving that the Mr Leiduck was not incompetent to give evidence in these proceedings within the meaning of s 3(b) of the EO on 27 September 2011, 11 January 2012, 19 September 2012 and 15 November 2012 when he swore/signed his (2^nd) 5^th affidavits, 6^th affidavit, witness statement and supplemental witness statement and on 28 January 2013 when he answered interrogatories administered by the plaintiff on oath.

(4)     Mr Leiduck’s (2^nd) 5^th affidavits, 6^th affidavit, witness statement, supplemental witness statement and answers to interrogatories are inadmissible.

2.  By a summons filed on 16 December 2016 (“Summons”), the defendants sought leave to appeal to the Court of Appeal against the above third and fourth-mentioned findings.

3.  Unless otherwise stated, I shall continue to use the abbreviations adopted in the Judgment.

The provision of s 14AA(4)

4.  The Court of First Instance can grant leave to appeal against a civil interlocutory judgment or order under s 14AA(4) of the High Court Ordinance (Cap 4)if it is satisfied either that the appeal has a reasonable prospect of success or that there is some other reason in the interests of justice why the appeal should be heard.

Merits

5.  A reasonable prospect of success requires the intended appeal to be more than “arguable” or “not fanciful”, without having to be “probable”: SMSE v KL [2009] 4 HKLRD 125, [17] and Wynn Resorts (Macau) SA v Mong Henry [2009] 5 HKC 515, [19].

Proposed grounds of appeal

6.  Indorsed on the Summons was a draft notice of appeal, by which it was contended that:

(1)     Grounds 1-4: I had erred in attributing the burden of proving competency under s 3(b) of the EO to the defendants.

(2)     Ground 5: I should have held on the evidence that the plaintiff had failed to discharge the burden of establishing the incompetence of Mr Leiduck on the said various relevant dates.

(3)     Ground 6: Further or alternatively, even if the burden rested with the defendants to prove competence, I erred in reaching the conclusion that on the evidence the burden had not been discharged.

Grounds 1-4: incidence of burden of proof

7.  I have in [73] to [80] of the Judgment set out the analysis that led me to the conclusion that the defendants have the burden of proving that Mr Leiduck was not at the times of his various written evidence incompetent as defined in s 3(b).  I shall not repeat the same.

8.  With respect to counsel, Grounds 1, 2 and 3 merely repeated arguments which were previously made by Mr Horace Wong SC (with Mr Clark Wang) and which I had addressed in [73], [76]-[77] and [75] of the Judgment respectively. 

9.  The only clarifications that one could make are, firstly, I referred to R v Yacoob (1981) Cr App R 313 at [78] of the Judgment (Ground 2) not for the facts, but for the principle at common law that in criminal cases, once the issue of competence of a witness is raised, the burden is on the party calling the witness or seeking to have the witness sworn to satisfy the court that the witness is competent to give evidence in the proceedings, which I think should also apply in civil proceedings by parity of reasoning having regard to the rationale behind the rule.

10.  Second, I disregarded the repealed s 3(a) of the EO (Ground 2), which dealt with the competence of child witnesses under the age of 7, because I did not derive any assistance from it in deciding the incidence of the burden of proving the competence/incompetence of persons of unsound mind.  That section read:

“The following persons only shall be incompetent to give evidence in any proceedings-

(a) children under 7 years of age, unless they appear capable of receiving just impression of the facts respecting which they are examined and of relating them truly” (emphasis by the defendants)

According to Mr Wong SC, “in steep contrast to how the burden is placed under s 3(b)”, it is clear that under s 3(a), the burden was placed upon the party who alleged that a child under 7 years old was competent to affirmatively prove that he “appear[ed] capable of receiving just impressions of the facts respecting which [he] is examined and of relating them truly.  It is not clear to me that the wording of s 3(a) was also intended to deal with the burden of proof of the competency/incompetence of a child witness under 7 one way or another.  There is however, no need to debate about the incidence of the burden of proof under s 3(a).  As a matter of principle, I do see any or any apparent or necessary correlation either way between s 3(a) and 3(b) in terms of the incidence of the burden of proving the matters provided for therein, especially after the repeal of s 3(a).  Unlike s 3(b) which is to prevent persons appearing incapable of receiving just impressions of facts or relating them truly due to unsoundness of mind from giving evidence, it appears to me that the part after “children under 7 years of age” in s 3(a) were drafted as it was to allow children under 7 but appear capable of receiving just impressions of facts or relating them truly to give evidence.

11.  Third, I did not recognise the existence of a presumption of competence, as suggested in Ground 3.  What I said in [75] of the Judgment was whether or not there is such a presumption is neither here nor there.  Mr Wong SC’s previous submission on the existence of a presumption of competence was thinly supported and reasoned.  See paragraphs 11 to 13 of Mr Wong SC’s skeleton submissions on the competency issue dated 6 May 2016 and paragraphs 28 and 47 of the supplemental submissions on the competency issue for the defendants dated 16 May 2016.  In short, it was based on his reading of the wording of s 3 of the EO, which was said to be supported by the attracts from R v Lam Chi Keung [1997] HKLRD 421, per Mortimer JA at 424I; Chan Chi v The Queen [1968] HKLR 61, per Hogan CJ ogan at 64 and, The Queen v Fung Kam Keung [1991] 1 HKLR 377, per Silke VP at 395H-386B, all quoted and distinguished at [76] of the Judgment.

12.  Grounds 1 to 3 have no reasonable prospect of success.

13.  As for ground 4, s 50 of the EO, enacted in 1999, stipulates:

“(1) Hearsay evidence shall not be admitted in civil proceedings if or to the extent that it is

(a) shown to consist of; or

(b) to be proved by means of,

a statement made by a person who at the time he made the statement was not competent as a witness.

(4) In subsection (1), “not competent as a witness” (沒有資格作證人) means suffering from such mental or physical incapacity; or lack of understanding, as would render a person incompetent as a witnesss in civil proceedings”

It is Mr Wong SC’s contentions that (1) s 50 expressly placed the burden of proof on the party challenging the admissibility of the hearsay evidence to prove inadmissibility on the ground of incompetence; (2) the legislature clearly intended that the burden rests with the party challenging the competence of a witness to prove his incompetence in accordance with the test set out in s 3(b); and (3) a consistent construction should be given to s 3(b) and s 50.

14.  In support of the first proposition, Mr Wong SC placed reliance on C v C [2001] EWCA Civ 1625, a case found and produced by Mr Paul Shieh SC (with Ms Sara Tong) in honour of the best tradition of the Bar.  This case was concerned with the admissibility of the hearsay evidence of what a girl who was 10 going onto 11 had said to her mother about what his father had said of the mother under s 5(1) of the Evidence Act 1995 which is similarly worded as our s 50(1) of the EO and which reads:

“Hearsay evidence shall not be admitted in civil proceedings if or to the extent that it is shown to consist of, or to be proved by means of, a statement made by a person who at the time he made the statement was not competent as a witness.

For his purpose … a child shall be treated as competent as a witness if he satisfies the requirements of section 96(2)(a) and (b) of the Children Act 1989 (conditions for reception of unsworn evidence of child).”

The conditions are that the child understands that it is his duty to speak the truth and he has sufficient understanding to justify his evidence being heard.

15.  At [10], Lady Justice Hale said, “it is clear from the wording of section 5, … , that the burden lies on the person who asserts that the maker of the statement is not competent to make that assertion and to make it out.” 

16.  This sentence was, however, neither preceded nor followed by any reasoning.  In the absence of reasoning, I respectfully beg to differ (notwithstanding the stature of Lady Justice Hale).  I cannot find in the wording of s 50 of the EO any express provision that operates to place the burden on proving incompetence on the party challenging the admissibility of the hearsay evidence.  It is odd and inconceivable that the legislature intended to cater for the burden of proof by the use of such cryptic language.

17.  Second, s 50 of the EO was introduced by amendment by Ordinance No 2 of 1999.  Section 3(b), not distinguishing between competence in terms of oral evidence and hearsay evidence, has existed on the statute book long before that.  During the period of time before the introduction of the present s 50, the incidence of burden (for both oral evidence and hearsay evidence) could not have been influenced by the provision of s 50.  If the defendants were right, the enactment of s 50 in 1999 would have had the effect of altering the pre-existing common law incidence of burden.  I can find no clue that s 50 has been intended to affect such a sea change in burden of proof in respect of both oral testimony and hearsay evidence.

18.  Ground 4 has no reasonable prospect of success either.

Ground 5: assessment of evidence on reversal of burden of proof

19.  This ground rises and falls with Grounds 1 to 4.

Ground 6: assessment of evidence competent regardless of burden of proof  

20.  By this ground, criticisms were made of the weight I attached to the following categories of evidence: (1) the care records kept by the nursing home at which Mr Leiduck stayed from 2 February 2012 to 18 April 2013; (2) the evidence of the staging of Mr Leiduck’s dementia on the various material dates; (3) the positive observations on Mr Leiduck’s condition by the friends and relatives interviewed by Dr Förstl; (4) the contents of Mr Leiduck’s affidavits/witness statements/answers to interrogatories themselves; (5) the notary certificates of the notary public before whom Mr Leiduck signed his written evidence on 19 September 2012, 15 November 2012 and 28 January 2013; and (6) the fact that the environment and circumstances under which Mr Leiduck prepared and confirmed his written statements were conducive to his performance at his best level cognitively. 

21.  The weight to be attached to any particular piece of evidence is a matter for the trial judge.  I believe I had adequately explained why I could not give weight or more weight to the said 6 categories of evidence in [209] to [218] of the Judgment.  For the avoidance of doubt, in addition to pondering on each category of evidence individually, I should clarify here that where more than one category of evidence are relevant to the competence of one piece of written evidence, I have also considered them cumulatively.

22.  We were concerned with Mr Leiduck’s competence when he signed his affidavits/witness statements/answers to interrogatories on 5 specific dates.  Based on my personal experience of having Mr Leiduck cross-examined before me, it is not sufficient to just show that Mr Leiduck did not exhibit any abnormality at the moments in question or on dates close to those moments.  Further to what I have already said in [218] of the Judgment, at the time of his cross-examination, Mr Leiduck was in his 80’s; he was physically frail; he was completely blind; he had suffered from DLB since July 2011; and he was giving evidence in what was to him a foreign language.  Despite his old age, physical and mental disabilities and not speaking in his mother tongue, to the untrained eye, Mr Leiduck was “normal” when, in fact, he was incompetent the whole time save for 1 session.

23.  The simplest step that the defendants could have taken but did not take was to adduce evidence on how instructions were actually taken for each piece of the written evidence in question; how each piece of such written evidence was then drafted, verified and finalised with, and signed by Mr Leiduck; and Mr Leiduck’s condition at each such stage.  I believe such evidence could have been adduced without waiving the legal professional privilege attached to the instructions given by or on behalf of Mr Leiduck.  In short, this court did not in fact have evidence, but was asked to make assumptions, as to “the environment and circumstances under which Mr Leiduck prepared and confirmed his written statements”.

24.  Ground 6 has no reasonable prospect of success.

The “other reason in the interests of justice” limb

25.  As for the “other reason in the interests of justice” limb, it is suggested in Hong Kong Civil Procedure 2020, Volume 1, paragraph 59/2A/4 at p 1186 that leave may be granted under this limb if the question is one of general principle, decided for the first time; or a question of importance upon which further argument and a decision of the Court of Appeal would be to the public advantage.

26.  This is not such a case. Section 3(b) has a long existence.  Despite its history and the habitual exceeding diligence of counsel on both sides in this case, I have not been referred to a single authority, whether direct or indirect, on any aspect of s 3(b).  I find it difficult to envisage the recurrence of the same or similar combination of facts and circumstances, the resolution of which would turn on the burden of proof so that some future case or cases might benefit from a judgment of the Court of Appeal on the incidence of the burden of proof under s 3(b).   

Residual discretion

27.  Even if there is a reasonable prospect of success, the court still retains a residual discretion to refuse leave (though a reasonable prospect of success would weigh heavily in favour of the grant of leave).  For instance, consistent with the underlying objective under Order 1A, rule 1(c) of the Rules of the High Court (Cap 4A) (ie promotion of reasonable proportion and procedural economy in the conduct of proceedings), the court may refuse leave to appeal in the interests of procedural economy and proportionality.  See Ho Yuen Ki Winnie v Ho Hung Sun Stanley under HCA 391/2006, unreported, 25 May 2009, [3] and on renewed application to the Court of Appeal under HCMP 1009/2009, unreported, 24 August 2009, [22].  See also Wong Kar Gee Mimi v Severn Villa Limited [2012] 1 HKLRD 887, [31].  In Ho Yuen Ki Winnie, A Cheung J (as he then was) (at [7-9]) and the Court of Appeal (Le Pichon and Hartmann JJA) (at [22]) were not convinced that there was a reasonable prospect of success but indicated obiter that they would not grant leave even if they were of a different view because the intended appeal would merely be an interlocutory skirmish that only served to increase costs and delay adjudication of the litigation.

28.  Having regard to the nature, contents and quality (hearsay, bare assertions) of the evidence given in Mr Leiduck’s (2^nd) 5^th affidavit, 6^th affidavit, witness statement, supplemental witness statement and answers to interrogatories and the availability of another witness (to be recalled, if necessary) who claims to be able to give the same evidence first hand, it would be procedurally uneconomical and disproportionate to permit the defendants to appeal on the competency issue.

29.  In this connection, I had in [27] to [29] of the Judgment identified the parts of Mr Leiduck’s written evidence relating to the 3 matters before the court: (1) the defendants’ case for setting aside the settlement agreement; (2) the defendants’ claim for damages for loss of commission under the housing project; and (3) IRC’s claim for loss of the value of its business or Mr Leiduck’s alternative claim for loss of opportunity to sell his IRC shares.

30.  The evidence that Mr Leiduck sought to give on the defendants’ case for the setting aside of the settlement agreement is to be found entirely in his 1^st and 2^nd affidavit which are untainted by any unsoundness of mind.

31.  As for the loss of the housing project and the collapse of IRC’s business, Mr Leiduck had to some extent dealt with these 2 matters in his 1^st to (2^nd) 5^th affidavits and the documents he had disclosed in these proceedings, an example of which is a memorandum of understanding dated 23 December 1991 between the Russian Ministry of Defence, Russia’s State Military Industrial Association Konversija, the Urban Development GMBH and IRSAM (in respect of the housing project).  However, insofar as Mr Leiduck’s own evidence is concerned, it will be recalled that Mr Leiduck was incarcerated in Monaco from 19 October 1993 to 22 June 1996.  He was therefore not around when the injunction struck.  His evidence on the events after the injunction and before his release in 1996 was essentially based on hearsay.  In fact, it was Mr Leiduck Jr who claimed to have actually witnessed first hand how the injunction allegedly impacted upon the operation and business of IRC; who allegedly tried to salvage the situation to no avail: who allegedly negotiated with Stern-Stroy for the sale of the shares in IRC and for the injection of capital by Stern-Stroy into IRC; who allegedly had a conversation with Philip Yip, IRC’s general manager, about his own interest to acquire IRC; who knew that Yip had a wealthy uncle who could finance such acquisition; who allegedly continued to pursue the housing project on behalf of IRC, etc.  See Mr Leiduck Jr’s 2^nd and 3^rd affidavits and the exhibits thereto. See also the transcript of Mr Leiduck’s Jr’s evidence in court.

32.  The defendants may wish to review their evidence on the issues of the case without Mr Leiduck’s (2^nd) 5^th affidavit, 6^th affidavit, witness statement, supplemental witness statement and answers to interrogatories.

33.  Even if the defendants have shown an appeal with a reasonable prospect of success before the Court of Appeal, as a matter of discretion, leave to appeal should be refused for the sake of procedural economy and proportionality.

Disposition

34.  For these reasons, I dismissed the Summons.  I also make an order nisi that the defendants should pay the plaintiff’s costs with certificate for 2 counsel, to be taxed if not agreed.

Mr Paul Shieh SC and Ms Sara Tong, instructed by Decherts, for the plaintiff

Mr Horace Wong SC and Mr Clark Wang, instructed by Robertsons, for the defendants

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4089 OF 1994

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D E C I S I O N

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Overview

1.  By an order made herein on 30 November 2012, Mr Justice L Chan gave the parties leave to adduce expert evidence on “Russian company law and on the Russian company registration system in relation to the issue as to the date on which a Russian company called Stern-Stroy Limited (“Stern-Stroy”) with the Individual Taxpayer Identification Number 7725214235 (“Number”) was first established in Moscow and whether it was an existing company in Moscow as at 25 February 1994 and 1 July 1994” (“Issue”), which issue arose in the circumstances to be described in paragraphs 8 to 17 below.

2.  His Lordship further directed the filing and mutual exchange of expert reports on the Issue, to be followed by a without prejudice joint meeting of the experts and then a signed joint expert report from the joint meeting identifying (1) the issue(s) on which the experts have reached a common opinion and the common opinion in respect of each such issue; (2) the issue(s) on which the experts have failed to reach a common opinion and the competing views on each such issue and the reasons for the opposing views.

3.  Pursuant to such directions, the parties exchanged the Expert Report dated 20 December 2012 by Mr Andrei Donstov (“Mr Donstov”), a partner in the Moscow Office of White & Case LLP (“W&C Moscow”), for the plaintiff and the Expert Report dated 20 December 2012 by Mr Karl Heinz Klenke (“Mr Klenke”).

4.  Thereafter, an issue arose as to whether Mr Donstov could give expert evidence for the plaintiff with the defendants demanding for his withdrawal on the ground that their solicitors, Messrs Robrtsons, had approached a partner (not Mr Donstov) in W&C Moscow with regard to the Issue through a series of privileged and confidential communications, which put W&C Moscow in a position of conflict in then acting as the plaintiff’s expert witness.  Such issue culminated in the defendants’ application to strike out Mr Donstov’s said report, which I dismissed on 5 February 2013 on the grounds set out in my Reasons for Decision dated 12 March 2013.

5.  In the meantime, neither party had taken any steps to comply with the directions for a joint expert meeting or joint expert report.  Instead, on 2 February 2013, the plaintiff, having come to the view that there was virtually nothing in common between Mr Klenke and Mr Dontsov so that it would not be fruitful for them to meet or try to issue a joint report, served Mr Dontsov’s Supplemental Expert Report dated 1 February 2013 on the defendants.  This was objected to as being very late and without prior notice to the defendants or leave of the court.  On 5 February 2013, I gave leave to the plaintiff to adduce and rely on Mr Dontsov’s supplemental expert report.  I further gave leave to the defendants to file and serve a supplemental expert report by Mr Klenke in response to Mr Dontsov’s 2 reports, which the defendants complied with by filing and serving Mr Klenke’s Supplemental Expert Report dated 25 February 2013.

6.  Now before the court is the defendants’ application (“Application”) by summons dated 15 December 2015 for leave to appoint one Mr Vladimir Yurievich Durasov (“Mr Durasov”) in place of Mr Klende as the defendants’ expert on the Issue.

7.  In support of the Application, the defendants have placed before the court Mr Durasov’s Expert Report dated 28 November 2015 on the Issue.

Relevance of the Issue

8.  By way of background, on 29 April 1994, the plaintiff applied for and obtained a Mareva injunction (“Injunction”) against both defendants upon the usual cross undertaking as to damages (“Undertaking”).

9.  The Injunction was subsequently discharged and the action discontinued as against the 2^nd defendant (“IRC”) on 17 May 1994 and 22 August 1994 respectively as the matter relied upon by the plaintiff to attach IRC with liability as a constructive trustee of its money was wrong.  As for the 1^st defendant, the late Mr Herbert Leiduck (“Mr Leiduck”),[1] the service of the writ of summons on him in Monaco was, after the plaintiff’s unsuccessful appeals to the Court of Appeal and the Privy Council, finally set aside and the Injunction against him discharged on 26 July 1995 for want of jurisdiction over him by the Hong Kong courts.

10.  By a summons issued on 23 July 2007, in enforcement of the Undertaking, the defendants apply for an inquiry as to the damages suffered by them by reason of the Injunction and for payment of the sum(s) found due upon such inquiry.  The trial of the question whether an inquiry should be ordered (“Trial”) commenced before me on 4 February 2013 and is, for various reasons that I need not go into at this point, still continuing.

11.  Insofar as it is material to the Application, it is part of the defendants’ case that the Injunction ruined IRC.  IRC claims damages for loss of the value of its business.  Alternatively, Mr Leiduck, holding 99,998 out of the 100,000 shares of and in IRC, claimed to have lost the opportunity to sell his IRC shares.  With regard to the latter claim, Mr Leiduck’s son, Mr Helge Leiduck (“Mr Leiduck Jr”), gave evidence that he started to negotiate with Stern-Stroy’s representatives in November 1993; that he had prior to the Injunction secured Stern-Stroy’s agreement in principle to purchase 70% of the shares of and in IRC and to invest in IRC; and that Stern-Stroy backed out of the transaction due to the Injunction.

12.  In support, Mr Leiduck Jr produced, inter alia, what appear to be:

(1) Stern-Stroy’s letter dated 25 February 1994 confirming its interest in purchasing all of Mr Leiduck’s shares in IRC at US$40 million; and

(2) Stern-Stroy’s letter dated 1 July 1994 withdrawing from the purchase for the reason that the value of IRC had become negligible and its reputation damaged beyond repair due to the Injunction against both Mr Leiduck and IRC.

The Number appeared in the letterhead.

13.  The plaintiff takes the position that this is a bogus claim.  More particularly, it is the plaintiff’s case that Stern-Stroy could not have existed on 25 February 1994 or 1 July 1994 and that it was not formed until December 2002.

Existing factual evidence on the Issue

14.  The plaintiff so asserts because the searches that its legal representatives and expert conducted on the public records of Stern-Stroy revealed only the following:

(1) a resolution dated 25 November 2002 (“Resolution”) signed by one Alexander Dmitrievich Klechkovsky (“Mr Klechkovsky”) as the founder of Stern-Stroy resolving to, inter alia, incorporate Stern-Stroy and to approve its articles of association;

(2) the articles of association of Stern-Stroy approved by the Resolution (“Articles”);

(3) an extract from the Unified State Register of Legal Entities (“USRLE”) with regard to Stern-Story on which 10 December 2002 was entered as Stern-Stroy’s date of first registration as both a legal entity and a taxpayer; and

(4) a list of all the documents contained in the USRLE registration file of Stern-Stroy, listing only the Resolution and the Articles.

15.  In answer, Mr Leiduck Jr claimed to have been informed by Mr Klechkovsky at a meeting in Kiev, Ukraine in January 2012 to the effect that:

(1) Stern-Stroy was first registered in August 1992 in Moscow but was dissolved in December 2000.

(2) The Number was used by Stern-Stroy all along.

(3) Stern-Stroy was registered anew in 2002 under the same name and kept using the Number.

16.  The defendants also called one Ms Mitsie Johnson and one Dr Olga Salman (“Dr Salman”) who claimed to work respectively for Mr Leiduck Jr and Stern-Stroy at the material time to testify as to the existence of Stern-Stroy and the negotiations between Mr Leiduck Jr and Stern-Stroy for the sale and purchase of IRC shares in 1993 and 1994.  In particular, Dr Salman recalled that she was employed by Stern-Stroy from September 1992 to January 1995; that Stern-Stroy was founded in the second half of 1992 under the Number which was printed on all company documents; that she remembered preparing Stern-Stroy’s letter of intent to purchase IRC shares; that the private company registration systems of the 1990’s were confusing and chaotic; and that the Number was simply re-used after the introduction of a new registration system in 2002.

17.  Further, Mr Klenke annexed to his first report a one-page document bearing the emblem of the Russian Federation, the date of 23 June 1993 and the caption “Certificate” with just this line: “The limited partnership “STERN-STROY” is legally registered in Russia under the number of 7725214235.” (“23.6.1993 Document”). This document was said by Mr Klenke to have been shown to him.  He described it as an official confirmation by an official body, most probably the “ministry of interior”.

Existing expert evidence on the Issue

The experts

18.  As stated above, Mr Donstov is partner of W&C Moscow.  As at the dates of his reports, he had been practising in Russian law particularly Russian corporate law for over 18 years.  He has experience in providing legal support for the registration of companies in Russia during the period from 1993 to 1997.

19.  In contrast:

(1) Mr Klenke studied politics.

(2) He had worked, inter alia, as a trade representative of the former German Democratic Republic stationed in Russia, a consultant to various Russian and international companies between 1989 and 2004 and the president of a Russian investment company between 2004 and 2010.

(3) He had set up and registered hundreds of companies in Russia since about 1992.

(4) He witnessed the establishment of the new social and economic systems in Russia and the changes brought thereby, including those to the company registration system in the early 1990s.

20.  I agree with Mr Horace Wong SC (leading Mr Clark Wang), counsel for the defendants, that Mr Klenke’s knowledge and experience with the Russian company registration system is that of a user.  He does not in fact possess any particular professional expertise.  What he has is at best general and second-hand knowledge that he acquired as an user in the course of his said career.

Mr Donstov’s opinion

21.  Mr Donstov’s 2 reports run to over 20 pages in substantive text and produce altogether 1,358 pages of supporting materials including relevant laws, regulations and official records and documents.

22.  In summary, Mr Donstov is of the view that Stern-Stroy could not have existed between February and July 1994 because:

(1) A company is deemed to be existing from the date of registration with the Taxation Ministry prior to 1 July 2002 and under the USRLE from 1 July 2002.

(2) The company search documents of Stern-Stroy, as set out in paragraph 14 above, show that it was incorporated in 2002, with nothing to suggest that it had a prior existence at all.

(3) Had Stern-Stroy been first registered in 1992, its registration file would have eventually been transferred to the Federal Tax Service in 2002, which would have kept copies of all registration and foundation documents of the company from 1992 to 2002.

(4) Prior to July 2002, a Moscow company was assigned a registration number in the format of xxx.xxx or xxx.xxx.xxx by the Moscow Registration Chamber (which was responsible for the registration or legal entities in Moscow) when it was established. 

(5) When the USRLE was implemented on 1 July 2002, all pre-existing companies were required to re-register and were assigned by the registration authority with a new 13 digit Main State Registration Number (“MSRN”) in place of their said old state registration numbers.

(6) The Number was however a unique taxpayer identification number (“INN”).  It was a supplemental number that was assigned by the tax authorities to a company after registration as a taxpayer with the tax authorities had taken place.  Such numbers, in 10 digits, only started to be assigned from September 1994 pursuant to the Procedure for Implementation of the Provisions of the Russian Federation President’s Decree No.1006 dated 23 May 1994 and approved by the State Tax Service, the Ministry of Finance and the Central Bank of the Russian Federation in August 1994.

(7) The first 4 digits of an INN reflect the code of the tax inspectorate that registered the taxpayer.  The 5^th to 9^th digits, assigned by the tax inspectorate, is the sequential number of the particular taxpayer and reflect the order in which it was registered in a particular locality by a particular tax inspectorate.  The last digit is a control number generated by a calculation algorithm.

(8) Before August 1994, taxpayers were not assigned any special numbers, except for the use of the sequential numbers in the registration books kept by the tax authorities to record information on the taxpayers who were legal entities registered in a certain region, city or city district.  If the whole of the Number were a sequential number, it would mean that by the time of the registration of Stern-Stroy, the relevant tax authority had already registered 7,725,214,234 legal entities in the City of Moscow.  However, as of 1 December 2002, the USRLE listed a total of only 4,555,490 legal entities registered in the whole of the Russian Federation, out of which 1,060,993 legal entities were registered before 1 July 2002.  Therefore, it is extremely unlikely for more than 7 billion companies or legal entities to be registered in Moscow alone in 1992 when private businesses were only starting to develop in Russia.

(9) The INN assigned to a particular taxpayer company remains unchanged during its life. Once a taxpayer company is liquidated, the INN that belongs to it cannot be assigned again to another company.

Mr Klenke’s opinion and Mr Donstov’s criticisms thereof

23.  Mr Klenke’s 2 reports are less than 10 pages long altogether in substantive text.  In addition to the 23.6.1993 Document, he produced only one other exhibit, which was an article entitled “Economic Reform in Russia in 1992: The Government Battles Labor Collectives” by Victor M Polterovich published in the Journal of International and Comparative Economics in 1995.  It dealt with the transfer of the state-orientated Russian economy into a capitalistic one, and not the company registration system in Russia at the material time.

24.  In short, Mr Klenke spoke of the following:

(1) President Boris Yeltsin issued a decree regarding the registration of private companies in 1992, without identifying or producing such decree.

(2) There was however an inherent disregard by civil servants of new rules and their implementation because of lack of experience and corruption.  This applied very much to the company and tax registration systems too.

(3) The Russian company registration system changed about 3 times in the decade leading up to 2002 when companies were made to re-register a final time.  A lot of the companies were just given the same INNs they had before.  The “evraz group” which was founded in 1992 was given as an example.  Although several companies in that group under the holding company (not specifically identified) were formed before 2002, they “are highlighted to have been registered at or after 2002 with the same registration number than (sic) it had in 1992”.

(4) Information was omitted or deleted for various reasons including corruption.

(5) The allocation of the INN was and still is not in practice arbitrary as one could and can still obtain a certain INN with “the right contacts and/or reasons and/or bribes”.

(6) He knew from his own experience that “companies were registered under a certain number in for example 1992 and that number was allocated to them in the big reform of the registration system in 2002 under for example the INN number”.

25.  For these reasons, Mr Klenke believed that Stern-Stroy could have existed under a certain registration number in 1993 and was re-registered in 2002 with the same registration number without leaving a trace of its previous registration under the new registration system.

26.  I think it is not unfair for me to say that all of Mr Klenke’s said observations were no more than bare assertions.  He spoke in the most general and imprecise terms.  What he said was not backed by any authorities, not to mention any rules or regulations.  The only basis for his views seem to be his personal experience, the true nature and extent of which is unclear.  I find it hard to imagine that any court would feel able to attach any weight to his opinion. 

27.  Not surprisingly, Mr Donstov was critical in his comments on the views expressed by Mr Klenke in his supplemental expert report.  In particular, Mr Donstov pointed out that:

(1) Mr Klenke was incorrect in his statement that companies in Russia were registered with an INN.  Since 1 July 2002, companies were assigned with 13-digit MSRNs by the registration authority upon registration or re-registration as a legal entity whereas INNs were assigned by the tax authorities to a company after it had registered as a taxpayer with the tax authorities.  The assignment of INNs to companies was first implemented in August/September 1994. The introduction and implementation of the USRLE in 2002 did not affect the INNs.

(2) With regard to the suggestion that many companies registered prior to 1 July 2002 kept their pre-USRLE “number”, which was the INN, Mr Klenke had confused a company’s MSRN with its INN, which numbers are in different formats and are assigned to companies for different purposes by different authorities.

(3) If a company was established before 1 July 2002, its prior existence would be reflected in the records kept by the USRLE.  The example of the Evraz Group was unparticularised and unsupported to be of any use.

(4) As for the suggestion that companies that existed prior to July 2002 could through bribery and corrupt means obtain a particular INN after July 2002:

(a) First, the computerisation of the assignment of INNs in 1994-1995 would make it difficult, if not impossible, for anyone to choose a particular INN. 

(b) Second, it was difficult to understand why a company would want to bribe a government official just to obtain a particular INN because all it meant was that the company would have to pay taxes and be controlled by the tax authority.

(c) Third, a company registered prior to 1 July 2002 kept the INN already assigned to it in any event.

(5) The 23.6.1993 Document is not a genuine document as it did not conform with any of the requirements applicable to official documents issued in around June 1993.  The word “certificate” is unknown to Russian official documentation.  It bears no resemblance to a document issued by the Ministry of Interior Affairs in 1993 that Mr Donstov caused to be obtained.  Such ministry has nothing to do with the registration of companies and therefore could not have issued a “Certificate” proving the registration of any company.

28.  Although Mr Klenke produced a supplemental expert report after having sight of Mr Donstov’s second report, he made no new point, other than that the fact that only the Resolution and the Articles could be found in the public registration records of Stern-Stroy is evidence of manipulations as other documents had to be submitted during registration since the 1990’s.

Defendants’ reasons for switching expert

29.  According to the 7^th Affidavit of Mr Leiduck Jr and the 28^th Affidavit of Mr Jeremy David Levy (“Mr Levy”) of Robertsons:

(1) After Mr Leiduck Jr took over the conduct of these proceedings in 2014 after Mr Leiduck’s death, he was advised by his lawyers of their view that they did not consider Mr Klenke to be a satisfactory expert who would be able to provide the necessary assistance that the court requires for the determination of the Issue.  He started to search for a more suitable expert.  After much effort, he located Mr Durasov as a potential expert in about November 2014.

(2) Coincidentally, in about August 2014, Mr Klenke (whose evidence was originally expected in early 2013) indicated to Mr Leiduck Jr that he might no longer be able to attend court in Hong Kong to give evidence due to the unexpected delay of the Trial and the change of his personal circumstances (as he had taken on new business commitments and had become very busy).  At that time, Mr Klenke was still unsure whether he would be able to come to Hong Kong to give evidence when his evidence was required.  Mr Klenke confirmed with Mr Leiduck Jr in about October 2015 that he was no longer available to act as the defendants’ expert.  The defendants informed the plaintiff of this by letter on 14 October 2015. 

(3) After Mr Leiduck Jr located Mr Durasov as a potential expert on the Issue, Mr Levy as the person having the conduct of these proceedings for the defendants started to contact Mr Durasov at the end of 2014 and the beginning of 2015.  However, the progress was slow due to various difficulties encountered.  Mr Durasov speaks no English.  He had to travel long distance to come to Hong Kong to meet with the defendants’ legal team on several occasions.  The identification and location of the relevant legal authorities and other documents relating to the Issue (concerning the operation of the registration system more than 20 years ago in Russia) was time consuming.  It was not until November 2015 that some of the key documents produced by Mr Durasov were located and the report of Mr Durasov was finalised on 28 November 2015.

(4) The summons by which the Application was made was issued shortly after Mr Durasov’s report was ready.

30.  Mr Wong SC has however made it clear in the course of his submissions in court that, in making the Application, the defendants rely on Mr Klenke’s inability, and not unavailability, to deal with the Issue.

Mr Durasov’s expertise and opinion

31.  Unlike Mr Klenke, Mr Durasov has direct first-hand knowledge and working experience in the assignment and recording of registration numbers and maintenance of registration information of companies during the material time (i.e. 1993-1994).  In this regard:

(1) Mr Durasov joined the Russian tax authority in May 1993 and had worked in tax inspectorates in Moscow (firstly in Inspectorate No.12 and then in Inspectorate No.43) until he left the government in 2010, hence having over 17 years of experience in the tax inspectorate rising from the rank of Tax Inspector to Senior and subsequently the Chief State Tax Inspector.  When he left the Federal Tax Inspectorate in 2010, he was the Director of Desk Audit Department No.1.

(2) More particularly, between May 1993 and October 1994, Mr Durasov worked with the Legal Department in Tax Inspectorate No.12 for the Northern Administrative District of the City of Moscow, which was responsible for creating and maintaining a database for organisations.  In October 1994, he was transferred to the State Register Maintenance and Taxpayers Registration Department, upon its establishment to take over such responsibilities from the Legal Department.

(3) His personal responsibilities in these departments covered all aspects of registration of companies including compiling registration files of enterprises; entering and recording the registration data in the relevant databases; the maintenance of a database; reporting and forwarding such data and the underlying documents to the relevant authorities; and most importantly, assigning State Register numbers (later known as Taxpayer’s Identification Numbers or INNs) to companies that were newly registered or existing enterprises that were re-registered.

(4) He had also acted as a witness for the tax authorities in matters concerning the application of tax laws in Russia.

(5) He left the tax service in 2010 and has since been working as an auditor.

32.  Mr Durasov’s report runs to over 15 pages in substantive text with close to 500 pages of supporting materials.

33.  It addressed 6 sub-questions under the Issue:

(1) When were INNs first started to be assigned to enterprises, whether officially or unofficially?  Were any INNs assigned in around February or July 1994?

(2) Are the 5^th to 9^th digits of an INN always strictly assigned in sequential order?  Could there be exceptions in practice?

(3) Does the USRLE system contain a full and complete collection of all the files and information of all companies that have registered, including those established in the early 1990’s?

(4) Is it possible for information of a company stored in the USRLE system or its predeceasing registration system to be altered or amended at the request of people and entities with special means and powers?

(5) Is it possible, or has there been any occasion, in practice for the INN of a previously dissolved company to be reused by a later incorporated company whether of the same name or not?

(6) Is it possible for a company which had existed for some years before 2002 to have been wound up some time before 2002 and then re-incorporated and registered in or after 2002, using the same name and the same INN as were used before its winding up?

34.  Mr Wong SC has in his written submissions highlighted the following 4 points made by Mr Durasov that are pertinent to the determination of the Issue but were not covered in the reports of either Mr Klenke or Mr Dontsov.

35.  First, in relation to the time when the 10-digit INNs first started to be assigned in Russia:

(1) Whilst agreeing that a number in the name of INN only started to be assigned in 1994, a number in the same format but under a different name called “Number in the State Register” (“State Register Number”) had started to be assigned from mid-1993 to new enterprises.  Enterprises already registered were re-registered and assigned a State Register Number during the period from 1 July 1993 to 1 October 1994. The State Register Number was later adopted as the INN of the company.  Hence, for companies registered (or re-registered) before August 1994, the INN would be the same as its State Register Number.

(2) In support, Mr Durasov produced the Order of the State Tax Service of Russia No. VG-3-12/41 dated 24 May 1993 (“Letter 41”) (which was not produced by Mr Donstov), showing that the State Register Number had started to be assigned during the re-registration process starting from 1 July 1993.  Letter 41 further specified the format of the first 9 digits of this number at appendix 1 thereto.

(3) Mr Durasov further produced the Task Statement of Automated Maintenance of the State Register of Enterprises (functional part, Phase 1, for the local level) attached to the Letter of the State Tax Service No.12-2-07/219 dated 4 October 1993 (“Task Statement Phase 1”) and the Task Statement of Automated Maintenance of the State Register of Enterprises (functional part, Phase 2 regional and federal levels) attached to the Letter of the State Tax Service No.VP-6-12/31 dated 1 February 1994 (“Task Statement Phase 2”).  These two Task Statements (which were not produced by Mr Donstov) were statements on the same system at different stages and showed that the State Register Number was a 10-digit number and provided the algorithm upon which the 10^th digit (being a control number) was calculated according to the value of the previous 9 digits.

(4) If one applies the algorithm provided in these Task Statements to the first 9 digits of the Number, i.e. 772521423, one would arrive at the last number “5” as the control number, which tallies with the 10^th digit of the Number.

(5) Mr Durasov then cross-referenced section 14.1 of the Company’s Registration Card/Chart in Schedule 1 to the Regulation n the Procedure for Keeping of the State Register of Companies No.YuU-4-12/65N registered with the Ministry of Justice as No.250 (“Regulation 250”), which Mr Donstov also produced.  Regulation 250 was the primary legislation pursuant to which the said Task Statements were prepared. Mr Durasov confirmed that the State Register Number referred to in section 14.1 was the State Register Number that the two Task Statements referred to.

(6) Mr Durasov also referred to the Procedure for Implementation of the Provisions of the Russian Federation Presidential Decree No.1006 “On Comprehensive Measures for Timely and Full Collection of Taxes and Other Mandatory Payments No.VG-4-13/94n/104/104 (approved by the Russian State Tax Service, the Russian Ministry of Finance and the Central Bank of Russia on 13 August 1994) cited by Mr Donstov and pointed out that this document for the first time officially termed the 10-digit number assigned to an enterprise upon registration or re-registration as the INN.  Previously, this number was officially called the State Register Number, although internally (e.g. in Task Statement Phase 2), the State Tax Service had already been referring to the number as the INN (see Task Statement Phase 2 and also Addendum 1 to the Task Statements).

(7) Mr Durasov further referred to an article in the 7 July 1995 issue of the established newspaper “Kommersant” which described the said re-registration process and the assignment of the State Register Number.  

36.  Second, in relation to the 5^th – 9^th digits of the Number:

(1) In normal circumstances, the 5^th – 9^th digits of an INN (and its predeceasing State Register Number) should be a sequential number.

(2) However, the paper records (in a paper logbook and company card/chart) were copied by duty inspectors and manually input into a computer system, which was then newly introduced and fraught with problems.  Different database softwares developed by different developers in different programming languages with mismatched software architectures and varying degrees of automation were used.  When tax inspectorates using different softwares sent their data (of registered or re-registered enterprises) to the data centre of the State Tax Service, because of the incompatibility of the formats, conversion was required and during the process many different types of error occurred.  Further, during the system migration in 2000 many more errors occurred when the different registration databases were merged into a unified information system.  In fact, Mr Durasov had been personally involved in the checking and identification of errors and data correction.

(3) Overall, Mr Durasov identified 4 problematic areas where errors (including loss of information, assignment of duplicate numbers to one company, the same number to different companies, changes in company status indices etc.) often occurred:

(a) manual recording of data;

(b) manual inputting of data to the electronic database;

(c) conversion of data format during the transfer between a local tax inspectorate and the unified data centre; and

(d) the merger of databases in 2000.

(4) Accordingly, given the fact that in reality many errors often occurred, the 5^th – 9^th digits may not always be sequential, and hence are not reliable for the determination of the time of the incorporation of a company. 

37.  Third, Mr Durasov drew a different inference from the fact that only the Resolution and the Articles were kept in respect of Stern-Stroy by Inspectorate No.25:

(1) According to the relevant regulations, some of which were not previously provided, if a company had indeed been incorporated in 2002, it would have submitted, and the corresponding tax inspectorate would have retained, many more documents than the only two that could be found in the files of Stern-Stroy.

(2) Mr Durasov further provided a sample set of documents of a company that was established in 2002 to demonstrate the types of document that a tax inspectorate would have kept for a company incorporated in 2002 so as to make the point that there should have been other documents if Stern-Stroy had been incorporated in 2002.

(3) In addition, Mr Durasov referred to the facts (a) that from 1 July 2002, when the incorporation registration duties were transferred from the Moscow Registration Chamber to the tax service, all documents previously held by the Moscow Registration Chamber were transferred over to the archive of the Directorate of the Federal Tax Service for the City of Moscow”; (b) that “the registration documents of local tax inspectorates were routinely transferred to the said archive on a regular basis”; and (c) that currently all the hard copies of the incorporation registration documents and documents related to registration with the tax inspectorates dating back to 1990s would not be kept by the local tax inspectorates, but in a central archive.

(4) Thus, unlike Mr Dontsov, Mr Durasov reasoned that the fact that documents which one would expect would have been kept by the tax inspectorate (if Stern-Stroy had indeed been incorporated in 2002) are missing is indicative of the unlikelihood (even impossibility) that Stern-Stroy was incorporated in 2002.  This also points to the unreliability of the extract containing just the 2 documents found.  It is likely that Stern-Stroy was an “older” company and there should have been earlier documents in its registration file, which would have been archived after the change in the law in 2002.

(5) Moreover, according to Mr Durasov:

“Making unlawful amendments into the URSLE at the initial stage of its existence was possible, because all local tax inspectorates had the opportunity to introduce amendments into the URSLE database … and a corrupt officer of the inspectorate could use this opportunity and make unlawful amendments into the URSLE system …The information on intentional amendments of Stern-Stroy records in the USRLE, for the purposes of covering up some of its business activities by a corrupt officer on the tax inspectorate No. 25, is possible.”

In support, Mr Durasov referred to a news report of the deliberate tinkering with the USRLE system through corruptive means.

38.  Fourth, Mr Durasov also explained how Stern-Stroy could be “dormant” for a couple of years and resume commercial operations later, which could simply be done by voluntary suspension of commercial operations without the necessity of any liquidation, so long as it continued to submit tax returns.

Principles for grant or refusal of leave to substitute expert

39.  The relevant principles governing the grant or refusal of leave to substitute an expert witness have been summarised by Mr Justice Johnson Lam (as he then was) in Chinachem Charitable Foundation Ltd v Chan Chun Chuen[2009] 5 HKC 190[2] at [19]-[27] and restated by Mr Justice Bharwaney in Law Chung Fai v Lam Ming Kuen, HCPI 96/2008, unreported, 13 September 2010, at [9].

40.  For present purposes, Bharwaney J’s restatement bears repeating:  

“The principles that have to be applied in determining an application to change an expert witness may be summarised as follows:-

(a) The court’s discretion, whether or not to allow a party to change his expert, is exercised within the ambit of the court’s management powers. These powers must be exercised in the light of the underlying objectives of the recent civil justice reform, including the need to ensure the cost effectiveness of the proceedings; to ensure that the case is dealt with expeditiously; to ensure reasonable proportionality having regard to the amount of money involved, the importance of the case, the complexity of the issues, and the financial position of each party; to ensure procedural economy in the conduct of the proceedings; and to ensure fairness between the parties.

(b) In the exercise of its powers of case management, the court recognises that the primary aim is to secure the just resolution of the dispute in accordance with the substantive rights of the parties.

(c) Expert shopping is undesirable and, whenever possible, the court will use its powers to prevent it.  It can lead to potential unfairness between those who can afford to shop around for the opinions of more than one expert and those who cannot.  Expert shopping is not conducive to cost effectiveness of the proceedings and the expeditious disposal of a case.

(d) The disclosure of the original expert’s report, and the waiver of the privilege that would normally be attached to it, would usually be imposed as a condition for granting permission to call a substitute expert.  However, the disclosure of the original expert’s report per se does not guarantee that the court would permit a substitute expert to be called.

(e) To curtail expert shopping, the court may refuse to grant leave if the only reason for calling a substitute expert is that his opinion is more favourable to the party calling him than the opinion of the original expert.

(f) However, if the court is satisfied that the just resolution of a dispute requires leave to be granted for a substitute expert to be called, it should not refuse leave simply because the opinion of the substitute expert is more favourable than that of the original expert. 

(g) In every case, the court should examine the grounds put forward by the substitute expert and make a preliminary assessment of the cogency of those grounds as compared with those set out in the report of the original expert and the report of the expert engaged by the other side.  If the court is satisfied that there are relevant matters canvassed by the substitute expert which may be important to the just resolution of the dispute which was omitted from the reports of the original expert, or which was outside the expertise of the original expert, a prima facie case would be made up for the admission of the substitute expert report in the interests of the just resolution of the dispute.

(h) In every case, however, the court must also have regard to other relevant circumstances, such as the potential disruption to the trial, the prejudice to the other parties, and the explanation offered by the applicant for the change of experts.  All these matters have to be considered and weighed in the light of and against the underlying objectives of the civil justice reform: to ensure cost effectiveness and economy, expedition, proportionality, and fairness between the parties.

(i) It is not possible to lay down definitive and exhaustive guidelines to cover and cater for every possible situation that may arise and which prompts an application by a party to change his expert.

(j) Ultimately, the court strives to do justice between the parties and, in cases where the court permits the parties to call expert evidence, the court strives to ensure a level playing field which fair access to proper experts for all parties.”

41.  Mr John Yan SC (leading Ms Sara Tong), counsel for the plaintiff, has also referred to the decision of Deputy High Court Judge L Chan (as he then was) in Wing Ming Garment Factory Limited v The Incorporated Owners of Wing Ming Industrial Centre, HCCT 60/2006, unreported, 15 February 2011; Master Leong’s decision in Tanang Padam Raj v Shek Chi Yau & Wong Ching Yi trading as Pak Tsun Company, HCPI 613/2011, unreported, 26 April 2013; and HH Judge Andrew Li’s decision in Yip Kwok Sun v Poly-style Limited, DCMP 2891/2011, unreported, 31 October 2013, in which an application for leave to change expert was refused.  I shall deal with these cases at appropriate points below.

Discussion

42.  Applying these principles, I am persuaded that the defendants should, subject to condition securing the payment of the costs to be ordered in favour of the plaintiff in consequence of the Application, be permitted to replace Mr Klenke with Mr Durasov.  My reasons are as follows.

43.  First, I have been strongly cautioned by Mr Yan SC on the need to guard against expert shopping by the defendants. 

44.  However, this is not how I would characterise the Application or the defendants’ motive behind it.  At this point, I see no evidence of the defendants shopping around for expert opinions on the Issue to the extent of expert shopping as we understand that term.  In this regard, I have deliberately set out above the opinions of Mr Donstov, Mr Klenke and Mr Durasov in some detail.  This is not a case where the defendants seek to replace expert because Mr Durasov’s conclusions are more favourable than Mr Klenke’s (see Chinachem Charitable Foundation Ltd v Chan Chun Chuen at [34]).  They are the same.  However, as said earlier, I personally find it hard to imagine that any court would feel able to attach any weight to Mr Klenke’s opinion.  His 2 reports (which I have read a number of times) are so inadequate and unhelpful that I have no difficulty in understanding the defendants’ desire to replace Mr Klenke.  Any party who is properly advised would want to do so.  While the defendants may be blamed for putting Mr Klenke forward as their expert in the first place, given that the court exercises its case management power primarily to secure the just resolution of disputes, they should not be penalised to the extent of being deprived of the chance to remedy such error if it can be done without prejudice to the plaintiff.

45.  On this, having regard to Mr Klenke’s qualification and experience, I do not see this to be a case in which the defects in Mr Klenke’s reports can be remedied by further communications with the expert (e.g. by providing him with additional evidence, seeking clarifications on matters not understood, seeking opinion on points not addressed in the original report, or, in general, by commissioning supplemental reports), which Mr Yan SC has suggested with reference to Tanang Padam Raj v Shek Chi Yau & Wong Ching Yi trading as Pak Tsun Company at [36]-[38]. Even if Mr Klenke could theoretically learn Mr Durasov’s report and its appendices by heart, any knowledge that he would thereby gain would be second-hand and would not equip him for cross-examination in court.

46.  I accept the defendants’ reason for wanting to change expert on the Issue.

47.  This brings me to my second ground for granting leave subject to condition.  I trust it is apparent from the above outlines of the opinions of the 3 experts that Mr Durasov has canvassed different facets of the Issue from angles and with reference to supporting materials which were not covered or included in the reports of either Mr Donstov or Mr Klenke and which would be conducive to a just resolution of the Issue.  It is not necessary to, and I do not, put the cogency of Mr Durasov’s report any higher than this, especially pending Mr Donstov’s full response thereto.  In this regard, Mr Donstov has by a 3-page letter dated 13 April 2016 to the plaintiff’s solicitors, Messrs Dechert, given some preliminary comments on Mr Durasov’s report.  Mr Wong SC has, on the basis of Mr Durasov’s report, made various criticisms of Mr Donstov in relation to both his 2 reports and comments by letter, including failing to provide the court with a complete picture of, or all relevant authorities on, the Russian company registration system at the material time.  I have no wish to pre-judge the Issue or pre-empt the experts’ evidence or counsel’s submissions thereon. Mr Donstov should be given a full opportunity to further explain his analysis and conclusions on the Issue.

48.  Third, the replacement of Mr Klenke by Mr Durasov and the admission of the latter’s report at this stage would not cause any prejudice to the plaintiff that cannot be adequately compensated by an appropriate order for costs.

49.  There is no date in sight for the resumption of the Trial.

50.  On costs thrown away, the defendants have, by Robertsons’ letter dated 25 January 2016 to Dechert, offered to pay the costs of Mr Donstov in reviewing Mr Klenke’s report and preparing a supplemental report in response thereto and in reviewing Mr Durasov’s report and responding with a fresh supplemental report.  Mr Wong SC has also indicated at the hearing on 25 April 2016 his clients’ willingness to pay the costs of their summons dated 15 December 2015 and to secure the liability for all such wasted costs by, for example, a payment into court.  Security is called for given that there is no general order for security for costs and the 1^st defendant is ordinarily resident out of the jurisdiction while the 2^nd defendant IRC is admittedly valueless.  Further, I think the security should extend to cover Dechert’s costs wasted by the change of expert and, depending on the outcome of the argument over the costs of the 25 April 2016 hearing, the costs of such hearing if awarded to the plaintiff.

51.  The plaintiff is further unhappy with the fact that Mr Durasov had Mr Donstov’s reports when he prepared his, thereby defeating the purpose of the protocol for the exchange of expert reports as ordered by L Chan J on 30 November 2012.  In support, Mr Yan SC referred to Yip Kwok Sun v Poly-style Limited, supra, in which it was said at [57] that this was tantamount to allowing the applicant “a second bite at the cherry”.  On the other hand, the same argument was made in Chinachem Charitable Foundation Ltd v Chan Chun Chuen, supra, and dismissed by Mr Justice Johnson Lam at [37] as not carrying too much weight in the circumstances: “The experts act independently in offering their opinions to the court.  There is nothing to suggest that either expert would have given a different opinion in their reports if they were to be exchanged as opposed to what actually happened.”  I respectfully agree and would adopt the same reasoning.

52.  The plaintiff also considers it unfair that Mr Durasov could take 1 year to produce his report while Mr Donstov would have to provide a response to the matters raised therein within a considerably shorter time.  This can be addressed by giving Mr Donstov a generous period to compile a fresh supplemental report.  As I said earlier, the Trial is not due to resume for a long time.

53.  Lastly, the plaintiff has criticised the defendants for securing the service of Mr Durasov first and then presenting the court with a fait accompli before making the Application.  Reliance is placed on Wing Ming Garment Factory Limited v. The Incorporated Owners of Wing Ming Industrial Centre, supra, at [33] and Yip Kwok Sun v Poly-style Limited, supra, at [56].  In the latter case, the court expressed the view that once a party sees the need for a new expert, instead of obtaining a report from the proposed new expert or meeting with him with a view to procuring a report (without the leave of the court), that party should ask the court for leave to do so first.

54.  With respect, I am puzzled by this suggested approach.  The cogency of the grounds put forward by the substitute expert as compared with those set out in the report of the original expert and the report of the expert engaged by the other side is material to the court’s exercise of case management powers in an application to change expert witness.  That being the case, how else can an applicant demonstrate to the court that the opinions of the proposed new expert are likely to facilitate the just resolution of the dispute if he is disallowed from first obtaining a report, or at least the preliminary views, of such expert?  See Chinachem Charitable Foundation Ltd v Chan Chun Chuen, supra, at [26] & [40] and Law Chung Fai v Lam Ming Kuen, supra, at [9(g)], [27]-[28].  In the latter case, Bharwaney J had to twice adjourn the hearing of the defendant’s application to change his medical liability expert to, inter alia, enable the defendant to place before the court the gist of the proposed new expert’s opinions.  His Lordship further ordered the defendant to pay the costs of the 2 wasted hearings as he should have properly supported his application by exhibiting the opinion or, at least, the gist of the opinion of the new expert.  In this connection, I note that the judge who decided Yip Kwok Sun v Poly-style Limited also ruled (rather inconsistently, if I may say so) in Ehsanul Haq Bajwa v Hospital Authority, HCPI 1040/2004, unreported, 24 May 2013 at [16], [18], [61] & [70] that the plaintiff should pay the costs of a hearing wasted due to his failure to adduce the gist of his proposed replacement liability and quantum experts’ opinions.

55.  I attach no blame to the defendants for having procured Mr Durasov’s report and prepared an English translation thereof first.  This also softens the plaintiff’s complaint of delay by the defendants in making the Application.

Disposition

56.  For the above reasons, I am inclined to allow the Application subject to condition of payment into court by the defendants.

57.  As for costs, I repeat paragraph 50 above.  As I understand from Mr Wong SC, while the defendants accept that they are seeking the court’s indulgence and should bear the costs of the summons and the costs of and occasioned to the plaintiff by the change of expert, they would ask for the costs of the contentious hearing on 25 April 2016 which became necessary only because the plaintiff did not accept the offer contained in Robertsons’ letter of 25 January 2016. 

58.  As I have not heard detailed argument on the incidence of the costs of the hearing on 25 April 2016, I direct the defendants to file and serve written submissions thereon within 7 days, to be followed by the plaintiff’s written submissions within 7 days thereafter with leave to the defendants to make written reply submissions within 7 days thereafter.

59.  To enable me to decide the term of the condition for leave to the defendants to replace expert, the plaintiff shall within 7 days from today file and serve an estimate of the costs of and occasioned to it by the defendants’ change of expert and summons dated 15 December 2015.  This should include the costs of the hearing on 25 April 2016 (in case it is awarded to the plaintiff).  I should however make it clear that I do not expect anything like a taxation bill, nor do I intend to assess the plaintiff’s costs.  What I intend to do is to arrive at a figure that the defendants should pay into court.  I will take a broad brush approach so the costs estimate may take the form that is usually produced in support of a security for costs application.  The defendants shall have 7 days to comment on the plaintiff’s costs estimate.

60.  I will give further expert evidence directions once I deal with the costs of the 25 April 2016 hearing and finalise the condition.  However, I can indicate at this stage that, given that both Mr Donstov and Mr Durasov live in Moscow, I am minded to resurrect the directions for a joint expert meeting and joint expert report after the filing and service of Mr Donstov’s new supplemental report.

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 4089 OF 1994

________________________

________________________

__________________________________________

REASONS FOR DECISION

__________________________________________

1.  On 5 November 2013, I appointed Mr Helge Leiduck (“Mr Leiduck Jr”) as the next friend of Mr Herbert Leiduck (“Mr Leiduck”) (who was until his death on 23 March 2014 the 1^st defendant in this action) upon the application by summons dated 25 September 2013 on Mr Leiduck’s behalf (“Next Friend Application”). I now give my reasons and rule on costs. As this matter has long ceased to be contentious, I hope I will be forgiven for being brief.

2.  The events leading to the Next Friend Application have been set out in detail in paragraphs 2 to 15 of my earlier Decision dated 22 April 2014 (“22.4.2014 Decision”),[1] which I shall not repeat.

3.  By a letter dated 23 October 2013 from Baker & McKenzie, the plaintiff’s then solicitors, to the court (“B&M Letter”), the plaintiff indicated that, while it would not oppose, or file evidence in relation to, the Next Friend Application, it made no admission to (1) the necessity of appointing a next friend for Mr Leiduck or (2) the suitability of Mr Leiduck Jr as next friend, the burden of proof of which is on the applying party.  The B&M Letter then set out in four pages what were in effect submissions on these 2 issues.

Whether Mr Leiduck was in need of a next friend

4.  On the first issue, the following medical reports on Mr Leiduck (“Reports”) were placed before the court:‑

(1)   a report dated 12 June 2013 by Dr Albrecht Stein who was appointed by the Superior State Court in Augsburg, Bavaria, Germany; and

(2)   reports dated 11 June and 16 August 2013 by Dr Klaus‑Dieter Pfeffer.

5.  I have in paragraphs 8 to 12 of the 22.4.2014 Decision set out the circumstances in which each of the Reports came to be commissioned; the questions addressed by them; the conclusions reached on such questions by the doctors and how the Reports came to be placed before this court, which I shall not repeat.

6.  There is no dispute that mental capacity is “issue specific” and that the test applicable to the appointment of next friend under Order 80 rule 1 for a party to legal proceedings who is under disability is whether such party is capable of understanding, with the assistance of such proper explanation from legal advisers, the issues on which his consent or decision is likely to be necessary in the course of the proceedings.  The focus of the enquiry is on the litigation under consideration rather than the whole of that person’s property and affairs.  See Ng Hong Ki v Leung Fong Kiu [2012] 1 HKLRD 435 (CA), per Kwan JA at §34.

7.  The plaintiff considered the said medical evidence to be “somewhat inadequate” as it did not report on Mr Leiduck’s competence or otherwise as a party to these proceedings but were dealing with his competence or otherwise to participate in court proceedings as a witness.

8.  My attention was specifically drawn by those acting for the plaintiff to:‑

(1)   paragraph 3.1 of Dr Stein’s said report which stated that Mr Leiduck understood for the most part his advice that he had the right to remain silent and that Dr Stein was not subject to the obligation of confidentiality usually owed by a physician to a patient and that Mr Leiduch was able to grant a valid confidentiality waiver; and

(2)   the statement in the letter dated 16 October 2013 from Robertsons, solicitors for the defendants, to the court that Mr Leiduck was able to provide them with relevant instructions in relation to the resolution of the issue regarding his competence.

9.  The plaintiff further reserved the right to make further submissions on this issue after having sight of the medical expert evidence to be filed for determining Mr Leiduck’s competence to give evidence on various dates during the period from 7 January 2008 to 22 August 2013 and to continue to give evidence thereafter.

10.  Although Mr Leiduck was not specifically assessed with reference to the test applicable for the appointment of a next friend, I was satisfied on the materials that were available to me as at the hearing on 5 November 2013 that he had become in need of a next friend:‑

(1)   Firstly, although Dr Stein and Dr Pfeffer were expressing views on Mr Leiduck’s fitness to be questioned in court, they had in their said respective reports set out in detail their primary findings of Mr Leiduck’s mental state upon which they based their conclusions of his incompetence as a witness.  I was entitled to, and I did, take into account those findings, which showed considerable and pervasive cognitive decline on the part of Mr Leiduck.

(2)   Secondly, I had before the hearing on 5 November 2013 reviewed the transcript of Mr Leiduck’s testimony on 16, 19, 21 and 22 August 2013 to remind myself of Mr Leiduck’s performance in the witness stand on those dates, which was largely taken up by Mr Horace Wong SC, counsel for the defendants, attempting to re‑examine Mr Leiduck.  I was entitled to, and I did, take into account, the manner in which Mr Leiduck testified.  It was a laborious exercise, to put it mildly.  One would have particularly noticed, in Mr Wong SC’s words, “the deteriorating condition of [Mr Leiduck], the drifting states that he frequently exhibited, the confusion with the timing and sequence of events, the difficulties that he encountered in comprehending questions of counsel and appreciating the significance of those questions affecting his interest, and the delusional and illogical evidence that he gave”. 

(3)   It is in my view a matter of common sense that there is an appreciable risk that a party to proceedings of the nature and complexity such as this one and suffering and exhibiting the cognitive deficits recorded in the Reports and manifested in court would be incapable of understanding, even with the assistance of proper explanation from legal advisers, the issues on which his consent or decision is likely to be necessary in the course of the proceedings.

(4)   Thirdly, I also took into consideration Mr Leiduck Jr’s evidence in his 4^th Affidavit dated 23 September 2013 that he observed a clear deterioration in Mr Leiduck’s mental capabilities since the middle of May 2013 and that Mr Leiduck’s condition further worsened rapidly between June and August 2013 so much so that the said successive reports by Dr Pfeffer were commissioned.

11.  Against such evidence, the fact that Mr Leiduch may on odd occasions still be able to give instructions on limited matters was neither here nor there.  What I had to assess was his capability to understand, with the assistance of proper explanation from legal advisers, the whole range of remaining issues on which his consent or decision would be likely to be necessary as these proceedings progressed.

Whether Mr Leiduck Jr should be appointed

12.  The plaintiff was critical of Mr Leiduck Jr for this purpose on 2 broad grounds:‑

(1)   He was resident in Germany.  Therefore, he could not properly be subject to the control and supervision of this court.  Problems may also arise in the enforcement of orders that may be made against Mr Leiduck or Mr Leiduck Jr personally.

(2)   The plaintiff was doubtful if Mr Leiduck Jr was capable of acting with propriety and impartiality and of representing Mr Leiduck’s interests with fairness at all times.  Such doubt arose from the plaintiff’s suspicion that Mr Leiduck Jr had not been full and frank to the court as regards Mr Leiduck’s mental condition.

13.  As a result of its reservations about Mr Leiduck Jr, the plaintiff directed my attention to the court’s power to appoint the Official Solicitor as next friend to conduct proceedings on behalf of a mentally incapacitated person under section 4(1)(a) of the Official Solicitor Ordinance (Cap 416).

14.  In an ideal world, one would generally prefer appointing a next friend who can be more effectively controlled and supervised by the court and against whom orders of this court may be enforced as a matter of course by reason of his presence within the jurisdiction.

15.  However, the plaintiff’s concerns must be weighed against the reality of the situation facing the court and the parties as at 5 November 2013:‑

(1)   The trial before me came to an abrupt stop due to Mr Leiduck’s mental condition after over 35 days in court from 4 February to 22 August 2013, which trial was conducted with reference to over 20 bundles of documents disclosed by the parties. 

(2)   Mr Leiduck was resident in Germany where he would stay without any question of his coming or being brought to Hong Kong.

(3)   It was anticipated that there was going to be inquiry into Mr Leiduck’s competence as a witness which would most likely involve the examination of Mr Leiduck in Germany, the discovery of his medical records that went back many years, probably all written in German and to be obtained from multiple sources in Germany and the interview of family members, friends and carers who were also in Germany.

(4)   In these circumstances, one would logically have expected the expert to be appointed to assist in this inquiry to be one practising in the relevant disciplines in Germany.

(5)   Other than Mr Leiduck Jr, no other candidate having an existing connection, and hence familiarity, with the case, Mr Leiduck or Germany had been identified.

16.  In light of these circumstances, it would be wholly unrealistic to saddle the Official Solicitor or any other stranger with the responsibility and burden of continuing these proceedings on behalf of Mr Leiduck.  In any event, the Official Solicitor should be appointed only if there is no other person fit and willing to act, which was not the case here.  See section 4(1)(b) of the Official Solicitor Ordinance.

17.  Against this background, while it would have been apparent from the 22.4.2014 Decision that I was also not entirely satisfied with the timing in which Mr Leiduck’s potential incompetence was brought to light, I did not consider it worthwhile to hold off the appointment of Mr Leiduck Jr, which would have brought these proceedings to a complete halt, in order to get to the bottom of when exactly Mr Leiduck Jr acquired knowledge of Mr Leiduck’s loss of competence or should have been alerted to such possibility. 

18.  For the avoidance of doubt, I should add that there was no basis for the plaintiff to question Mr Leiduck Jr’s independence if independence is understood in the relevant sense, which is being at risk of being subject to the influence of the opposite party or anyone having interests adverse to those of Mr Leiduck.  See SX v LW, HCMC 8/2011, unreported, Mimmie Chan J, 30 July 2013, §§16, 20, 22 and 29.

Costs

19.  Although the arguments in favour of the appointment of Mr Leiduck Jr prevailed at the end of the day, I see no basis for the plaintiff to be visited with the costs of the Next Friend Application, the need for which cannot in any way be attributed to the plaintiff.

20.  On the other hand, while the Next Friend Application was not a matter on which the plaintiff should have had no say and the matters raised in the B&M Letter were not entirely invalid, I find the plaintiff’s stance of formally not opposing the application and then turning up with both leading and junior counsel to effectively oppose the application at the hearing to be disingenuous.  I would have been sufficiently assisted by the B&M Letter.

21.  In the circumstances, I am prepared to order the 1^st defendant to pay the plaintiff only the costs of the B&M Letter to be assessed summarily.  The plaintiff should file and serve a statement of costs within 14 days.  The 1^st defendant should file and serve a statement of objections (if any) within 14 days thereafter.  The plaintiff should have 14 days to respond to the 1^st defendant’s objections (if any).

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 4089 of 1994

__________________

__________________

__________________

J U D G M E N T

__________________

The Competency Issue

1.  Before the court is what has become known in these proceedings as the “competency issue” which encompasses the following questions:

(1)  whether the late Mr Herbert Leiduck (“Mr Leiduck”) (who was until his death on 23 March 2014 the 1^st defendant in this action and one of the witnesses for the defendants) was, at the time of his examination on 30 January and 9 February 2014 by Professor Dr med Hans Förstl (“Dr Förstl”),[1] incompetent to give evidence in these proceedings within the meaning of section 3(b) of the Evidence Ordinance (Cap 8) (“EO”);

(2)  if so, since which date had Mr Leiduck become so incompetent;

(3)  in particular, whether Mr Leiduck was so incompetent on the dates when he swore/signed his affidavits/witness statements/answers to interrogatories, signed statements of truth verifying the defendants’ pleadings and gave oral evidence; and

(4)  whether and, if so, how likely Mr Leiduck might recover from his incompetence in the future.

2.  The answers to questions (1)[2] and (4)[3] have since lost significance as Mr Leiduck never resumed giving evidence after 22 August 2013 (save that his condition in January and February 2014 as observed by Dr Förstl might throw light in the retrospective assessment of his mental health in the preceding years).

3.  With regard to question (3), Mr Leiduck signed statements of truth to verify the defendants’ pleadings; answered interrogatories administered by the plaintiff on oath; swore/signed affidavits/witness statements and gave viva voce testimony from a business centre in Germany (where he resided) via video link as follows:[4]

Date	Event
7.1.2008	1st affidavit
9.12.2008	2nd affidavit
25.6.2009	3rd affidavit
30.3.2010	4th affidavit
6.4.2010	(1st) 5th affidavit (which sought to confirm all matters in the defendants’ pleadings that had not been expressly verified or otherwise mentioned or dealt with in any of Mr Leiduck’s affidavits)
16.11.2010	Statement of truth of smended points of claim re fraud
27.9.2011	(2nd) 5th affidavit
11.1.2012	6th affidavit
19.9.2012	Witness statement
15.11.2012	Supplemental witness statement
15.12.2012	Statement of truth of consolidated points of claim
23.1.2013	Statement of truth of consolidated points of reply
28.1.2013	Answer to interrogatories
25.2.2013	Examination in chief and cross‑examination
27.2.2013	Cross‑examination
1.3.2013	Cross‑examination
5.3.2013	Cross‑examination
6.3.2013	Cross‑examination
7.3.2013	Cross‑examination
10.4.2013	Cross‑examination
11.4.2013	Cross‑examination
8.5.2013	Cross‑examination
9.5.2013	Cross‑examination
13.5.2013	Cross‑examination
14.5.2013	Cross‑examination
15.5.2013	Cross‑examination
6.6.2013	Cross‑examination
7.6.2013	Cross‑examination
16.8.2013	Cross‑examination & re‑examination
19.8.2013	Re‑examination
21.8.2013	Re‑examination
22.8.2013	Re‑examination

4.  Section 3(b) of the EO provides as follows:

“The following persons only shall be incompetent to give evidence in any proceedings‑

(a) (Repealed 70 of 1995 s 2)

(b) persons of unsound mind, who, at the time of their examination, appear incapable of receiving just impressions of the facts respecting which they are examined or of relating them truly; and no person who is known to be of unsound mind shall be liable to be summoned as a witness without the consent previously obtained of the court or person before whom his attendance is required.” (emphasis added)

5.  The competency issue, including the terms of question (3) and the written evidence to be included in that question (see para 3 above), was drafted by agreement between the parties and approved by me by para 1 of the Order dated 5 November 2013 as amended on 24 December 2014.

6.  Although the relevant dates in question (3) were identified by agreement between the parties after the hearing on 5 November 2013 and it was the plaintiff who specifically asked for the dates when Mr Leiduck signed the statements of truth relating to the defendants’ pleadings to be included in question (3),[5] Mr John Yan SC (leading Ms Sara Tong) pointed out in their closing submissions on the competency issue that EO section 3(b) prevents persons who are incompetent within its meaning from giving evidence and a person is not giving evidence by signing a statement of truth in respect of a pleading or an answer to interrogatory.

7.  On reflection, I tend to agree that one is not, in ordinary parlance, giving evidence in signing a statement of truth verifying a pleading so that section 3(b) has no application to such an act.

(1)  The primary purpose of the requirement for a pleading to be verified by a statement of truth is to ensure that such document accurately reflects the true case of the party who puts forward it and to discourage pleadings which are unsupported by evidence, are either untrue or wholly speculative and which are put forward in the hope that something will turn up during discovery or the trial.  See Hong Kong Civil Procedure 2017, vol 1, para 41A/1/1.

(2)  In this regard, I note from the provisions in Order 41A, rule 3(1)(b), (2), (3), (4), (6), (7), (8), (9) and (10) of the Rules of the High Court (Cap 4A) that a statement of truth in respect of a pleading is required to be signed by a responsible person of the party who puts it forward, as opposed to a person or persons whose evidence will prove the facts asserted in the pleading.

(3)  A pleading, even verified by a statement of truth, does not function, and cannot be adduced, as evidence.  The facts asserted in a pleading so verified will still have to be proved in the usual way by evidence in the proper sense of the word.

8.  As Mr Leiduck was not giving evidence when he signed the statements of truth respecting the defendants’ pleadings, there is no need to investigate his competence as a witness when he signed those statements of truth on 16 November 2010, 15 December 2012 and 23 January 2013.

9.  Answers to interrogatories, however, stand on a different footing, to which section 3(b) applies.

(1)  The administration of interrogatories is part of the process of discovery of facts.  See Hong Kong Civil Procedure 2017, vol 1, para 26/0/2. 

(2)  Answers to interrogatories are given on oath. 

(3)  Answers to interrogatories, when put in, form part of the general body of the evidence in the case.  See Hong Kong Civil Procedure 2017, vol 1, para 26/7/1.

(4)  In this instance, the only remaining relevant answer[6] in Mr Leiduck’s Answers to Interrogatories dated 28 January 2018 arose out of and is related to what Mr Leiduck had said in para 13 of his witness statement dated 19 September 2012.

I shall therefore have to inquire into Mr Leiduck’s competency when he signed the Answers to Interrogatories on 28 January 2013.

These Proceedings

10.  This action was commenced on 30 April 1994 by the plaintiff (then known as Mercedes Benz AG) to recover certain monies[7] (together with interest) that had been advanced by it to one Intercontinental Resources Societé Anonym Monegasque (“IRSAM”), a company incorporated in the Principality of Monaco and of which Mr Leiduck was the sole owner and president, pursuant to an agreement contained in or evidenced by a letter dated 8 July 1993 from the plaintiff to IRSAM.

11.  Prior to the issue of the writ of summons herein on 30 April 1994, on 29 April 1994, the plaintiff applied for and obtained a mMareva injunction (“injunction”) against both Mr Leiduck and Intercontinental Resources Company Limited (“IRC”), a company incorporated in Hong Kong and of which Mr Leiduck was a 99.998% shareholder and a director, upon the usual cross‑undertaking as to damages (“undertaking”).

12.  The injunction was applied for and granted on the strength of an affidavit made on 29 April 1994 by Mr Paul John Carolan, then a partner of Baker & McKenzie (“B&M”), former solicitors for the plaintiff.  More particularly, the plaintiff joined IRC as the 2^nd defendant and sought to attach IRC with liability as a constructive trustee on the basis that it had received information from one Jacques Lefort (“Lefort”), a magistrate in Monaco investigating various criminal complaints against Mr Leiduck, that US$6 million of the monies paid by the plaintiff to IRSAM had been misapplied towards the repayment of a loan of which IRC was a co‑borrower in July 1993. 

13.  In fact, this information was wrong.  The monies advanced by the plaintiff to IRSAM had not been used by or for the benefit of IRC.

14.  By a letter dated 14 May 1994 from B&M to IRC’s then solicitors, the plaintiff advised IRC that it would have the injunction discharged as against IRC and would not resist an order for costs in favour of IRC provided that IRC would not claim damages pursuant to the undertaking.  The parties’ solicitors then agreed over the telephone and confirmed by letters on 16 May 1994 that the plaintiff would pay IRC’s costs and disbursements on an indemnity basis and that IRC would make no claim for damages pursuant to the undertaking (“settlement agreement”).

15.  The injunction was discharged by consent, and the action discontinued, as against IRC on 17 May and 22 August 1994 respectively.

16.  As against Mr Leiduck, the service of the writ of summons herein on him in Monaco was, after the plaintiff’s unsuccessful appeals to the Court of Appeal and Privy Council, finally set aside and the injunction against Mr Leiduck discharged on 26 July 1995 for want of jurisdiction over him by the Hong Kong courts.

Defendants’ Application and Case for an Inquiry as to Damages Caused to them by the Injunction

17.  Then, after the lapse of more than 10 years, by a summons issued on 23 July 2007, in enforcement of the undertaking, the defendants apply for an inquiry as to the damages suffered by them by reason of the injunction and for payment of the sum(s) found due upon such inquiry.

18.  It is unnecessary for present purposes for me to set out the defendants’ entire case for an inquiry as to damages.  I shall identify only those aspects to which Mr Leiduck’s evidence may relate.

19.  First, on liability, having agreed not to enforce the undertaking, it is incumbent upon IRC to have the settlement agreement set aside before it can claim damages. In this regard, IRC’s case for setting aside the settlement agreement is premised partly[8] upon:

(1)  the plaintiff having bribed Lefort for information that he had obtained from his investigation into the affairs of Mr Leiduck and companies controlled by him including IRC as follows:

(a) that in about early 1994, Lefort indicated to one Dieter Fink (“Fink”), a former sale executive in charge of the plaintiff’s Eastern European Operations, that he wanted to obtain a “classy” Mercedes car at “a cheap price”, which indication was meant and understood to be a request for a luxurious Mercedes Benz car as a free gift in return for co‑operating with the plaintiff;

(b) that Fink passed on such request to a director of the plaintiff in charge of sales surnamed Hubbert (“Hubbert”); and

(c)  that in about February 1994, Lefort received money in cash from an employee of the plaintiff and purchased a Mercedes Benz E300 from distributeur SAMGF in exchange for Lefort providing to the plaintiff information that he obtained from his investigation into the affairs of Mr Leiduck and companies controlled by him including IRC; and 

(2)  the defendants first discovering that the plaintiff had obtained information from Lefort through bribery on 16 March 2006 when Mr Leiduck had a telephone conversation with Fink who told him about Lefort’s said request and his passing the same onto Hubbert.

20.  As for damages, the defendants claim damages under 2 heads.  Firstly, Mr Leiduck or alternatively IRC claim to have suffered loss of profits (in the form of commissions to the tune of €90 million minus expenses) under a housing development project to build 15,000 houses in the Leningrad and Tula regions of Russia for the Russian Armed Forces withdrawing from East Germany following the dissolution of the Warsaw Pact (“housing project”). 

21.  Secondly, it is also the defendants’ case that the injunction ruined IRC.  IRC claims damages for loss of the value of its business.  Alternatively, Mr Leiduck, holding 99,998 out of the 100,000 shares of and in IRC, claims to have lost the opportunity to sell his IRC shares.

Mr Leiduck’s Evidence

22.  To put the discussion and assessment of Mr Leiduck’s competence as a witness in context, it is useful to have an outline of his evidence.

23.  In this regard, for reasons that will become apparent shortly (see para 94‑96 below), it is not necessary for me to be concerned with Mr Leiduck’s testimony in court.

24.  Turning then to his written evidence, I note at the outset that much of Mr Leiduck’s affidavits, witness statements and answers to interrogatories (though voluminous) in fact dealt with many matters that are strictly speaking irrelevant (or have since become irrelevant) to the defendants’ claim for damages against the plaintiff pursuant to the undertaking (and which I shall for such reason have to ignore in deciding whether the defendants are entitled to an inquiry of damages).  Obvious examples include Mr Leiduck’s version of the transaction giving rise to the plaintiff’s substantive claims against him in this action and how and why it did not go through; what Mr Leiduck saw as the plaintiff’s persecution of him, including the pursuit of criminal complaints and prosecution against him in Monaco; the treatment received by Mr Leiduck under the criminal justice system in Monaco particularly his incarceration in a Monegasque prison for 33 months from 19 October 1993 to 22 June 1996 without trial, followed by convictions of charges which Mr Leiduck said were trumped up before the criminal court in Monaco on 23 May 2000 and a sentence of a term of imprisonment which Mr Leiduck did not actually serve; what an independent French parliamentary report by a taskforce of the National Assembly of France said about the handling of Mr Leiduck’s case by Monaco; the various efforts made by Mr Leiduck after May 2000 to clear his name; Mr Leiduck’s rebuttal of the plaintiff’s allegations that he had defrauded various third parties; the alleged inducement and intimidation by the plaintiff of Mr Philip Yip (“Yip”), the then general manager of IRC, to agree on behalf of IRC not to claim damages by a promise of business dealings with Yip and a threat to sue Yip personally (which allegations, though made on affidavit, do not form part of the defendants’ pleaded case); and the investigation and evidence of two investigators that the defendants no longer rely on as indicated by Mr Horace Wong SC (leading Mr Clark Wang) on Day 4 (7 February 2013).

25.  Further, in view of the statutory test of incompetence (see para 4 above), we may also put aside matters that were clearly spoken to by Mr Leiduck not from his personal perception and recollection, eg where he was merely repeating the contents of a document[9] and where he was expressly reiterating what he had been given to understand by others.[10]

26.  In short, I shall concentrate on matters that Mr Leiduck necessarily deposed to first hand from his personal perception and recollection.

27.  In this regard, first, in support of the defendants’ case for the setting aside of the settlement agreement, Mr Leiduck’s 1^st affidavit (para 8, 15, 16 and 17) and 2^nd affidavit (para 2, 4, 5 and 6) dealt with the alleged bribery of Lefort by the plaintiff by setting out Mr Leiduck’s telephone conversation with Fink on 16 March 2006; a subsequent telephone call made by Mr Leiduck to one Dieter Schultz (a director of the plaintiff in charge of finance) who told Mr Leiduck that the car would not be supplied from Stuttgart but made available through a local dealer (which conversation Mr Leiduck relied on as corroborating what Fink had told him); and a letter dated 27 March 2006 written by Mr Leiduck to Mr Karl Ulmer, his lawyer in Germany, advising him of his telephone conversation with Fink on 16 March 2006.

28.  Second, in support of the defendants’ claim for damages for loss of commissions under the housing project, Mr Leiduck deposed to his “good relations with the Russians”; the signing of, inter alia, a memorandum of understanding dated 23 December 1991 between the Russian Ministry of Defence, Russia’s State Military Industrial Association Konversija, the Urban Development GMBH and IRSAM (represented by Mr Leiduck); IRC’s initial intended technical supporting role in the housing project; the replacement of IRSAM by IRC after the suspension of the operation of IRSAM by the Monegasque authorities in October 1993 and the withdrawal of the Russians from the housing project as a result of the injunction.  See para 3 and 6 of Mr Leiduck’s 3^rd affidavit; para 34 of Mr Leiduck’s (2^nd) 5^th affidavit; para 5‑7 of Mr Leiduck’s 6^th affidavit; para 15‑21 of Mr Leiduck’s witness statement and para 5 of Mr Leiduck’s supplemental witness statement.

29.  Third, in support of IRC’s claim for loss of the value of its business or his own alternative claim for loss of opportunity to sell his IRC shares, Mr Leiduck deposed to how he founded IRC in 1972 and developed and expanded its business over the years until about 1993 when he became desirous of devoting his time and energy to building his business in Eastern Europe and started to explore the possibility of either selling 70% of his IRC shares to Yip or disposing of all his IRC shares to two Russian gentlemen surnamed Temerko and Mukhin.  According to Mr Leiduck, with Yip, he had only got to the stage of eliciting an expression of interest from Yip but they had not agreed on or even negotiated any details.  With the two Russians, Mr Leiduck had indicated to them that he was looking for something in the region of US$30 million.  Further, Mr Leiduck had also been told by his son, Mr Helge Leiduck (“Mr Leiduck Jr”), between 28 July and 27 September 2011 that Mr Leiduck Jr had been in negotiation with a Russian company called Stern‑Stroy Limited for a sale of 70% of Mr Leiduck’s IRC shares for US$20 million plus a promise of additional investment of up to US$40 million in IRC.  Mr Leiduck also asserted the belief that if it had not been for the injunction, he would have sold his IRC shares (which were worth US$30‑40 million), or a substantial portion thereof, to one of these 3 potential buyers.  See para 2‑26, 33 and 35‑39 of Mr Leiduck’s (2^nd) 5^th affidavit; para 10‑14 of Mr  Leiduck’s 1^st witness statement and the first answer of Mr Leiduck’s answer to interrogatories.

Circumstances under which Competency Issue Arose

30.  The court received Mr Leiduck’s written evidence and further heard his oral testimony while being unaware that:

(1)  On 7 July 2011, following a report by Mr Leiduck’s wife of incidents of visual hallucinations (some scenic) and disorientation, a Dr A Gallard, a specialist in neurology, had diagnosed Mr Leiduck to be suffering from dementia with Lewy‑bodies (“DLB”).

(2)  On 3 January 2012, a Dr F Sondhauss, a consultant/specialist for psychiatry and psychotherapy, had made psychological findings of, inter alia, erratic and long‑winded thought processes, reduced attention and concentration, impaired long term memory, paranoid thoughts, misperceptions in the form of visual hallucinations and impaired relation to reality and diagnosed Mr Leiduck to be suffering from moderate dementia. 

31.  As it turned out, Mr Leiduck did not complete his evidence in re‑examination. On 22 August 2013, before Mr Leiduck resumed his testimony under re‑examination, Mr Wong SC handed up to the court the English translation of a medical report dated 12 June 2013 (“Stein Report”) by a Dr Albrecht Stein which:

(1)  was commissioned by the court in Augsburg, Bavaria, Germany as a result of Mr Leiduck’s unwillingness and inability to testify in certain criminal proceedings against a third party;

(2)  addressed the question “whether Mr Leiduck is able to make a statement as a witness” in terms of his abilities to reasonably express his interests during the court room proceedings, to formulate his statement as a witness in a comprehensible manner, to answer specific questions of the parties in the case adequately and truly, to follow court proceedings adequately, to meet the obligation to tell the truth, to understand questions and statements of other parties in the proceedings and to adequately and actively assert his own legal interests;

(3)  noted that Mr Leiduck was suffering from dementia and cerebral‑organic psycho‑syndrome and taking medication for dementia (exelon); and

(4)  concluded that Mr Leiduck was then completely unable to participate as a witness in court proceedings, with no prospect of recovery.  In particular, it was said, inter alia, that Mr Leiduck had considerable deficiencies in both long and short‑term memory; that due to the considerable reduction in his memory function, particularly the long‑term memory, he could not be questioned “responsibly” on things that happened many years ago; that many experiences were increasingly processed by Mr Leiduck in a delusional manner as a result of his advanced age and the illness pattern of dementia and the cerebral‑organic psych‑syndrome which would only intensify; and that he could no longer answer sophisticated questions which went beyond his personal situation in a manner which was adequate and met his obligation to tell the truth.

32.  In addition to the Stein Report, Mr Wong SC also mentioned that Mr Leiduck had been examined by some other doctor though counsel was then not in a position to provide any meaningful detail.

33.  The trial was adjourned to 28 August 2013 for the defendants to make full and proper disclosure of all the information that they had at hand regarding Mr Leiduck’s mental health and capacity and for both parties to consider the implications of such information on the status of the evidence already given by Mr Leiduck and prepare submissions on what the court could and should do in the circumstances.

34.  By the 1^st affidavit of Mr Jeremy Levy of Robertsons (“Robertsons”), solicitors for the defendants, made on 23 August 2013, the defendants exhibited two other medical reports on Mr Leiduck compiled on 11 June 2013 and 13 August 2013 (“Pfeffer Reports”) by a Dr Klaus‑Dieter Pfeffer, a specialist in psychiatry and psychotherapy, following examinations of Mr Leiduck on 7 June and 9 August 2013 and which concluded that Mr Leiduck was “legally incompetent, incapable of being questioned and unfit to face proceedings in view of his cognitive and emotional disturbances as well as his physical impairment”.

35.  By the resumed hearing on 28 August 2013, it was recognised by all concerned that the contents and conclusions of the Stein Report and the Pfeffer Reports put into question Mr Leiduck’s fitness both as a party and as a witness.

Competency Issue Directions

36.  On 5 November 2013, I appointed Mr Leiduck Jr as next friend for Mr Leiduck for the purpose of carrying on these proceedings on Mr Leiduck’s behalf, thereby dealing with Mr Leiduck’s fitness as a party.  After Mr Leiduck’s death, by an Order dated 9 April 2014, Mr Leiduck Jr was appointed to represent Mr Leiduck’s estate in this action and to carry on this action on behalf of Mr Leiduck’s estate.

37.  On 5 November 2013 and subsequently on 8 November and 3 December 2013, with a large measure of agreement between the parties, I also gave and revised directions (“competency issue directions”) for assessing Mr Leiduck’s competence as a witness.

38.  More particularly, pursuant to the competency issue directions and by a joint letter of instructions dated 27 December 2013 from the parties’ solicitors (settled by the court failing full agreement between the parties), Dr Förstl[11] was appointed as joint expert to assess Mr Leiduck’s mental condition at the various times material to the competency issue.

39.  By his report dated 24 March 2014 (“1^st Förstl Report”) and oral evidence in court on Days 38‑40 (14‑16 April 2014), Dr Förstl expressed the views:

(1)  that Mr Leiduck was incompetent on 30 January and 9 February 2014 when he was examined by Dr Förstl;

(2)  that Mr Leiduck would not recover from such state of incompetence;

(3)  that there is no sufficient medical evidence reliably pointing to Mr Leiduck being of “unsound mind” before the diagnosis of DLB in July 2011;

(4)  that Mr Leiduck was incompetent in the relevant sense on all the occasions on which he gave oral evidence, save for the 8 May 2013 session;

(5)  that there is no sufficient evidence pointing to whether Mr Leiduck was competent or incompetent when he made his various affidavits and witness statements etc after July 2011.

40.  At the conclusion of Dr Förstl’s evidence in court on 16 April 2014, Mr Yan SC applied for leave to adduce additional expert medical evidence from Professor Felice Lieh Mak (“Prof Lieh Mak”)[12] on the competency issue, more particularly, Mr Leiduck’s competence or otherwise prior to February 2013.  In this regard, Mr Yan SC had, on 14 April 2014 before the commencement of Dr Förstl’s oral evidence, handed up a report dated 14 April 2014 by Prof Lieh Mak (“1^st Lieh Mak Report”) which expressed the contrary opinion that Mr Leiduck had become incompetent from as early as 2008 and remained so throughout the material times up to January 2013.

41.  I heard the application on 17 April 2014.  For the reasons set out in the decision handed down herein on 22 April 2014, by an order dated 25 April 2014, I gave the plaintiff leave to adduce expert evidence from Prof Lieh Mak on whether Mr Leiduck was incompetent on the various dates from 7 January 2008 to 28 January 2013 when he signed affidavits, witness statements, statements of truth verifying the defendants’ pleadings and answers to interrogatories.

42.  By an order dated 12 December 2014 made by consent, I gave the defendants similar leave to adduce expert evidence from Prof Helen Chiu Fung Kum (“Prof Chiu”)[13] on the same issues in response to Prof Lieh Mak’s reports.

Test of Incompetence

43.  I have already set out the text of s 3(b) of the EO in para 4 above.  There is no direct local authority on the meaning of section 3(b).[14]  English cases do not assist given the different tests for competence.[15]

44.  In response to Dr Förstl’s request for clarification of the meaning of incompetence under section 3(b), by Robertsons’ email dated 25 February 2014 to Dr Förstl, it was explained to Dr Förstl, inter alia, that a person falls within section 3(b) if and only if:

(1)  he is of unsound mind (which Dr Förstl called “criterion (1)” as a matter of shorthand in the 1^st Förstl Report); and

(2)  by reason of his being of unsound mind, he appears incapable of

(i)  receiving just (in the sense of “right”, “proper” or “correct”) impressions of the facts respecting which he is examined (“criterion (2a)”); or

(ii)  relating such facts truly (“criterion (2b)”).

45.  That is to say, a person is not incompetent simply by reasons of his having any particular mental illness or condition, unless he thereby appears incapable of receiving just impressions of the facts respecting which he is examined or of relating such facts truly.

46.  Dr Förstl understood (correctly in my view) section 3(b) to be triggered if criteria (1), (2a) and (2b) are met in the following ways: (1) and (2a) are true; or (1) and (2b) are true; or (1) and (2a) and (2b) are true.

47.  With this understanding, in respect of each the 3 criteria, Dr Förstl looked for and considered:

(1)  criterion (1) (“unsound mind”): the diagnosis of DLB or evidence of other significant neuropsychiatric disease;

(2)  criterion (2a) (“incapable of receiving just impressions”): evidence of impaired recollection and comprehension of facts, more specifically, facts respecting which Mr Leiduck was examined; and

(3)  criterion (2b) (“incapable of relating facts truly”): evidence of impaired ability to present those facts.

48.  In fact, Robertsons’ email dated 25 February 2014 to Dr Förstl was settled by me, failing agreement between the parties.  In doing so, I was provided with, and I duly considered, the parties’ solicitors’ respective draft replies to Dr Förstl which in effect contained the parties’ submissions on the proper construction of section 3(b).  In other words, Robertsons’ email dated 25 February 2014 to Dr Förstl, as settled by me, in effect contained my ruling on the meaning of section 3(b).  Given the fundamental importance of providing the expert with accurate guidance on the statutory test of incompetence, if I were wrong, I would expect both or either of the parties to demand an oral hearing at which further and/or more detailed arguments could be made by the parties, following which I would rule on the issue.  If I were still considered wrong, I would expect either or both of the parties to try to set me right by an appeal to the Court of Appeal.  As it were, neither party expressed disagreement with the reply to Dr Förstl that I settled. 

49.  I therefore did not anticipate:

(1)  the embellishment now sought to be placed by the plaintiff on the test of incompetence under section 3(b) as it applies to Mr Leiduck’s pre‑trial written evidence that was not contained in B&M’s draft reply to Dr Förstl; or

(2)  the resurrection by the defendants of a submission which was made in Robertsons’ proposed reply to Dr Förstl, which I had considered and dismissed.

50.  For the plaintiff, Mr Yan SC read section 3(b) of the EO with the following emphases:

“The following persons only shall be incompetent to give evidence in any proceedings‑

...

(b) persons of unsound mind, who, at the time of their examination, appear incapable of receiving just impressions of the facts respecting which they are examined or of relating them truly; and no person who is known to be of unsound mind shall be liable to be summoned as a witness without the consent previously obtained of the court or person before whom his attendance is required.”

51.  Mr Yan SC argued that:

(1)  affidavits/affirmations and witness statements are not per se admissible as evidence of a witness in a trial, without the attendance, adoption and oral examination on oath of the deponents/witnesses in open court.  See Order 38, rule 1.

(2)  The word “examination” in the phrase “at the time of their examination” in section 3(b) refers to cross‑examination. 

(3)  Reading section 3(b) as a whole and construing its words (especially the phrase “at the time of their examination” and the other words emphasised by the plaintiff as shown in para 50 above) in context, the test of competence in section 3(b) does not apply to competence to provide written evidence but requires competence to give evidence as a witness in court and be subject to examination in court, by which counsel means cross‑examination.

(4)  Hence, in determining whether Mr Leiduck was incompetent as a witness on any particular date on which he signed an affidavit/witness statement, the test is whether he was incompetent assuming he was cross‑examined in court on that particular day, and not his competence to produce written evidence or to sign documents.

(5)  Mr Leiduck’s competence on each of the subject dates between January 2008 and January 2013 must therefore be assessed on the assumption he was to be cross‑examined in court on those dates.

52.  The plaintiff advanced this submission (which was not included in B&M’s draft reply to Dr Förstl on the statutory meaning of incompetence) to take advantage of some of the answers given by Dr Förstl during the following line of cross‑examination by Mr Yan SC on 15 April 2014:

“Q: So if you had been asked in 2012 whether Mr Leiduck should be allowed to be, or allowed to testify, you would still be — even if you had known that he had this great drive and great mission in life, you would have been very uncertain whether or not he would have performed well?

A: Yes. And I would have —

Court: By performing well you mean whether he would be competent?

A: Could really stand trial without serious frustration, right from the beginning. That would have been a cause for my hesitating to recommend that he should really do it. On the other side, that is what he wants to do and it has an almost therapeutic quality for him to pursue that matter. So I would have been torn.

Court: That's not what we are interested in finding out. I think that the question is not whether he would find the experience satisfying or frustrating, but whether he would be able to give admissible evidence. So again, we go back to the two criteria under the Evidence Ordinance.

A: You see me as a medical expert for the court. I saw myself as the doctor who has to give advice, is it healthy for him to pursue that matter or not?

Court: No, you advising the court. Not the patient, whether he should risk suffering further frustration by giving evidence in court. You are advising the court whether the court should accept his evidence as being given by a person who is competent to do so.

A: Had I been consulted as an expert for the court —

Court: In 2012.

A: ... by 2012, I would have made an attempt to explain that it will be very hard to deal with this patient properly in court, and that one has to approach him very carefully and with great sympathy, and that sessions should be shorter. So that he would have had to be handled with care. That is what my advice would have been. And I assume that had the written evidence already been available, I would have probably told the court there is nothing else to be gained from a video interview. Because I would have doubted in the patient's stamina and ability to perform during lengthy and repeated interviews. Speculation.

Q: Because you would have felt that if he had been tested and challenged, then he wouldn't be able to perform competently?

A: Yes. To perform as well, and add anything useful to the written material.

Court: Because of a deficiency in his verbatim memory?

A: Indeed.

Court: He wouldn't be in a position to add to his witness statements?

A: Yes. Obviously, one wants to get a picture of the person, and for that reason, I understand that it can be very important to really meet him perhaps also via a video interview, to have an impression who that person is, how decent, how serious he is. But that would have been the purpose of these encounters and not his cross‑examination about details in 1993, 1994.

Court: But the purpose of cross‑examination was for the court to make a finding as to whether his written evidence is true or not.

A: I understand.

Court: So are you saying that you would not advise the court to allow him to be cross‑examined because you think that he had by then become incompetent?

A: I would have assumed‑

Court: What, in the technical sense that we are talking about?

A: I would have assumed that under these difficult and challenging circumstances, nothing useful would come of it. Neither corroborating nor invalidating what has already been available and written on paper. So I think, had you known about the patient's dementia, you would have wanted to see him, meet him, have an impression, but you would probably also have abstained from very critically questioning him on certain details that he was no longer able to reproduce without any personal support, without any aid from written or other material.

Q: Shall we put it a slightly different way; if you had been asked in 2012, without seeing the results of the oral examination, but seeing everything else; the nurses' reports and so on, if you had been asked then: ‘Can this person be subject to normal cross‑examination before the court?’ What would your answer have been?

A: My answer would have been no, not to normal cross‑examination. But if you agree on a different modality, if that would have been possible, I think I would have said yes. I understand it is important for the court, both sides to meet the patient acoustically, visually, to have an impression. But it is for your information‑

Q: Assuming that there could not have been special arrangements made to accommodate him.

A: Yes.

Q: And he would be subject to the same strenuous cross‑examination that he was subject to that you saw. Would you have said that he would not be competent to testify?

A: I would have advised against it, feeling that under these circumstances, it may give a wrong impression and not really — I’m repeating myself now. Not really adding to what was already there and available. I understand that for court, somebody who is so difficult to interview gives a negative impression. And a quite an impressive, bold, a proud person, how astounding at his age, he has such ideas and still stands his ground. But then over the course of the interviews, this impression was not an altogether positive one, I guess. He was scolded and admonished, at least, and he could not even on certain occasions — probably made the impression he did not want to accept what he was being told about how to answer the questions. And then there were more and more moments — for example, this is a temporary situation, that he did not understand that you were warning him. And I guess during that period, you felt this is not an ordinary interview. It is a very special situation. That was then confirmed by medical evidence.

Court: But was it difficult, or was the cross‑examination difficult for him because he had by then lost his ability to receive correct impressions of events, facts and circumstances?

A: Yes, I think lost the ability to master his cognition, or to gain access to the events, the details that he needed to speak about. He had lost the ability to speak about it precisely, and that altogether did not give a positive impression, I feel. But I have no way to compare with other video interviews and protocols of that kind. It may be that even under other circumstances, similar situations arise and they are not so infrequent and not so specific for the patient and his situation we are dealing with right now. It is your experience, not mine. Perhaps even non‑demented individuals get challenged to such an extent that they reach their limit in the course of a 120‑minute video interview or during other hearings.

Q: What about, say, in July 2011. If by that point in time, you had Dr Galland's report and you had the reports from his wife about him being disoriented. Had the court asked you whether this patient would be fit to be cross‑examined in the same way that he was cross‑examined in 2013, what would you have said?

A: Well, so then I would have been very cautious and I would not have recommended it to a patient with dementia with Lewy‑bodies. With the understanding how important it is for Mr Leiduck and knowing that it is a very changeable condition I would have said, yes, why don't you — or provide the written evidence and add to the written evidence. But I would not have encouraged him really to undergo video interviews.

Q: Well, this is a question not from the perspective of the patient, but from the court. If the court had asked you in July 2011, ‘Is this a person who should be subject to cross‑examination in a court?’, what would you have said?

A: I would probably have said no.

Q: Thank you.

A: Not if this is an important part of the hearing of the trial. I would have probably have advised against it. Probably.

Q: Yes.

Court: Dr Forstl, you said a moment ago you wouldn't have recommended Mr Leiduck to be cross‑examined in court, but you would have recommended him to provide his evidence in written form.

A: Yes.

Court: Why is there a difference, depending on the form in which he gives evidence? If he had lost the ability to comprehend facts correctly and to relate facts truly, then certainly it would apply equally to his written evidence?

A: Your Ladyship, patients with changeable conditions, fluctuations, can use the better periods to do very useful tasks. But if a fixed timeframe is given, offered that he has to sit for the video interview between 10 and 12 on this or that day, he may not be in the right frame of mind just during this predefined‑

Court: This goes back to your point that he suffered, he suffered a form of dementia which fluctuated, so that as long as he gave instructions and prepared his written evidence during a period of normality, then that piece of evidence would not have been affected by his incompetence.

A: Yes.

Court: Because what we don't know is whether the affidavits and the written statements that we are concerned about were prepared during such periods.

A: Yes. That is what we need to assume if we assume that he has done it by himself or almost only by himself, and as discussed yesterday, there are reasons to assume that the largest part of the important parts, or most of it, is really drafted by himself.

Q: Yes, you would need to make two assumptions, wouldn't you? You would need to assume that he had drafted those affidavits, and you would also need to assume that he had drafted them in a moment of competence before you could confidently say that the court, or anyone, can rely on the contents of these affidavits.

A: Yes.

Q: Would that be correct?

A: That would be correct. So I was only looking for the evidence of incompetence.

Q: Yes, yes, I accept that.

A: You mentioned yesterday that there is so much Mr Leiduck Senior, writing the same person who is speaking. He uses the same ideas. He sometimes uses exactly the same phrasing, et cetera. And even during his oral interviews, he does indeed refer to what has been written in the affidavits. He doesn't always refer to that evidence accurately, to that material accurately, but the gist, of course, there is one line, one firm message. The harm that has been done to him and family.

Q: Yes.

Court: So dealing with his oral evidence. You wouldn't have — well, in 2011, 2012, you wouldn't have recommended the court to accept Mr Leiduck's evidence in cross‑examination unless his evidence could have been taken in a different way, unless we could all sit in the court and wait for a normal interval in his condition and question him during that time.

A: Yes.

Court: Is that what you're talking about?

A: Perhaps it would have been possible to ask a few introductory questions, about the weather, about the date, how his morning was, to get an impression about the mood he is in. You have done that informally on several occasions and your impression was not a negative one. Perhaps Mr Leiduck could have been, would have agreed to take a certain memory test before one starts asking the more difficult questions about remote events, et cetera, because that would probably have been changeable from interview to interview. Perhaps he would have agreed on that. I'm not sure whether this would be a way to go about this. And then, of course, I would have recommended that if you wanted — you cannot test his verbatim memory reliably. This will just not be possible. What you can get is a better picture of the person. And if the conversation about the background story would have been a friendly one and not a controversial one, perhaps more could have been gained. A more proper impression of the person could have been gained. I understand that this is not the way things are going under normal circumstances.

Q: But, Dr Forstl, even if one had adopted the approach you suggested, of giving him a memory test, at the beginning of every session, even if he had passed the memory test when he was first asked and when he first took the test, halfway through the interview he could have lost it as well.

A: You're right, yes.

Q: Thank you. Now, what if you had been asked in 2010 then?

A: Under which circumstances would I have been asked? I'm not a specialist for cardiovascular medicine. I could have encountered the patient during a confusional state and I could have seen him then. Perhaps that would have been reason enough for me, as I’m particularly interested in these diseases, to do a more extensive cognitive test, explaining to the patient, Mr Leiduck, that he might benefit from that. Because we can use medication to improve his cognitive performance at that time.

Q: But again, would you have been confident that he would have been competent throughout the period when he was cross‑examined?

A: Mr Leiduck had been admitted repeatedly in critical condition, also temporarily affecting his mind, his cognitive performance. I would not have been sure whether a situation like this would not have distressed him so badly with his cardiovascular disease, that a good outcome to the advantage of Mr Leiduck would have been expected. I think I would have been cautious as his doctor.

Court: How about as the court's expert?

A: As the court's expert, I would have said, yes, it's a confusional state. I have not found sufficient evidence in my cognitive test that there is a dementia. If it is a confusional state, it will simply pass. And during the interval, why not?

Q: And in 2008‑2009? If you had been asked?

A:  There were also periods of confusion and they are temporary, and if it's not too much stress for his heart, I would have said yes, it is possible.”

53.  According to Mr Yan SC, as Dr Förstl accepted that Mr Leiduck could not be subjected to the stress and challenges of a normal cross‑examination (whatever that may mean!) before the court in 2011 and 2012 and was equivocal as to whether Mr Leiduck could do so in 2008, 2009 and 2010, Mr Leiduck was not competent to provide written evidence either during those years.

54.  Mr Yan SC is essentially asking the court, before holding Mr Leiduck competent on the occasions between January 2008 and January 2013 when he provided written evidence, to require Mr Lieduck to be capable of withstanding a fictional cross‑examination in court, in addition to being free from any unsoundness of mind that made him appear incapable of receiving just impressions or giving true accounts of fact.

55.  Neither of the authorities cited by Mr Yan SC, properly read, supports this proposition.

(1)  R v Powell[2006] 1 Cr App R 31was concerned with a very young child who gave her evidence‑in‑chief through a pre‑recorded interview and was then cross‑examined orally before the court.  The evidence‑in‑chief through the pre‑recorded video indicated that the child just about passed the competence threshold under section 53(3) of the 1999 Act.  The discussion by Scott Baker LJ at para 33‑42 of the judgment of the English Court of Appeal, relied on by Mr Yan SC, dealt with the largely abortive attempt at cross‑examination in court.  The statement in para 33 that what is relevant is the complainant’s competence to give evidence at the time of the accused’s trial, to which my attention has been specifically drawn, has to be understood in this light.  I agree with Mr Wong SC that the case is therefore no authority for the proposition that assessmentof the competency of a witness in giving written evidence out of court at a time earlier than trial would have to be made by reference to a hypothetical oral examination that was never made or required of him. 

(2)  R v Chan Kin, supra,is again a case that concerned oral evidence given in court (by girls who were mentally challenged).  It has nothing to do with written evidence given outside court before trial.  Mr Yan SC sought to derive support from p 3 of the judgment.  However, as noted in footnote 14 above, the Court of Appeal was there dealing with how a judge who has been made aware that a witness about to give evidence suffers from some form of mental disability should proceed. 

56.  Free of authority, I have great difficulty with the plaintiff’s argument.

57.  The EO itself contemplates that evidence may be given orally or in writing.  See, for example, sections 9, 44 and 76(3).  Section 3 itself stipulates when a person is or becomes incompetent “to give evidence in any proceedings”, without distinguishing between oral and written evidence. 

58.  Indeed, there are many proceedings in which evidence is received entirely in the written form without any oral examination in court.  There can be no question that the written evidence to be used in these proceedings must not come from someone who is incompetent as a witness as defined in section 3(b).  There is plainly no place for an assumption of a fictional cross‑examination in court in proceedings that do not entail such a stage. 

59.  Section 3(b) provides in terms for a single test of incompetence (unsoundness of mind causing an appearance of inability to justly perceive or truly relate facts), without regard to the manner in which evidence is taken.  If the legislature had intended to treat oral and written evidence differently and to also require a witness who gives evidence in writing to be capable of standing up to an oral cross‑examination in court at the time when he signs his affidavit/witness statement, I would have expected such different treatment between oral and written evidence and additional requirement for competence of written evidence to be expressly spelt out in section 3(b), rather than being left to be inferred in the really convoluted manner suggested by the plaintiff.

60.  To my mind, there is no reason why the words “at the time of their examination” in section 3(b), on which Mr Yan SC placed particular reliance, need to be read as referring to cross‑examination in court only.  The examination of a witness at a trial takes place in three stages: examination‑in‑chief, cross‑examination and re‑examination.  This phrase is apt to be applied to all these three stages.  As I see it, it simply fixes the time at which a witness must not be incompetent. 

61.  Nowadays, the examination‑in‑chief of a witness in court routinely takes the form of confirmation by the witness of the contents and truth of the affidavits/witness statements made by him before trial.  Given that the stage of examination‑in‑chief is completed in two phases, for an affidavit/witness statement to be admissible as direct evidence, the witness must not be incompetent at the time when he is asked to affirm the content and the truth of the document in court.  In the event that the witness has by the time of the trial become incompetent as defined in section 3(b), his pre‑trial affidavits/witness statements may, in appropriate circumstances, be admissible as hearsay evidence provided that he was not competent at the time when he signed them.  It is only when the witness is shown to be incompetent within the meaning of section 3(b) both when he signed the affidavits/witness statements and when he is asked to verify them in court that such written evidence is inadmissible on the ground of incompetence.

62.  I reject the plaintiff’s submissions that Mr Leiduck’s competence to give written evidence is dependent upon his being able to handle a hypothetical cross‑examination in court at the time when he provided such written evidence and that Mr Leiduck’s written evidence was produced while being incompetent because Dr Förstl either found Mr Leiduck unable to, or was equivocal as to whether Mr Leiduck could, cope with such examination from 2008 to 2012.

63.  It follows that Mr Wong SC’s complaint that Mr Yan SC had, in breach of the rule in Browne v Dunn (1894) 6 R 67, failed to put to the three experts the necessity of imagining a hypothetical cross‑examination of Mr Leiduck in court in assessing his competency to produce written evidence has become academic.

64.  For the defendants, Mr Wong SC invited me to infer that the EO intends that the threshold level of competence required to escape the application of section 3(b) should be that commensurate with the intelligence expected of an ordinary seven year old child. 

65.  In making this argument, counsel referred to and relied on the repealed section 3(a) of the EO which rendered children under seven years of age incompetent to give evidence unless they appear capable of receiving just impressions of the facts respecting which they are examined and of relating them truly, thereby creating a rebuttable presumption of incompetence of a child under 7.  Section 3(a) was deleted with effect from 28 July 1995 to “improve the quality of the trial by focusing on the weight to be given to the child’s account and easing the decision‑making process”: R v Lam Chi Keung, supra,at 426E.

66.  Mr Wong SC reasoned that the effectively identical wordings of the tests of competence/incompetence in sections 3(a) and (b) suggest that the threshold for person of unsound mind should also be at the same level, i.e. the level of a seven year old child of ordinary intelligence.  And the abolition of section 3(a) did not raise this threshold as far as persons of unsound mind are concerned “as section 3(b) has remained unchanged (if not lower by reason of the apparent shift to focus on the weight rather than admissibility)”.

67.  I had rejected the defendants’ invitation to read into section 3(b) a threshold level of intelligence by refusing to adopt the part of Robertsons’ draft reply to Dr Förstl that made the same point.

68.  Mr Wong SC did not produce any authority supporting the correlation between sections 3(a) and (b) suggested by him, which I find to be non‑existent.

69.  First, had the legislature intended “intelligence” of any level to be a material factor in determining the competence/incompetence of a person of unsound mind, one would have expected some hint of this in section 3(b) which, however, makes no such reference at all.

70.  Second, it is clear from section 3(b) (and likewise the repealed section 3(a)) that the ability/inability of a witness of unsound mind to justly perceive or truly relate facts is not to be assessed in abstract but with reference to the matters respecting which he is examined.  Section 3(a) was concerned with child witnesses and matters respecting which such witnesses are examined.  The old rebuttable presumption that a seven year old child is competent to give evidence must thus be viewed in the context of the matters respecting which a child witness may be examined. 

71.  In this connection, one just has to look at the relevant written evidence given by Mr Leiduck as summarised in paras 27‑29 above.  I simply cannot see an average seven year old child even of ordinary intelligence receiving an impression, or giving an account, of matters of the nature and complexity dealt with by Mr Leiduck.

72.  I have no hesitation in rejecting the defendants’ invitation to read into section 3(b) a threshold level of “intelligence” once again.

Burden and Standard of Proof

73.  Section 3(b) itself is silent on the incidence of the burden of proving whether a witness is or is not a person of unsound mind who appeared incapable of justly receiving or truly relating facts.  In this connection, I am unable to accept Mr Wong SC’s suggestion that the section implicitly places on the party alleging incompetence the burden of proving the same because it chooses to provide for what constitutes incompetence and not what constitutes competence. Given that the purpose of section 3(b) is to prevent incompetent persons from giving evidence, it is natural for incompetence (rather than competence) to be defined.  How else should the section be worded?

74.  Mr Wong SC for the defendants sought to attribute to the plaintiff the burden of proving the conditions of incompetence under section 3(b), principally on the basis that there exists a presumption that everyone is competent to give evidence unless shown to the contrary. 

75.  In my view, whether there is a presumption of competence is neither here nor there. What Mr Wong SC has failed to demonstrate, either on authority or in principle, is that such a presumption operates to shift to the party disputing competence the burden of proving incompetence within the meaning of section 3(b).

76.  In this regard, Mr Wong SC referred to the following judicial statements:

(1)  Chan Chi v The Queen [1968] HKLR 61, per Hogan CJ at 64:

“... When the Judge in the court below formed the view that the witness put before him was not a child of tender years, an impression which was strengthened by the reply that he was 14 years old, we think the Judge was entitled, without further inquiry, to treat the witness as competent, and to take sworn testimony from him.”

(2)  The Queen v Fung Kam Keung [1991] 1 HKLR 377, per Silke VP at 385H‑386B:

“Chan Chi referred to R. v. Horsburgh [1966] 3 Canadian Criminal Cases 240, where the Ontario Court of Appeal analysed the issue by dividing infant witnesses into four categories and, having done so, went on to state, as set out in Chan Chi at page 64:

‘The necessity for an inquiry arises only when the child witness is one of ‘tender years’.  The fact that some questioning did take place does not lead to the conclusion that the witnesses were of ’tender years’.  The brevity of the examination indicates to me that the presiding judge did not consider a more exhaustive examination necessary in order to determine that the witnesses were competent.  A child of 14 is presumed subject to conviction and punishment under the Criminal Code and in my opinion, a similar presumption must apply to the competency of such child to give sworn evidence.  An unnecessary enquiry does not defeat the presumption of competency unless the questioning actually elicits information which clearly shows that the child does not appreciate the nature or consequence of an oath.’”

(3)  R v Lam Chi Keung, supra, per Mortimer JA at 424I (after referring to the English provision which requires a child’s evidence to be received unless it appears to the court that the child is incapable of giving intelligible testimony):

“This seems to require that the competency of a child witness be judged in the same way as any other witness. But as Mr Ross points out — the Hong Kong legislation appears to provide that even a child who is unable to give intelligible testimony is competent if otherwise of sound mind. However, this last point did not arise at trial and cannot arise now. This witness was of sound mind and capable of giving intelligible testimony. Clearly, a child witness is to be regarded as competent at least unless the contrary is shown.”

77.  None of these cases were concerned with a witness of unsound mind in a civil case. They all involved child witnesses of sound mind for the prosecution in criminal proceedings and were concerned with determining whether a prosecution witness was of tender years and therefore unable to give sworn testimony.  The incidence of the burden of proving competence/incompetence of such a witness did not arise at all.

78.  At common law, in criminal cases, it is well established that once the issue of competence of a witness is raised, the burden is on the party calling the witness or seeking to have the witness sworn to satisfy the court that the witness is competent to give evidence in the proceedings: see R v Yacoob (1981) 72 Cr App R 313 (which was decided before the 1999 Act).  The criminal standard of proof (beyond reasonable doubt) applied in deciding issues of admissibility of the evidence of prosecution witnesses (R v Ewing [1983] QB 1039) while the civil standard (balance of probabilities) applied to the evidence of the defence (R v Mattey [1995] 2 Cr App R 409).[16]  The rationale appears to me to be that the burden of proving the competence of a witness (when the same is in issue) and therefore the admissibility of his evidence should follow the burden of proving the facts sought to be established by that witness’ evidence.

79.  By parity of reasoning, I cannot think of any objection in principle why the same rule should not apply in civil cases: see Phipson on Evidence, supra, paras 9–12.  This is the only approach that is consistent with the general rule that the party who asserts must prove.  Where a party seeks to rely on a particular piece of evidence, and there is a dispute as to its admissibility, he should have the burden of proving that it is admissible (Phipson on Evidence, supra, para 6–04). The competence of a witness goes to the admissibility of his testimony.  Where the competence of the witness is put in issue, proving that the witness is not incompetent so that his evidence is admissible is really discharging the burden of proving the facts to which such evidence relates.  It follows that in civil cases the burden should also fall on the party calling a witness and relying on his evidence to prove that he is not incompetent under section 3(b) of the EO if this is disputed.

80.  In conclusion, the defendants have the burden of proving that Mr Leiduck was not at the material times incompetent as defined in section 3(b) by showing, on a balance of probabilities, that Mr Leiduck

(1)  was not of unsound mind; or

(2)  did not appear incapable (a) of receiving just impressions of the facts respecting which he was examined or (b) of relating them truly.

Such burden is only consistent with the defendants’ burden of establishing the matters sought to be proved by Mr Leiduck, the admissibility of which is conditional upon and Mr Leiduck’s competence.

81.  I now turn to the competency issue.

Materials before the Court

82.  In addition to the written evidence and transcripts of oral testimony listed in para 3 above, there are before the court 6 leverarch files of original and translated contemporaneous records kept by the independent medical and nursing professionals who cared for Mr Leiduck from November 2001 right up to his death on 23 March 2014.

83.  These primary materials were reviewed by the three expert witnesses who between them produced a total of seven reports of about 300 pages citing reference materials which take up another three full leverarch files:

Date	Expert	Report
24.3.2014	Dr Förstl	1st Förstl Report
14.4.2014	Prof Lieh Mak	1st Lieh Mak Report
19.5.2014	Prof Lieh Mak	2nd Lieh Mak Report
8.2014	Dr Förstl (commenting on the 1st & 2nd Lieh Mak Reports)	2nd Förstl Report
3.9.2014	Prof Chiu (commenting on the 1st & 2nd Lieh Mak Reports)	Chiu Report
13.1.2015	Prof Lieh Mak (commenting on the 2nd Förstl Report)	3rd Lieh Mak Report
13.1.2015	Prof Lieh Mak (commenting on the Chiu Report)	4th Lieh Mak Report

84.  The 1^st Förstl Report also set out the information provided to Dr Förstl by Dr Christine Funk (the general practitioner who looked after Mr Leiduck since his move to the second nursing home in Starnberg‑Percha in April 2013), Dr Pfeffer (a specialist for psychiatry and psychosomatics and the author of the Pfeffer Reports), Mr Leiduck Jr and his wife (Ms Herlinde Leiduck), Dr Linda Koiran (Mr Leiduck’s daughter), Dr med Lother Schumann (Mr Leiduck’s wife’s cousin and Mr Leiduck’s long‑term friend and himself an orthopaedic surgeon) and Mrs Schuman.

85.  It also contained Dr Förstl’s report on his personal examination of Mr Leiduck on 30 January and 9 February 2014.

86.  The three expert witnesses were examined in court for a total of 20 days.[17]  Dr  Förstl and Prof Chiu on one hand and Prof Lieh Mak on the other held contradicting views, and were cross‑examined in the most comprehensive fashion by Mr Yan SC and Mr Wong SC, on numerous points, some of which have, with the benefit of hindsight and in the light of the parties’ final positions in closing submissions, become of peripheral importance (save that a conclusion one way or another may perhaps function in generating an impression of the general reliability of the witnesses) or even altogether immaterial, to the real questions that I have to decide.

87.  In addition to the aforesaid primary factual evidence on Mr Leiduck’s mental condition and the opinion evidence given by the three experts on the basis of such primary factual evidence, I also have the benefit of the parties’ closing submissions, made both in writing which add up to close to 500 pages (not counting appendices and authorities) and orally in court which took three full hearing days.[18]

88.  I am indebted to counsel for their thoroughness in both evidence and submissions, all of which I have duly reviewed and considered with care.  I am well aware of all the differences between the parties, put to the witnesses in cross‑examination and addressed in closing submissions.  With no disrespect to counsel, I do not propose to attempt to resolve every such difference.  It is unnecessary for me to do so.  To maintain the focus of this judgment, I hope I would be forgiven for dealing only with those matters that have a material effect on the findings that I have to make.

Summary of the Experts’ Opinions

89.  I have been reminded by Mr Yan SC, and I bear in mind, that:

(1)  The question of the capacity of a witness is a question of fact (R v Reynolds [1950] 1 KB 606), the determination of which is a matter for the court and not for the expert witnesses.

(2)  While the court should not form its own expert theory or adopt a specialist position not posited to it by any expert (see Hodgkinson,Expert Evidence Law & Practice, 4^th Edition, para 12–007), it is open for the court to make findings contrary to opinions of the experts (even where their reports are agreed).

(3)  In the final analysis, facts are always predominant as they are what the party must prove or disprove, and expert opinion evidence only serves to provide the court with the necessary specialist framework to enable it to form its own independent judgment in the assessment of the facts proved in evidence.

(4)  The evidence of all three experts should be considered on an equal footing. 

(5)  The court does not have to accept the evidence of Dr Förstl, although he was appointed by the court as a joint expert, and must take its own view of such evidence in light of all the other factual evidence available (see Coopers Payen Ltd v Southampton Container Terminal Ltd [2004] 1 Lloyd’s Rep 331 (CA), per Clarke LJ at para 41–43, applied in L v L, HCMC 1/2003, unreported, 20 April 2005, per Lam J at para 10).

90.  Nevertheless, the experts’ conclusions provide a useful starting point.

Dr Förstl

91.  According to Dr Förstl:

(1)  A diagnosis of DLB was first made on 7 July 2011 (see para 30(1) above) and the clinical diagnostic features of DLB (cognitive impairment with a great deal of fluctuations, occasional visual hallucinations and (mild) Parkinsonism) have been satisfied ever since.

(2)  Further, the cranial Computed Tomography (cCT) images recorded on the same day[19] showed clear evidence of severe vascular brain changes in Mr Leiduck, which is diagnostic for vascular dementia (“VaD”) (or a vascular contribution to cognitive impairment).

(3)  The correct etiological diagnosis is therefore mixed dementia with vascular and neurodegenerative brain changes (vide infra).

(4)  However, while some earlier medical reports mentioned suspicious symptoms, there is no sufficient medical evidence reliably pointing to earlier significant cognitive deficits or other relevant psychopathology that might account for “unsound mind” before July 2011.

(5)  Hence, criterion (1) (“unsound mind”) could not be satisfied for the period prior to July 2011.

(6)  However, even for the period after July 2011, Mr Leiduck did not have to suffer from signs of dementia everyday even if he had this disease (which was a type of brain change).  The course of both DLB and VaD, though downhill, is characterised by fluctuations, the amplitudes of which can be quite significant and drastic.  The patient may on some days be capable of performing quite well, not appearing to be demented at all.  On other occasions, especially under pressure, he may show clear signs of dementia.  Some of these fluctuations may even arise spontaneously.  They can occur within a matter of hours.

(7)  The typical changeability of these forms of dementia means that criteria (2a) and (2b) could be satisfied differently at different times and under different circumstances. Sitting in a familiar environment (like one’s own study) drafting, giving instructions for the preparation of, approving or signing a written statement with the assistance of an attorney and holding out during cross‑examination in a strange setting (like a court room or interview room) present different situational demands.

(8)  In this regard, Mr Leiduck’s mental state and competence had been significantly and almost constantly affected after his wife’s death on 3 February 2013 and became obvious with the beginning of his oral testimony on 25 February 2013.  Even then, remarkable changes — including occasional and transient recoveries — were to be observed between February and August 2013.

(9)  Therefore, each occasion on which Mr Leiduck gave evidence, and each piece of evidence given by him, has to be examined and evaluated individually.

(10)  Fully appreciating that it was not for him to examine the truth or falsity of Mr Leiduck’s evidence, Dr Förstl focused less on contents but more on the form of presentation.

(11)  He was satisfied that Mr Leiduck was incompetent in the relevant sense on all the occasions on which he gave oral evidence, save for the 8 May 2013 session.  He found in the transcripts of the examination of Mr Leiduck in court (which provide the most reliable evidence) proof of Mr Leiduck’s impaired recall (of names, dates and other detailed facts) from his verbatim memory and persistent resort to his gist memory.  Mr Leiduck was also verbose and at times incoherent and became unable to relate the facts properly when he did not take in the questions or directions or while he was occupied with his thoughts and intent on presenting his side of the story.

(12)  He however could not find in the transcript of Mr Leiduck’s cross‑examination on 8 May 2013 sufficient material pointing to fulfilment of criteria (2a) and (2b).

(13)  As for the evidence contained in Mr Leiduck’s various affidavits and witness statements etc, he could not find sufficient evidence upon which he could conclude whether Mr Leiduck was competent or incompetent when making them, even after 7 July 2011, because he did not feel able to assume, without reliable evidence, whether Mr Leiduck drafted, gave instructions for, approved or signed a particular written proof in a good or bad moment during the fluctuating course of his dementia.

Prof Chiu

92.  On Mr Leiduck’s competence on the subject dates between 7 January 2008 and 28 January 2013, Prof Chiu generally shared Dr Förstl’s views:

(1)  Before July 2011, there is insufficient evidence to diagnose Mr Leiduck as suffering from dementia.

(2)  After the diagnosis of DLB in July 2011, Mr Leiduck’s competence must be assessed on each occasion and incompetence cannot be inferred in the absence of clear evidence of dementia from January 2008 to the end of 2010.

(3)  Mr Leiduck was competent within the meaning of section 3(b) of the EO on the subject dates between September 2011 and January 2013.

Prof Lieh Mak

93.  Prof Lieh Mak on the other hand took the view that Mr Leiduck was suffering from DLB and VaD, and had therefore been incompetent as a witness, since as early as 2008.

Findings on the Competency of the Oral Evidence

94.  I accept Dr Förstl’s conclusion of incompetence regarding Mr Leiduck’s oral evidence, which is not disputed by either party.

95.  As for the 8 May 2013 session, it will be seen that I prefer Dr Förstl’s evidence (supported by Prof Chiu) as to the typical changeability of both DLB and VaD.  I see no reason to doubt Dr Förstl’s assessment that Mr Leiduck, though of unsound mind on 8 May 2013, did not appear to be incapable of receiving just impressions of facts or of relating them truly.

96.  Consequently, I find all of Mr Leiduck’s evidence in court, except that given on 8 May 2013, inadmissible on the ground of Mr Leiduck’s incompetence under section 3(b) of the EO.

Outstanding Issues

97.  What remains in issue is Leiduck’s competence or otherwise on 7 January 2008, 9 December 2008, 25 June 2009, 30 March 2010, 6 April 2010, 27 September 2011, 11 January 2012, 19 September 2012, 15 November 2012 and 28 January 2013 (leaving out the dates on which Mr Leiduck signed statements of truth of pleadings for the reasons explained in paras 7 and 8 above).

98.  More particularly, I have to decide:

(1)  whether Mr Leiduck had already become of unsound mind by virtue of DLB (or VaD) before being diagnosed by Dr Gallard in July 2011;

(2)  if so, since when Mr Leiduck became of unsound mind; and

(3)  whether his being of unsound mind on the subject occasions, if any, made him appear incapable of receiving just impressions of fact or of relating them truly.

My Overall Impression of the Experts

Dr Förstl

99.  Dr Förstl’s standing as a leading expert in both neurology and psychiatry with particular qualifications, expertise and experience in all kinds of dementia and age associated mental diseases, and his independence and impartiality as the court‑appointed joint expert, is beyond question and has never been questioned.  The department of which Dr Förstl is the director has, inter alia, a day care centre for elderly patients (with dementia, depression and other age associated mental diseases) and three outpatient clinics for organic mental diseases (dementia and mild cognitive impairment).  It has an excellent reputation in, among others, the area of dementia and frequently provides expert opinions on questions of mental capacity to families, lawyers and courts.  Dr Förstl is certainly familiar with the assessment of mental competence to be a witness, having been involved in the approval of approximately four opinions per year dealing with the question of mental competency to testify in court and the retrospective assessment of when a witness may have become incompetent.

100.  I have been greatly assisted by Dr Förstl.  The 1^st and 2^nd Förstl Reports were comprehensive and well grounded in analysis and reasons.  Dr Förstl’s evidence under cross‑examination in court (over six days) was visibly forthcoming and fair and inspired confidence.

Prof Chiu

101.  I have likewise benefited from reading the Chiu Report and following Prof Chiu’s evidence under cross‑examination in court (over five days).

102.  Prof Chiu is clearly respected locally and internationally in the fields of psychogeriatric (old age psychiatry) and dementia.

103.  More particularly, Prof Chiu holds/held, inter alia, the following esteemed professional positions:

(1)  Founding President of the Hong Kong Psychogeriatric Association;

(2)  Chairman of the Psychogeriatric Working Group which co‑ordinates the development of psychogeriatric services of the Hospital Authority;

(3)  Member of the Expert Group on Dementia set up by the Hong Kong Government;

(4)  Founding Director (2002–2004) of the Jockey Club Centre for Positive Ageing, a specially designed centre for dementia care;

(5)  Past President of the Pacific Rim College of Psychiatrists and the International Psychogeriatric Association (“IPA”)[20];

(6)  Member of the IPA Capacity Taskforce which deals with issues of mental capacity;

(7)  Member of the Medical and Advisory Panel of the Alzheimer’s Disease International; and

(8)  Editor of Asia Pacific Psychiatry and Member of the editorial boards of over ten journals including International Psychogeriatrics and International Journal of Geriatric Psychiatry.

104.  Prof Chiu served as Keynote or Plenary Speaker of various Alzheimer’s Disease International conferences.  She was recently invited to participate in the WHO First Ministerial Conference on Global Action Against Dementia.

105.  Prof Chiu has researched and published widely on dementia and is a pioneer in the research of dementia in Hong Kong, having carried out the first epidemiological study in dementia in Hong Kong in 1995.

106.  Not only is Prof Chiu an expert on dementia, she also has special experience in and knowledge of DLB, the sub‑type of dementia with which we are concerned under the Competency Issue:

(1)  She was invited to the International Psychogeriatric Association Meeting on DLB in 2002, and co‑authored with, inter alia, Prof Ian McKeith the review paper entitled “Dementia with Lewy Bodies” published in 2004 in Lancet Neurology, a high impact journal.

(2)  She is currently a member of the Consultation Group on the Classification of Behavioural and Psychological Symptoms in Neurocognitive Disorders, which is responsible for the recommendation of a classification system and standard descriptions for BPSD to be included in ICD‑11.  Amongst the 15 members of this group, there are about five psychiatrists and Prof Chiu is one of the only two psychiatrists from Asia.

(3)  She is professionally connected with the pioneering/leading researchers and experts on DLB including Prof McKeith, Prof Donaghy, Prof J O’Brien, Prof O’Neill etc whose authoritative papers were the main authorities cited and relied on in these proceedings.

(4)  In addition to research on dementia generally, Prof Chiu has further published papers specifically on DLB.

107.  Prof Chiu is, however, not just an academic, but an experienced clinician with ample first hand experience in treating dementia patients (including those with DLB) for about 25 years and has seen at least 1,500 patients.  In the past 3 years, she has treated over 200 dementia patients, 8 to 9 of which were suffering from DLB.  The latter figure should be viewed against the relatively low prevalence of DLB in Hong Kong (only about 3%).

108.  Prof Chiu effectively conveyed her vast experience and expertise in dementia generally and DLB specifically through her report and oral examination.  She was demonstrably familiar with the literature and researches on DLB and able to recall them in her head and discuss them in a relevant manner.  She managed to comment on, and provide responding authorities, to the new research materials produced by the plaintiff in the middle of her evidence within a day.  Mr Yan SC cautioned against the assumption that every patient and his disease progression will follow a “textbook” picture and criticised Prof Chiu for taking an overly academic approach in the assessment of Mr Leiduck. With respect, this is unfair.  The proof of facts on a balance of probabilities is not a subjective exercise.  In the assessment of mental health and capacity, the findings, opinions and conclusions obtained through specialised studies and researches acknowledged and accepted by the academic and medical communities should be invaluable in guiding the court in deciding where the balance of probabilities should inherently and objectively lie.  In any event, Prof Chiu never lost sight of Mr Leiduck as an individual and always took into account his peculiar personal circumstances.

109.  Further, despite her lack of prior experience as a court expert, Prof Chiu was not unfamiliar with the assessment of mental capacity, having been actively involved in the research, publication and discussions with other experts on issues relating to assessment of mental capacity over the years.

110.  On the whole, I find Prof Chiu a professional and knowledgeable expert witness who, though called by one side, is fair and true to the discipline that she practises.

Prof Lieh Mak

111.  I do not think it is unjust for me to say that Prof Lieh Mak is more of a generalist.  Dementia is admittedly not her specialty.  Her curriculum vitae does not reveal any specialised research or publication on dementia.  She saw only around 30 elderly patients in the previous three years with just 1 or 2 of them suffering from DLB (who were all at a very late stage of the condition).

112.  Of course, I appreciate that the evaluation of expert opinion evidence is not a comparison of the experts’ credentials.  However, I have come to the view that I should approach Prof Lieh Mak’s evidence with caution.

(1)  There were quite a number of fundamental errors in the four Lieh Mak Reports and in Prof Lieh Mak’s evidence in court (over nine days).  I adopt the examples identified by Mr Wong SC: that she used the non‑existent phrase “higher cognitive function” (instead of “higher cortical function”); that she seemed uncertain about, and gave different figures for, the cut‑off score of the Mini‑Mental State Test (“MMSE”) which is widely used in the detection of dementia; that she wrongly equated neurocognitive disorder (“NCD”) in para 16(b) of the 2^nd Lieh Mak Report with dementia when in fact only Major NCD corresponds with dementia and Minor NCD does not; that she erred in suggesting, and had to withdraw under cross‑examination her statement in para 16(b) of the 2^nd Lieh Mak Report, that in view of Mr Leiduck’s advanced age once brain cells die they are dead and new cells could not be generated or new connections made and had to later agree that neurogenesis does occur and new connections could be made for elderly people.

(2)  Prof Lieh Mak was less forthcoming than one would expect from an expert witness.  There were many instances in which the same question had to be repeated a number of times before Mr Wong SC could get a direct answer from Prof Lieh Mak.  Again, I adopt the examples listed by Mr Wong SC: the question whether Prof Lieh Mak had seen any patient who had systematised delusions that lasted for several years which was asked four times before Prof Lieh Mak said “no”; the question as to where she got the guideline on nursing care level which was asked four times before Prof Lieh Mak said she probably obtained it from the internet without actually identifying the source; and the question as to whether she had assumed that the records of the psychiatric consultations done during Mr Leiduck’s hospitalisation in May 2008 were records of one examination which had to be repeated even by the court before Prof Lieh Mak would answer in the affirmative.

(3)  Prof Lieh Mak’s positions on many key issues evolved and changed in the course of her oral evidence in such ways and to such extents that at least create the impression that the matters had not been well thought through.  Mr Wong SC has identified many examples in para 34(3) of his written submissions dated 6 May 2016.  I shall set out some of them:

(a)  Prof Lieh Mak came up with a new description of DLB as “dementia superimposed by the delirium” in the middle of her oral evidence, but then withdrew it when pressed.

(b)  She changed her description of the progressing course of DLB (as well as her hand demonstration) from a linear downhill course to a fluctuating downhill course.

(c)  As to what actually fluctuates in DLB, Prof Lieh Mak changed from her original position that only attention and alertness fluctuates to the later position that other domains of cognition do also fluctuate, but they are contingent upon fluctuation of attention and alertness.

(d)  She changed the nature of her “Top‑Down” theory from one based on brain structures to one based on functions.

(e)  Prof Lieh Mak changed her diagnosis for the year 2008 from Stage 1 DLB to dementia with unknown aetiology, and then to somewhere between Stage 1 and Stage 2 DLB.

(4)  It seems to me that many of Prof Lieh Mak’s conclusions were underpinned by assumptions that were wrong or groundless or not her place to make, for example:

(a)  Prof Lieh Mak assumed that Mr Leiduck’s case was factually false and that he must have been delusional in maintaining it.

(b)  She assumed that the delusions observed by Dr Pfeffer and Dr Sondhauss were of the same content as those contained in the evidence of Mr Leiduck in the present proceedings in support of her opinion that Mr Leiduck’s delusional theme was fixed and had lasted for many years.

(c)  Prof Lieh Mak “took it for granted” that there had been cognitive decline for six months before 2008 in order to justify her diagnosis of dementia in 2008 in satisfaction of the six months rule required by ICD‑10.

(d)  Prof Lieh Mak assumed that a lot of details were missing in Mr Leiduck’s written evidence because he could not remember them even though he wanted to put them in order to justify her opinion on his over reliance on gist memory.

(e)  Prof Lieh Mak assumed that Mr Leiduck’s reason for changing his mind in providing in his 2^nd Affidavit the name of Fink (which he deliberately withheld in his 1^st Affidavit as he had promised Fink to do so) must be because he did not appreciate the significance of his promise, in order to justify her conclusion that Mr Leiduck had difficulties in receiving just impression.

(f)  Prof Lieh Mak was inexplicably reluctant to review and reconsider her opinion upon being told that Mr Leiduck was in fact correct about the date of his release from prison in Monaco (in 1996) which preceded his conviction in Monaco (in 2000), a statement which Prof Lieh Mak assumed to be wrong and relied upon to attribute delusion to Mr Leiduck. Indeed, I had to remind her a few times that Mr Leiduck had not mixed up those dates.

113.  It is worthy of note that although Mr Yan SC objected to the observations that Mr Wong SC made with regard to Prof Lieh Mak’s quality, independence and integrity as an expert witness (e.g. that she “has shown herself to be an evasive, defensive, and biased expert”; that she was “constantly shifting ground when seeking to justify her opinion” etc), Mr Yan SC did not take issue with Mr Wong SC’s summary of the instances upon which he made those criticisms against Prof Lieh Mak.

114.  Indeed, I further observe that Mr Yan SC himself did not adopt many of the arguments made by Prof Lieh Mak in support of “unsound mind” in the years preceding 2011 in the closing submissions for the plaintiff.  In light of this, in the judgment that follows, I will not address all the arguments made by Prof Lieh Mak but shall focus on the plaintiff’s case with reference to the submissions advanced on its behalf.

115.  For the avoidance of any misunderstanding, despite my said impressions of the expert witnesses, I propose to resolve the material differences between them based on the relative merits of the arguments.

DLB

Diagnostic criteria

116.  The obvious starting point for making a diagnosis of DLB, be it contemporaneous or retrospective, must be the diagnostic criteria.

117.  In this regard, I do not see the point of Mr Yan SC’s observation that the diagnostic criteria were formulated for the purpose of the diagnosis of live patients rather than for retrospective assessment.  I do not see myself conducting a roving open‑ended inquiry into Mr Leiduck’s mental health.  The plaintiff disputes Mr Leiduck’s competence, after access to his medical records, on specific ground, which is that Mr Leiduck had been of unsound mind by reason of DLB ever since 2008, as retrospectively diagnosed by Prof Lieh Mak.  How else could I decide whether Prof Lieh Mak is right if not by reference to the diagnostic criteria?  Prof Lieh Mak herself claimed to have applied the DSM‑5 diagnostic criteria.  Mr Yan SC has produced no authority to the effect that the criteria for the diagnosis of DLB would be any different in a retrospective assessment.  Prof Chiu was clear that the diagnostic criteria for DLB are the same for both clinical assessment and retrospective assessment.

118.  There are currently two internationally accepted diagnostic criteria of DLB:

(1)  the “Consensus Criteria” as set out in the 3^rd report of the DLB Consortium in 2005; and

(2)  DSM‑5 at pp 618–620.

119.  The Consensus Criteria sets out the criteria for the clinical diagnosis of DLB as follows:

“1. Central feature (essential for a diagnosis of possible or probable DLB)

Dementia defined as progressive cognitive decline of sufficient magnitude to interfere with normal social or occupational function. Prominent or persistent memory impairment may not necessarily occur in the early stages but is usually evidence with progression. Deficits on tests of attention, executive function, and visuospatial ability may be especially prominent.

2. Core Features (two core features are sufficient for a diagnosis of probable DLB, one for possible DLB)

Fluctuating cognition with pronounced variation in attention and alertness

Recurrent visual hallucinations that are typically well formed and detailed

Spontaneous features of parkinsonism

3. Suggestive features (If one or more of these is present in the presence of one or more core features, a diagnosis of probable DLB can be made. In the absence of any core features, one or more suggestive features is sufficient for possible DLB. Probable DLB should not be diagnosed on the basis of suggestive features alone)

REM sleep behaviour disorder

Severe neuroleptic sensitivity

Low dopamine transporter uptake in basal ganglia demonstrated by SPECT or PET imaging

4 Supportive features (commonly present but not proven to have diagnostic specificity)

Repeated falls and syncope

Transient, unexplained loss of consciousness

Severe autonomic dysfunction, e.g. Orthostatic hypotension, urinary incontinence

Hallucinations in other modalities

Systematized delusions

Depression

Relative preservation of medial temporal lobe structures on CT/MRI scan

Generalized low update on SPECT/PET perfusion scan with reduced occipital activity

Abnormal (low uptake) MIBG Myocardial scintigraphy

Prominent slow wave activity on EEG with temporal lobe transient sharp waves

5. A diagnosis of DLB is less likely

In the presence of cerebrovascular disease evidence as focal neurologic signs or on brain imaging

In the presence of any other physical illness or brain disorder sufficient to account in part or in total for the clinical picture

If parkinsonism only appears for the first time at a stage of severe dementia.

...”

120.  The diagnostic criteria in DSM‑5, under “Major or Mild Neurocognitive Disorder with Lewy Bodies”,[21] read as follows:

“A. The criteria are met for major or mild neurocognitive disorder.

B. The disorder has an insidious onset and gradual progression.

C. The disorder meets a combination of core diagnostic features and suggestive diagnostic features for either probable or possible neurocognitive disorder with Lewy bodies. For probable major or mild neurocognitive disorder with Lewy bodies, the individual has two core features, or one suggestive feature with one or more core features. For possible major or mild neurocognitive disorder with Lewy bodies, the individual has only one core feature, or one or more suggestive features.

1. Core diagnostic features:

a. Fluctuating cognition with pronounced variations in attention and alertness.

b. Recurrent visual hallucinations that are well formed and detailed.

c. Spontaneous features of parkinsonism, with onset subsequent to the development of cognitive decline.

2. Suggestive diagnostic features:

a. Meets criteria for rapid eye movement sleep behavior disorder.

b. Severe neuroleptic sensitivity.

D. The disturbance is not better explained by cerebrovascular disease, another neurodegenerative disease, the effects of a substance, or another mental, neurological, or systemic disorder.” (original emphasis)

121.  The DSM‑5 diagnostic criteria were apparently based largely on the Consensus Criteria.  It can be seen that:

(1)  Criteria A & B effectively correspond to the Central Feature as defined in the Consensus Criteria;

(2)  Criterion C sets out the core diagnostic features and suggestive diagnostic features, as referred to in the Consensus Criteria with only one difference which is not relevant to the present case;

(3)  Criterion D is similar to para 5 of the Consensus Criteria.

122.  Apart from setting out the diagnostic criteria required to be satisfied for a diagnosis of DLB, DSM‑5 also reproduces the Supportive Features mentioned in para 4 of the Consensus Criteria under a different label namely, “Associated Features Supporting Diagnosis” which includes again similar features like repeated falls, syncope, systematized delusions etc.

123.  DSM‑5 further provides for the following diagnostic guidelines for Major NCD (equivalent to dementia under ICD‑10) at pp 602–603:

“A. Evidence of significant cognitive decline from a previous level of performance in one or more cognitive domains (complex attention, executive function, learning and memory, language, perceptual‑motor, or social cognition) based on:

1. Concern of the individual, a knowledgeable informant, or the clinician that there has been a significant decline in cognitive function; and

2. A  substantial impairment in cognitive performance, preferably documented by standardized neuropsychological testing or, in its absence, another quantified clinical assessment.

B  The cognitive deficits interfere with independence in everyday activities (i.e., at a minimum, requiring assistance with complex instrumental activities of daily living such as paying bills or managing medications).

C  The cognitive deficits do not occur exclusively in the context of a delirium.

DThe cognitive deficits are not better explained by another mental disorder (e.g. major depressive disorder, schizophrenia)”

124.  Mr Wong SC rightly observed that apart from one minor difference that has no bearing in the present case, these two sets of diagnostic criteria are effectively identical.

125.  In applying these diagnostic criteria, the “supportive features”under the Consensus Criteria or the “associated features supporting diagnosis” under DSM‑5are not part of the diagnostic criteria.  The mere presence of these features, however frequent or serious, would not warrant a diagnosis of DLB.  This should be spelt out because Prof Lieh Mak who applied DSM‑5 had included, in para 10(c)(E) of the 2^nd Lieh Mak Report,the “associated features supporting diagnosis”as part of the DSM‑5 diagnostic criteria.  Prof Lieh Mak accepted in her oral evidence that the features mentioned there (e.g. delusion) are not a diagnostic criterion of DLB.

126.  I have so far not mentioned ICD‑10 which does not contain any specific diagnostic criteria for DLB.  But it is not irrelevant as it does provide for the diagnostic criteria for dementia generally (which is the central feature for a diagnosis of DLB under both the Consensus Criteria and DSM‑5) as follows:

“Dementia is a syndrome due to disease of the brain, usually of a chronic or progressive nature, in which there is disturbance of multiple higher cortical functions, including memory, thinking, orientation, comprehension, calculation, learning capacity, language, and judgment. Consciousness is not clouded. Impairments of cognitive function are commonly accompanied, and occasionally preceded, by deterioration in emotional control, social behaviour, or motivation. This syndrome occurs in Alzheimer’s disease, in cerebrovascular disease, and in other conditions primarily or secondarily affecting the brain.

In assessing the presence or absence of a dementia, special care should be taken to avoid false‑positive identification: motivational or emotional factors, particularly depression, in addition to motor slowness and general physical frailty, rather than loss of intellectual capacity, may account for failure to perform.”

127.  Insofar as it is material to the issue at hand, I should also refer to the following diagnostic guidelines in the ICD‑10:

“The primary requirement for diagnosis is evidence of a decline in both memory and thinking which is sufficient to impair personal activities of daily living, as described above ... The above symptoms and impairments should have been evident for at least 6 months for a confident clinical diagnosis of dementia to be made.” (emphasis added)

128.  One of the matters explored in Prof Lieh Mak’s oral evidence was the requirement for a confident clinical diagnosis of dementia to be made that the relevant symptoms and impairments should have been evident for at least six months.  Prof Lieh Mak’s suggestion under re‑examination on Day 50 (28 August 2015) that the “6‑month” criterion could be ignored or “presumed”in a retrospective assessment[22] is without basis and unsupported by authorities.

Fluctuation of Cognition[23]

129.  The significance of the fluctuating nature of DLB is that, as explained by Dr Förstl (with whom Dr Chiu agreed), “individual snapshots” at a given time would not be representative of a longer period; in order to ascertain the competence or incompetence of a DLB patient such as Mr Leiduck, one would need to actually look at his performance on that particular day at that particular time; thus it would be wrong to generalise and each session has to be examined individually.

130.  Whilst there is consensus between the experts that DLB patients experience fluctuations and that the periodicity of the fluctuations range from minutes, hours, days or weeks and varies from patient to patient and even for the same patient,[24] Prof Lieh Mak on the one hand and Dr Förstl and Prof Chiu on the other disagreed on the following aspects of the feature of fluctuation.

What fluctuates?

131.  The first aspect of the controversy is what actually fluctuates in DLB.

(1)  On one hand, Prof Lieh Mak initially took the position that only attention and alertness fluctuates, other cognitive functions (like comprehension, complex attention, learning, complex motor function and complex executive function) do not fluctuate.  Then, on day 43 (26 May 2015), while accepting under cross‑examination that cognition and cognitive performance do fluctuate, Prof Lieh Mak suggested that their fluctuation is “subject to” or “contingent upon” fluctuating alertness and attention.  Prof Lieh Mak’s final position under further cross‑examination on day 44 (27 May 2015) was that other domains do fluctuate independent of attention and alertness but that such fluctuation would be minor.

(2)  On the other hand, according to Prof Chiu, whilst attention and alertness do fluctuate prominently, other domains of cognitive functions also fluctuate. Although the diagnosis of dementia would not fluctuate (which is in the first place based on abnormalities in cognitive function and functioning over a prolonged period) and the brain pathology leading to dementia would not fluctuate, the clinical manifestation of dementia in DLB, including attention, cognitive function and functioning of the patient, fluctuates markedly.  Disturbance in attention is not the sole explanation for fluctuating cognition.  While there is association between fluctuating cognition and attention disturbances, the fluctuating cognition in DLB is not 100% contingent upon disturbances in attention and alertness.

(3)  Dr Förstl agreed with Prof Chiu that it is not just attention and alertness that fluctuate, but that the “performance/behaviour” of the patient fluctuates.  Such fluctuations in performance and behaviour (“memory, planning, language, recognition, executive and other intellectual functions”) occur “because his alertness and attention go up and down, because nerotransmitter systems ... are less balanced, because the underlying Lewy‑body ... have already affected a large number of neurons within these systems.  All of this makes the patient more vulnerable to distress, physical or psychological, intrinsic or extrinsic”.

132.  I prefer the views of Dr Förstl and Prof Chiu to that of Prof Lieh Mak for the following reasons.

133.  First, the fluctuation that is described as a core feature in both the Consensus Criteria and DSM‑5 is “fluctuating cognitionwith pronounced variations in attention and alertness” (emphasis added).

134.  Second, the preponderance of research and medical literature produced in these proceedings alludes to fluctuations in cognition and cognitive performance, and not just in attention and alertness, and does not suggest that fluctuating attention and alertness is the sole reason for fluctuating cognition.  The following examples, in chronological order, have been identified by Mr Wong SC:

(1)  McKeith et al, “Operational criteria for senile dementia of Lewy‑body type” (“McKeith 1992”):

“fluctuating cognitive impairment” (p 912 left)

“The most striking features of the [DLB] was their widely fluctuating performance on all measures — cognitive, mental state, physical, and behavioural...” (p 913 right)

“Fluctuating memory impairment was characteristic of the [DLB] patients with delirious features...” (p 913 right)

Fluctuation in “[h]igher cortical functions” is observed (p 915 left) 

“The fluctuating cognitive performance with periods of relative lucidity and intact memory function” (p 917 right‑p 918)

“The extent to which [DLB] patients fluctuated in their cognitive performance requires repeated emphasis” (p 918 left)

“A more sustained cognitive impairment had become established albeit with market fluctuations in severity” (p 919 left)

“The presence of fluctuating cognitive impairment is essential and must be of a degree sufficient to cause variations either in functional ability or performanceon repeated tests of cognitive function” (p 921 left top)

(2)  McKeith, “Dementia with Lewy bodies” (“McKeith 2004”):

“The core clinical features of DLB ... are fluctuating cognitive impairment ...” (p 335 left, Table II [B25(2)/40/315])

“Fluctuations in cognitive functions, which may vary over minutes, hours, or days, occur in 50% to 75% of patients, and are associated with shifting levels of attention and alertness...”

(p 336 left)

(3)  D Neef et al, “Dementia with Lewy Bodies: An Amerging Disease” (“Neef 2006”):

“Fluctuating cognition is characteristic of [DLB]; these fluctuations may occur over minutes, hours, or days” (p 1226 left text box)

(4)  Bradshaw et al, “Higher cortical deficits influence attentional processing in dementia with Lewy bodies, relative to patients with dementia of the Alzheimer’s type and controls” (“Bradshaw 2006”)explains the mechanism in a more detailed fashion:

“The findings from this study also make a potentially important contribution to our understanding of the neurocognitive underpinnings of fluctuations in DLB. Fluctuation is indeed a multidimensional phenomenon, characterised by fluctuation not only in attention but also in behaviour, functional abilities and cognitive function more generally. ...On another level, by showing that there may be a cortical contribution to attentional processing in DLB, our findings raise the possibility that the gross, clinically observable fluctuation in behaviour and functional ability may be cognitively modulated, depending on situational factors and the degree to which demands are being placed on impaired cortical function.” (p 1134)

(5)  McKeith, “Dementia with Lewy bodies” (“McKeith 2007”):

“Fluctuations in cognitive function, which may vary over minutes, hours or days, occur in 50–75% of patients and are associated with shifting levels of attention and alertness... Cognitive fluctuations may contribute to large variability in repeated test scores. eg 5 MMSE points difference over the course of a few days or weeks” (p 532 right § 60.2.2)

“The most common errors among less experienced clinicians were failure to recognize cognitive fluctuations unique to DLB patients ...” (p 533 left § 60.3.1)

(6)  Rongve & Aarsland, “Dementia with Lewy bodies and Parkinson’s disease dementia”[25] (“Rongve & Aarsland 2013”):

“...core symptoms, i.e. well‑formed visual hallucinations and cognitive fluctuations” (p 469 left)

“Cognition Fluctuating” (p 473 table 35.2)

“Cognitive Fluctuations

Fluctuations in DLB commonly occur in both cognition and level of arousal and sleepiness ...” (p 473 right)

(7) Taylor et al, “Covariant perfusion pattern provide clues to the origin of cognitive fluctuations and attentional dysfunction in Dementia with Lewy bodies” (“Taylor 2013”):

“A core symptom of DLB is that of fluctuating cognition (FC), which can affect up to 90% of patients (McKeith et al., 2005).  Clinically, these spontaneous alterations in arousal, attention, and cognition can have significant impacts on patient function (Ballard et al., 2001)”

(8) Donaghy & McKeith, “The clinical characteristics of dementia with Lewy bodies and a consideration of prodromal diagnosis” (“Donaghy & McKeith 2014”) which described the fluctuations in DLB as “fluctuating cognition” and later on “fluctuating attention and cognition”; and

(9) Donaghy et al, “Prodromal dementia with Lewy bodies” (“Donaghy 2014”) which also described the fluctuation as “fluctuating cognition” only (at pp 422 and 427).

135.  The papers produced or referred to by Prof Lieh Mak do not actually support her view in any of its successive forms.

(1)  Prof Lieh Mak referred to the following statement in the chapter on DLB by Prof McKeith (“McKeith 2012”) in the New Oxford Textbook of Psychiatry, 2^nd Edition, Volume 1, page 361:

“Fluctuation in cognitive performance and functional abilities, which is based in variations in attention and level of consciousness, is the most characteristic feature of DLB and the one which causes greatest diagnostic difficulties.”

(2)  Prof Lieh Mak seized upon the wordings in McKeith 2012to say that by 2012, Prof McKeith had changed his opinion from his previous papers and opined that fluctuation was “based in” therefore contingent upon variations in attention and level of consciousness.

(3)  The suggestion that the opinion of Prof McKeith or other acknowledged experts in the field has changed such that they now take the view that fluctuations in DLB are either limited to fluctuations in attention, or that the fluctuations in cognition are solely the result of disturbances in attention does not stand up to scrutiny.  One just has to look at Rongve & Aarsland 2013, Donaghy & McKeith 2014 and Donaghy 2014 cited in para 134 (6), (8) and (9) above.

(4)  Prof Lieh Mak also referred a two‑page introduction of DLB in the website of the National Institute of Neurological Disorders and Stroke which described the central features of DLB toinclude “progressive cognitive decline, “fluctuations” in alertness and attention, visual hallucinations, and parkinsonian motor symptoms, ...”.  This is not a research article or medical study, but is an article (author unknown) on a website that seeks to promote, in a general (and brief) way, awareness of DLB to the general public.  I think I can be excused for not according it the same weight as the other serious medical paper intended for use by researchers, academics and medical professionals. 

Can a patient fluctuate back to normal or near normal cognitive functioning?

136.  There is little dispute that the amplitude of fluctuations in DLB is “marked” or “substantial”.

137.  Both Dr Förstl and Prof Chiu opine that a DLB patient can, in the course of these fluctuations, return to normal or near normal level performance during the good moments of their fluctuations, especially in the early stages of the dementia.

138.  Prof Chiu explained normal or near normal performance to mean:

(1)  “the cognitive functions appear relatively well, similar to normal, but they still suffer from dementia as a diagnosis...  Because of their cognitive functions, so good that it is similar to normal level”;

(2)  “Near normal means it is comparable to normal, but it may not be — because for cognitive testing it depends on what you are testing... you don’t score 100 percent in every aspect”.

139.  Of course, as confirmed by Prof Chiu, normalcy means what is “normal for that person”, and that “one person’s normal cognitive ability would be different from the normal cognitive ability of another person”.

140.  Dr Förstl and Prof Chiu’s understanding is consistent with the preponderance of authorities.  Mr Wong SC highlighted these:

(1)  McKeith et al, “Consensus guidelines for the clinical and pathological diagnosis of dementia with Lewy bodies” (i.e. the 1^st report of the consortium on DLB) (“McKeith 1996”):

“In the earliest stages, patients may show deficits of cognitive function and global performance that alternate with periods of normal or near‑normal performance.

...

The other extreme of fluctuation ... are periods of apparent spontaneous remission during which recall of recent information is evident and other cognitive functions may briefly return.” (p 1115 right)

(2) Ferman, “Dementia with Lewy Bodies: A Review of Clinical Diagnosis, Neuropathology And Management Options” (“Ferman 2000”):

“The fluctuations in DLB are described as variations in cognition or arousal that may range from lucid interaction to reduced clarity of awareness and clouded consciousness. Fluctuating arousal may reflect periods of unresponsiveness while awake (e.g., blanking out, zoning out), episodes of excessive somnolence despite adequate night time sleep, or periods of daytime behavioural confusion with limited awareness of surroundings alternating with normal or near normal function. Cognitive fluctuations have also been described as variability in the patient’s cognitive or functional abilities and periods when the patient regains his or her ability to perform tasks that he or she was previously unable to carry out.”

(3) Ferman et al, “DLB fluctuations: Specific features that reliably differentiate DLB from AD and normal aging” (“Ferman 2004”):

“Fluctuating cognition have been described as periods of behavioural confusion, inattention, and incoherent speech alternating with episodes of lucidity and capable task performance.” (p 181 left)

(Prof Chiu postulated that “capable task performance” implies the regaining of function.)

(4) Bradshaw et al, “Fluctuating cognition in dementia with Lewy bodies and Alzheimer’s disease is qualitatively distinct” (“Bradshaw 2004”) which described their findings of fluctuation in these terms:

“Verbatim qualitative descriptions of FC in DLB suggested an interruption in the flow of awareness or attention. This was frequently associated with transient episodes of confusion and an inability to engage in meaningful cognitive activity, followed by reversion to a near normal level of function. These episodes occurred spontaneously, in the absence of a situational explanation, suggesting that they were internally driven. By contrast, fluctuations in AD reflected a diminished capacity to cope with the cognitive demands of the immediate environment.” (p 386 left)

And which set out in Table 4 (p 386) the following real life examples given by caregivers about the good and bad moments of a DLB patient:

“Worst: He was hallucinating, his character changed and he got loud, almost aggressive.

Best: He was only slightly muddled.

Worst: She required full direction with ADLs, was lethargic, dribbling and confused to time, place and routine.

Best: She was alert, aware of her routine and familiar with the other residents.

Worst: He couldn’t work out how to charge his electric razor or plug it in.

Best: He attended to clerical work and paid the bills.

Worst: She was nonsensical, confused, and mumbled incoherently.

Best: She was almost as she was.

Worst: She got up at 2:30 am and got dressed for an appointment.

Best: Periods where she seems to think quite clearly, made sense and remembered things.

Worst: He woke in the morning and thought there was a drama somewhere and he had to be there, I couldn’t convince him otherwise.

Best: He woke up calm, and was more easily convinced not to worry.

Worst: He kept looking for “the exit”, couldn’t find the bedroom or the bathroom and had trouble recognising me (wife).

Best: He was alert, opened the door, and greeted me after work. He knew me and seemed pleased to see me.

Worst: She was seeing people, preparing extra meals, and asking how many people to cook for.

Best: Normal conversation, made sense, nothing unusual.

Worst: Illogical discussion, all jumbled, and didn’t make sense.

Best: Made himself clearly understood.”

(5)  Neef 2006:

“Physicians should not rely on clinical impressions at a single visit, because the patient’s cognitive impairment may range from near normal to severe confusion.” (p 1226 left)

(6)  Rongve & Aarsland 2013:

“Fluctuations in DLB commonly occur in both cognition and level or arousal and sleepiness, with some patients changing rapidly from normal alertness and cognition within seconds or minutes, yet others have much slower shifts of days or weeks.” (p 473 right)

(7)  Y Huang & G Halliday, “Can we clinically diagnose dementia with Lewy bodies yet?” (“Huang & Holiday 2013”) [B27/26/199] which quoted the above passage from Ferman 2000 with agreement (p 3);

(8)  Taylor 2013:

“Remission to near‑normal cognitive function can occur spontaneously in the absence of clear environmental triggers” (p 1917)

(Prof Chiu read “remission” as a stronger word than “fluctuation” and as strongly suggesting the return or recovery to normal performance.)

141.  The following authorities according to which a DLB patient could achieve scores in the MMSE test within the normal range commonly ascribed to a non‑demented person also indicate a capability to return to normal cognitive ability:[26]

(1)  McKeith 1992 [B25/38/302]

“Of SDLT patients 40% scored 29 or more out of 37 on the MTS, a level above that commonly accepted (26/37) for identifying demented cases... At presentation therefore, 40% of the SDLT patients were scoring above the MTS threshold for dementia.” (p 913 left)[27]

(2)  Consensus Criteria:

“Composite global cognitive assessment tools such as the Mini‑Mental State Examination (MMSE) cannot be relied upon to distinguish DLB from other common dementia syndromes and some patients who meet the criteria for DLB will score in the normal range.”

142.  The marked fluctuations that DLB patients experience are such that Dr Förstl would explain to a patient who has just been diagnosed with DLB in the following terms:

“Look, Mr Meyer, do not be surprised, I have to explain your letter or medical report will say that you suffer from dementia with Lewy bodies. Now, we all know you are not demented today at 10 o’clock in the morning and you will not be demented hopefully for the next weeks and months, you have an increased risk of developing more serious problems. We can prevent that because you will respond much better to an anti‑dementia drug compared to the average patient with so‑called Alzheimer’s dementia, so we should consider giving you that anti‑dementia substance fairly soon right now. We see no reason for doing that, but should these problems come back, speak with your doctor and he should prescribe that. On the other hand, you’ve been badly confused over the last nights, and if that happens again you should not accept a prescription of haloperidol and other neuroleptics because it may be detrimental for you.”

143.  Dr Förstl also said in para 5.2.f of his 2^nd report:

“... a person bouncing back to normalcy after a diagnosis of for example a dementia with Lewy bodies, would temporarily not satisfy the criteria for a dementia and therefore the diagnosis of dementia with Lewy bodies would have to be discarded until he again became demented.”

144.  What I understand Dr Förstl to be saying here is that a DLB patient can bounce back to such a level of cognitive functioning that he can effectively be said to be not demented.

145.  In contrast, according to Prof Lieh Mak, there can never be fluctuation back to normal once a patient is diagnosed with DLB.  She initially put forward two bases to explain this:

(1)  Once a function is lost, it is irretrievable due to the simple fact that once brain cells die, they are dead and there can be no generation of new cells or new connections.

(2)  Dementia is characterized by an irreversible and a “linear downhill course of decline” (which Prof Lieh Mak demonstrated by drawing a straight downhill line with her hand).

146.  The first basis was offered without authority and was abandoned by Prof Lieh Mak after much cross‑examination on day 46 (29 May 2015).

147.  With regard to the second basis, on day 44 (27 May 2015), again after much cross‑examination, Prof Lieh Mak accepted that the course is one which is “fluctuating downwards” (and gave a corresponding hand demonstration).

148.  Nevertheless, in so conceding, Prof Lieh Mak maintained that fluctuation could never be back to the “baseline”, i.e. “the level of cognitive performance achieved by the patient before he became demented”.  That is to say, the patient would not, even during a good “swing”, be able to achieve the level of cognitive performance attained by him before he became demented. 

149.  To explain this, Prof Lieh Mak suggested for the first time in cross‑examination that DLB is essentially “dementia superimposed by delirium”; that DLB “fluctuation is a delirium, but not a fluctuation of the underlying dementia” and that delirium would not give the patient normal performance.  Under cross‑examination, Prof Lieh Mak backed down and revised the description of DLB to “symptoms of delirium imposed upon dementia”.

150.  I have great difficulty in following Prof Lieh Mak’s analysis.  Her contention that there could be no fluctuation back to normalcy or near normalcy is against the weight of the authorities set out in para 140 above.  The equation of the fluctuations experienced by DLB patients to delirium or delirious symptoms goes against common sense.  Fluctuations would by definition be between good and bad and between up and down. Prof Lieh Mak’s theory leaves the “good” and the “up” unexplained.

151.  To sum up, I am unable to accept Prof Lieh Mak’s evidence. I find that DLB progresses in a fluctuating downhill course and that the fluctuations are of marked amplitude with the patient being capable of putting up normal or near normal performance in the good/up “swings”.  While the period of normalcy would get less and less as the DLB progresses, I accept Prof Chiu’s evidence that normal or near normal performance is still possible during the moderate stage though there will be a point when the DLB has progressed to such severity that even a good swing would not be able to push performance of the patient back to normalcy.

Other differences

152.  There was also a debate as to which part of the brain deteriorates and which function is lost first.  To put this in context, Prof Lieh Mak initially suggested that DLB develops “Top‑Down” in that the higher functions would be affected first before basic functions are impaired.  From this she argued that if a DLB patient has suffered impairment to his basic functions already, then his higher cortical functions must necessarily have already been severely impaired.  On this basis, Prof Lieh Mak relied on the level of basic personal care that Mr Leiduck required as evidence of the severity of his cognitive impairment.

153.  Although much time has been spent in both evidence and submissions on this, it is unnecessary for me to resolve this issue for the simple reason that I am not persuaded that, having regard to the whole picture before me, it is more probable than not that Mr Leiduck’s dependence on others for basic personal care and the various other matters in 2008, 2009 and 2010 relied upon the plaintiff were symptoms of a dementia, whether DLB or VaD.

154.  Another topic canvassed in cross‑examination and submissions is BPSD which refers to a cluster of symptoms including delusions, hallucinations, agitation/aggression, depression/dysphoria, anxiety, elation/euphoria, apathy/indifference, disinhibition, irritability/ lability, aberrant motor behaviour, sleep and appetite and eating disorders.[28]  The main aspects explored are the cause of BPSD (whether they are multi‑factorial) and whether BPSD have a direct correlation with the severity of the dementia or cognitive impairment so that the behaviourial symptoms of Mr Leiduck that one can observe from the records kept on him by his first nursing home in Essen during the period from February 2012 to April 2013 can be used to gauge his cognitive performance and hence competence.

155.  Again, on proper analysis of all the evidence available, I need not deal with this issue, interesting those it is.  This is so because even if the defendants are right that BPSD are multi‑factorial in cause and that they do not have a direct correlation with the severity of the dementia or cognitive impairment, it is my view that the defendants have failed to discharge the burden of proof on them that it is more probable than not that Mr Leiduck had bounced back to a level of cognitive functioning that made him competent as a witness when he signed his (2^nd) 5^th affidavit, 6^th affidavit, witness statement, supplemental witness statement and answers to interrogatories on 27 September 2011, 11 January 2012, 19 September 2012, 15 November 2012 and 28 January 2013 respectively.

156.  All three experts were asked about how they would stage Mr Leiduck’s dementia at different times.[29]  Given that we are concerned with Mr Leiduck’s competence on specific dates and that cognitive fluctuations occur at all stages of DLB and VaD, I do not derive any real assistance from a general statement that Mr Leiduck’s DLB and VaD had approximately reached what stage at what time.

157.  On these notes, I turn to the question whether Mr Leiduck suffered from DLB or VaD in 2008, 2009 and 2010 even before Dr Gallard’s diagnosis.

Available Information about Mr Leiduck’s Health

158.  Mr Leiduck was born on 9 January 1930.  So he was 78 years old at the beginning of the material period of time.

159.  Mr Leiduck was throughout the period with which we are concerned suffering from a number of physical illnesses and ailments, some of a chronic nature with increasing severity (especially heart diseases). 

160.  The earliest record available to us that documented Mr Leiduck’s heart conditions is a medical report dated 23 November 2001 relating to his hospitalisation from 5 to 23 November 2001.  This was followed by repeated hospital admissions in subsequent years.  The heart conditions deteriorated over the years, necessitating a surgery for recanalization for left‑dominant coronary circulation in November 2001, further surgery for recanalization of the RIVA in January 2003 and eventually the implantation of a pacemaker in February 2008. Indeed, the substantial body of medical records we see in this case were generated by the hospital admissions for treatment of Mr Leiduck’s various physical illnesses and ailments.

161.  Mr Leiduck also suffered from a condition called retinitis pigmentosa, which is a progressive disease having these features:

(1)  The age of onset is usually adolescent or early adulthood.

(2)  The early symptom is night blindness.  Vision deteriorates gradually and the person is usually legally blind by mid‑adult life.  The end stage is complete blindness.

162.  The medical report dated 23 November 2001 already noted that Mr Leiduck had significant visual impairment due to bilateral retinitis pigmentosa.  A medical report dated 27 March 2008 in relation to his hospitalisation from 5 to 30 March 2008 recorded the fact that Mr Leiduck had 100% disability and required a care level of 1 due to his amaurosis.  Upon his admission to hospital again on 24 May 2008, he was documented in the nursing record as having just 1% sight. Mr Leiduck became completely blind sometime in 2011 or 2012.

163.  As a result of his heart and other physical conditions, Mr Leiduck had been repeatedly admitted into hospitals in every year since 2001 (i.e. the year from which we have Mr Leiduck’s medical records).  Mr Wong SC counted at least 26 admissions, 10 of which were between 2008 and 2010, as set out in Appendix 2 to his written submissions dated 6 May 2016.

164.  Of particular relevance to us is that during these hospital admissions, Mr Leiduck also underwent 7 neurological examinations, 2 psychological examinations and 2 psychiatric assessments as follows:

(1)  clinical neurological examination during 15 to 16 October 2004 which “did not show a neurological deficit”;

(2)  psychological examination during 11 to 17 November 2006 with findings that Mr Leiduck was “alert, oriented, conscious”;

(3)  neurological examination during 7 to 11 October 2007 which did not reveal any abnormalities;

(4)  neurological examination during 17 February to 5 March 2008 in which no focal neurological deficits were found;

(5)  exploratory neurological and psychological examinations during 5 to 30 March 2008 with “normal” findings;

(6)  neurological and psychiatric consultations (arising from recurrent panic attacks due to known coronary heart disease and hyperliproteinaemia) on 26 May 2008 with these findings: “conscious, alert, oriented”; “organised line of thoughts” and “cooperative, responses adequate”;

(7)  psychiatric consultation on 27 May 2008 in the course of which the following was noted:

“Feels panic mostly at night, describes in detail that this is triggered by perceived changes in heartbeat (presumes this, but doesn’t actually detect anything)

Also waking up due to panic (patient describing panic; appears only to be uneasiness), is afraid of escalating.

Patient panics, vicious circle [illegible] in heart makes panic worse)

...

Treatment – discussion on the causes; looked for ways to deal with panic; not productive at this time. Patient presumably cannot cope with panic.”

(8)  general neurological examination during 17 to 22 February 2010 yielding “normal” findings.

165.  There was no record of any diagnosis, findings, complaints or even suggestion of any cognitive impairment prior to July 2011.  Dr Förstl (who is of course familiar with the environment where Mr Leiduck was treated) made the following observation on Day 38 (14 April 2014):

“I felt that the environment where [Mr Leiduck] was treated was a very modern and effective environment. They would not have neglected a significant case of dementia.”

166.  It was during the 4 to 18 July 2011 admission that Mr Leiduck was referred to Dr Gallard for a neurological examination on 7 July 2011. 

167.  The report by Dr Gallard following his examination of Mr Leiduck on 7 July 2011 read as follows:

“History:

According to the medical history given by a third party (wife) there have been a number of occurrences in which the patient has experienced visual hallucinations, some scenic. On the day he was admitted as an inpatient, his wife found him disoriented in the early hours of the morning in the living room, having turned on all the lights and saying everything was ‘full of Russians’. She later discovered him on the floor in a pool of urine, legs bent, wrapped in a blanket, claiming there was a canal running on either side of him. Later on he lay down in bed with his head at the foot of the bed and said that the Chinese were there.

He has had noticeable movement disorder for a long time; his wife has put this, along with the occasional falls, down to his poor vision. In the meantime there have been times where it takes him several seconds to react to speech. After a stay in hospital in Werden he was discharged with the medication Risperdal, which she then discontinued after consultation with the patient’s GP as it caused tiredness and confusion.

He sometimes confuses events and facts and at times falls to recognize his current situation. He can also sometimes be verbally aggressive.

Until the start of the year he had been drinking at least two ales or a bottle of red wine each evening and had done so for years, which she has since reduced significantly.

Findings:

Possibilities of neuropsychological testing is significantly limited due to bilateral amaurosis (can now only see shadows). At present the patient is oriented to person, place and time (only stated his age incorrectly).

Perception is good, concentration not significantly affected. Memory appears to be age‑appropriate. Rambling formal thought processes, currently no disorder of thought content.

Affect is generally friendly, at times is somewhat irritable (repeatedly cuts examinations short), sufficiently able to express changes in emotion. Has retained impulses. Delayed motor functions. The patient ascribes his ‘malfunctions’ to his loss of vision.

Neurologically, the patient experiences hypokinesia and akinesia with difficulty starting movement and also takes very small, cautious steps due to poor vision, no significant rigidity, no tremor, no paresis or high grade sensory disturbances. Hypophonic, slightly unmodulated speech with no aphasia. Occasionally irregular nystagmus mainly to the left. No ocular muscle paresis.

Assessment and recommendations:

In summary, Lewy body dementia must be taken into account when considering the combination of fluctuating vigilance and cognition disorders with relatively good memory performance on the one hand, and repeated visual scenic hallucinations and extrapyramidal symptoms on the other, as well as repeated falls (although these have mostly not been observed by others) (CCT and EEG inconclusive).  Because a common symptom of this disease is increased hallucinations from L‑Dopa, rivastigmine therapy is recommended, e.g. in patch form, 4.6 mg/d and increased to 9.2 mg/d in 4 weeks at the earliest.  Attention: use classical neuroleptics (Incl. risperidone) and anticholinergic drugs with caution.”

Any unsoundness of mind before Dr Gallard’s diagnosis?

168.  Against the aforesaid background, the plaintiff surmised that Mr Leiduck’s dementia had been overlooked by the doctors who treated him before July 2011. In support, the following points were made:

(1)  DLB is not a common form of dementia.[30]

(2)  Diagnosing DLB is inherently difficult, especially for clinicians who are not involved in treating dementia on a daily basis.[31]  It would also take more than a single visit to ascertain because of the great amplitude in fluctuations, in some visits the patient may appear normal or near normal in their cognitive function, but in the next visit they can have severe confusion.

(3)  A diagnosis of dementia is to a significant extent dependent on accurate information and details provided by an informant who knows the patient well.  Mr Leiduck’s family members (particularly his wife who had been stated as having the tendency to overestimate Mr Leiduck’s abilities) may not have drawn his symptoms to the attention of his treating doctors.

(4)  Mr Leiduck’s doctors were focusing on his other more acute illnesses.  For example, in 2008 when Mr Leiduck was admitted into hospital for panic attacks which are not associated with dementia, his assessment would be focused on the immediate issue (i.e. panic attacks) and there would be no cogent reason to specifically assess the presence of dementia or other cognitive impairment.

(5)  Doctors would not confront Mr Leiduck and raise the issue of dementia until there were obvious and relatively advanced symptoms exhibited.

(6)  The cognitive examinations conducted on Mr Leiduck might not have been of the appropriate or requisite nature, extent and depth that would reveal cognitive impairment.

(7)  Mr Leiduck had an impressive façade, especially in the better moments of his illness, so that one may not be able to immediately detect cognitive impairment on a conversational level.

169.  With respect, if there is evidence that Mr Leiduck had started to suffer from DLB or VaD in 2008, 2009 and 2010, these reasons may explain why the dementia was not diagnosed until July 2011.  However, they do not, without more, establish or even tend to establish Mr Leiduck’s allegedly undetected dementia.  So the real question is whether Mr Leiduck did or did not exhibit any symptoms of DLB or VaD in 2008, 2009 and 2010.

2008

170.  For the year 2008, I wish to start by taking on board Mr Wong SC’s observations that Prof Lieh Mak’s opinion that Mr Leiduck had started to suffer from DLB and was thereby incompetent in 2008 was initially supported on 6 bases and that only 2 of these grounds have been retained by the plaintiff in final submissions.  Like Mr Wong SC, I cannot help but wonder where this leaves the plaintiff given that Prof Lieh Mak expressly did not rely on any of the original 6 bases as being conclusive but as painting the “whole picture”.

171.  Be that as it may, the plaintiff still pointed to the following:

(1)   a CT scan conducted in October 2004 indicating multi‑infarct syndrome with a pronounced subcortical arteriosclerotic encephalopathy and resulted in a diagnosis of multi‑infarct syndrome;

(2)   the nursing care history taken by the Elisabeth Hospital in Essen on 24 May 2008 showing that Mr Leiduck required assistance in basic personal care, such as washing, dressing, shaving, etc and the following entries in the nursing records kept in respect of Mr Leiduck:

24.5.2008

“Patient requires help in all day‑to‑day activities.”

25.5.2008

“Help with basic care”

“Patient did not sleep entire night, more restless than in the day.

“Patient disoriented at times.”

26.5.2008

“Patient confused cannot find way to room.”

“Patient urinated in dayroom, not following instructions to call night‑duty staff.”

“Patient walked out of room again into corridor, he got lost, was brought back to his room and was asked to ring if he needs anything or needs to be taken to the WC.”

27.5.2008

“Patient confused again — was on ward and couldn’t find his way to room. Was aggressive when he was led back to his room. Felt patronised and misunderstood.”

172.  I shall deal with these in turn.

CT scan

173.  There is a distinction between pathology and symptoms, and the two do not correlate.[32]  All the experts agreed that one cannot make diagnosis of dementia from brain pathology — dementia is a syndrome and not a disease, and can only be diagnosed from clinical symptoms, not CT scan results which are not part of the diagnostic criteria.  Most infracts (more than 80%) observed in CT scans are actually silent infracts that have no clinical manifestation at all.

174.  As explained by Dr Förstl, whilst a person with such brain changes may have a statistically increased risk of developing dementia in the future, this is just one of the many factors that might contribute to a later manifestation of dementia, but “it would not allow me to make an individual prediction that this person will probably become demented within the next five years.”

175.  Prof Lieh Mak admitted that “there’s no correlation between the extent of damage and the functional loss”; that “it's not possible to say that [Mr Leiduck] was demented or the degree of dementia” and that she was just “making the assumption that it is possible to have some degree” of dementia or cognitive impairment (the basis of which Prof Lieh Mak did not make clear).  In the end, she accepted that without memory loss, the CT scan would not warrant any diagnosis of dementia.

Need for help with basic care

176.  First, the nursing care history actually recorded both Mr Leiduck’s need for personal assistance and that he was not suffering from dementia.  Mr Leiduck was also noted in the same document as being alert, orientated (to identity, situation, location and time), active, cooperative and even‑tempered and as having clear speech. 

177.  Second, as explained by Prof Chiu and Dr Förstl, referring to DSM‑5,in order to diagnose dementia, it must first be shown that there is cognitive decline that interferes with independence in everyday activities, i.e. the loss of independence in everyday activities is due to the cognitive deficit, because there can be any number of reasons for a person’s loss of independence in everyday activities that have nothing to do with cognitive deficit.  One cannot reverse the logic and use the need for personal assistance to diagnose dementia.

178.  In Mr Leiduck’s case, common sense would suggest that he required personal care assistance because of his advanced aged, poor physical health and visual impairment.

Behaviour in ward

179.  I agree with Mr Wong SC that the entries extracted in para 170(3) above should be read in context:

(1)  that Mr Leiduck was in pain and was feeling very unwell (thoracic oppressions, outbreaks of sweating, dyspnoea);

(2)  that he was blind[33] and found himself in an unfamiliar environment;

(3)  that delirium (or “confusional state”)[34] is a very common phenomenon in hospitals, particularly for elderly patients and Mr Leiduck's physical conditions (pain, visual impairment and chronic heart diseases including coronary heart disease, ventricular extrasystoles and reduced left ventricular function) are well‑known risk‑factors for delirium and made him predisposed to develop delirium; and

(4)  that Mr Leiduck had been prescribed with not less than 4 types of medications which were delirium‑inducing: Tavor (lorazepam) (which would have the side‑effect of producing pradoxical increase in aggression); Zopiclone (which was prescribed in maximum dosage); Aponal (doxepin); and Atosil (promethazine).

180.  I have no difficulty in accepting Mr Wong’s submission that the entries in the nursing records of the May 2008 Admission at most suggest a minor and transient confusional state suffered by Mr Leiduck at night, and caused by a “whole package” (using Prof Chiu’s expression) of factors including Mr Leiduck’s physical conditions, blindness and the drugs that he was receiving during the time.

181.  This is soundly reinforced by:

(1)  the findings of the neurological and psychiatric consultations underwent by Mr Leiduck on 26 and 27 May 2008 (see paras 163(6) and (7) above).  I can see no evidence, other than Prof Lieh Mak’s unsupported assertion, that suggest that the two specialists who saw Mr Leiduck had missed out on his dementia; and

(2)  the fact that Mr Leiduck had completely recovered from the delirium and that the nursing record showed that he was normal when he was discharged on 28 May 2008.

182.  Most importantly, there was no other report of any mental condition — delirium or otherwise - in the whole of 2008 at all.

2009

183.  For 2009, the plaintiff referred to the following as demonstrative of dementia:

(1)  these entries in the nursing records kept by the Elisabeth Hospital in Essen in respect of Mr Leiduck’s stay over 7 days from 15 to 21 October 2009:

15.10.2009

“Telephone number of wife not given”

16.10.2009

“Patient showered by nursing staff.”

“neuro consultation requested”

“Patient spontaneously not able to control bowel movements, some released into trousers”

19.10.2009

“Patient complained in the evening that he hadn’t received his beer.”

“Chat with patient, aggressive, indignant, demanding beer (despite being told several times that this is not possible), claims consultant prescribed it”

(2)  the increase since May 2009 in Mr Leiduck’s nursing care level from Level 1 to Level 2 (meaning a need for continuous skilled nursing care and meaningful availability of restorative services in addition to minimum basis care and services — at least 3 hours per day, 2 hours of which is basic care) and the notation in the Medicproof Expert Assessment dated 16 May 2012 (“2012 Medicproof Report”) that according to a preliminary assessment dated 29 June 2009 (“2009 Assessment”), “since the preliminary assessment, the insured patient’s condition has worsened further, including in terms of cognitive ability”.

Wife’s telephone number

184.  Prof Lieh Mak speculated that the phone number was not given because Mr Leiduck had forgotten his wife’s phone number due to his dementia.

185.  The entry in the nursing records was very brief, apart from recording that the telephone number of the wife was not given, no further details was provided.  The fact that Mrs Leiduck’s telephone number was not given could be due to any number of reasons.  It was pure speculation on Prof Lieh‑Mak’s part to assume that Mr Leiduck had forgotten about the phone number.

186.  Even if the telephone number did slip Mr Leiduck’s mind, it is in any event not that uncommon to find people forgetting phone numbers, including phone numbers of oneself and one's spouse.  One such incident is not something from which dementia could be inferred. 

187.  It should also be perfectly understandable in light of the circumstances under which Mr Leiduck was admitted and the symptoms that he was exhibiting at that time.  Mr Leiduck was rushed to the hospital by ambulance, with angina pectoris, shortness of breath, cold sweats, headache, dizziness, palpitations with a new onset of atrial fibrillation, which is a very serious life-threatening condition(Mr Leiduck was put on heparin treatment because the doctors considered him as having a high risk of stroke).  Mr Leiduck could well be so unwell physically that he was not able to respond to a request for phone number.

Bowel movement

188.  This is a non‑point.  Prof Lieh Mak conceded after much cross‑examination that Mr Leiduck did not have faecal incontinence and this entry could simply be because Mr Leiduck felt pain, which was common for elderly patient, and the release was an accident.

Aggression

189.  The plaintiff attempted to classify this as BPSD.  However, as pointed out by Prof Chiu, this kind of behaviour could be seen in a lot of normal elderly who are not demented.  One cannot put the cart before the horse.  One has to diagnose dementia first before one moves on to judge whether certain repeated behaviour — aggression, anger, depression, fear etc — is BPSD.  One cannot turn around the logic and diagnose a person to be demented because he was found indignant or aggressive on a particular occasion, when his request for something he wanted was denied.

190.  As in 2008, there was no other report of any mental condition or behaviourial issue in the whole of 2009 at all.

Nursing care level

191.  The assessment of nursing care level was merely an assessment to ascertain the amount of time for personal care assistance in terms of hours and minutes that a person requires.

192.  Insofar as Mr Leiduck was concerned, the MediClin Report dated 27 March 2008 recorded that “due to [Mr Leiduck’s] amaurosis he has a Degree of Disability of 100 and a care level of 1”.

193.  The report of the 2009 Assessment is not available but the 2012 Medicproof Report noted the following about the 2009 Assessment:

“There is a nursing care need for care level 2 since May 2009

The patient’s everyday competence is not (significantly) impaired

Fully inpatient care is not recommended”

194.  Prof Lieh Mak relied on these records to argue that the increase in the level of Mr Leiduck’s need for nursing care could not be explained by his physical conditions but must have been the result of the view taken by the Medicproof experts that Mr Leiduck was suffering from dementia in 2009.

195.  This argument, however, ignored what was recorded under the heading “Previous history relevant to nursing care” in the 2012 Medicproof Report:

“Heart failure due to multiple myocardial infarctions, pacemaker implanted in 2009. Retinitis pigmentosa of the eyes with blindness (monthly disability benefit for the blind) for many years. Balance disorders. Until the patient went into a care home, he was looked after at home by his wife; however he was admitted to a care home because he kept falling, he would slip over in his urine. He did not tell his wife when he needed to pass bowel movement or pass water. From 5 to 16 April 2012 he was admitted as an inpatient due to a urinary tract infection with exsiccosis and bronchitis. During this stay he was also diagnosed with dementia (Lewy body dementia) with delusional disorder and adjustment of medication. Difficult relationship between wife and nursing staff as the wife believed the insured patient could still do a lot himself.”

196.  It is clear that, contrary to Prof Lieh Mak's conjecture, the nursing care level was recommended by reason of the various physical illnesses (such as heart failure, blindness, balance disorders, etc.) in 2009.

197.  As far as the Midicproof experts were concerned, dementia only became relevant for the assessment of nursing care level since April 2012.  If indeed dementia had been diagnosed or its possibility detected and considered relevant in 2009, it would have been mentioned in the medical history, as the Medicproof experts in May 2012 clearly had the repot of the 2009 Assessment in their hands for reference.

198.  Even in 2012, according to para 3 of the 2012 Medicproof Report, the diagnoses relevant to Mr Leiduck’s need for nursing care were:

“3.1 Diagnoses justifying nursing care

Complete blindness due to retinitis pigmentosa

Heart failure, scoliosis of the spine.

3.2 Diagnoses (§4 para. 16 and 17 MB/PPV 2010)

Cognitive disorder based on the onset of reduced brain capacity with misperceptions, overestimation of patient’s ability, and stool and urine incontinence.”

199.  That is to say, even in 2012 (after DLB had already been diagnosed and fully taken into account), the Medicproof experts did not consider Mr Leiduck’s DLB to be a “diagnosis justifying nursing care” in assessing the nursing care required by him.  It is hence most unlikely that 3 years earlier when the Medicproof experts made the 2009 Assessment, they were making it on the basis that Mr Leiduck was suffering from dementia — but somehow made no reference whatsoever to it (or else the “previous history” in the 2012 Report would have referred to it).

2010

200.  For 2000, the plaintiff relied on the following notations in the record relating to Mr Leiduck’s hospitalisation from 5 to 8 July 2010:“need for assistance with personal care”; “need for constant supervision” and “delirium, not further identified”.

201.  I believe these have already been dealt with in the above paras 175 to 177 (need for help with personal care) and paras 178(3) and 179 (delirium) where I dealt with similar issues regarding the May 2008 hospitalisation.

202.  As in 2008 and 2009, there was no other report of any mental condition or behaviourial issue in the whole of 2010 at all.

203.  To take stock, there were only three documented confusional states or suspected confusional states, all of which occurred during hospitalisation and from which Mr Leiduck apparently recovered fully, in the entire 3 years from 2008 to 2010.  They came nowhere near fulfilling the relevant diagnostic criteria, to which one should always go back.

204.  Indeed, it appears to me that the plaintiff (relying on Prof Lieh Mak’s assessment) was making a mountain out of a molehill.

205.  The plaintiff’s case relating to 2008‑2010 is fully met by the following answers given by Dr Förstl to Mr Wong SC’s questions on day 60 (24 February 2016):

Q: So these three occasions are all we’ve managed to find.  But in between, we are talking about a time span from 2008 to July 2011, a period of more than three years, with three occasions in the record, all of which related to hospitalization, all of which occurred circumstances which you say a confusional state would not be surprising even for normal, elderly person.

A: Yes.

Q: So you would not be able to draw from such evidence to say that such confusional states are indicative of any dementia?

A: Certainly not of a dementia, but of an increase of developing dementia in due course, ‘due course’ meaning the whole observation period that is available.

...

Q: Do you mean a risk?

A: Yes, a risk.

Q: A risk of developing dementia in some future years?

A: Yes.

Q: But as to when that may come?

A: Certainly not.

Q: You won’t be able to say?

A: No.

Q: It may never come, actually?

A: Indeed.

206.  In light of the evidence, the only conclusion that I can draw regarding 2008, 2009 and 2010 is that Mr Leiduck had not started to suffer from either DLB or VaD, and was therefore not of unsound mind, in those years.

207.  What I can however accept is that the behaviour that led to the consultation with and examination by Dr Gallard probably occurred more than once for a while before that visit.  That much is clear from the “History” section of Dr Gallard’s report (para 166 above). However, I consider it unnecessary to dwell on this, seeing that Mr Leiduck did not produce any written evidence after 6 April 2010 and before 27 September 2011.

208.  For the avoidance of doubt, in coming to the aforesaid conclusion in respect of 2008‑2010, I did not apply any “presumption of competence”.  In my view, such a “presumption” merely describes the implicit basis upon which the court receives evidence from a witness whose competence is not in issue.  It has no place when competence is contested.  When there is a challenge, competence has to be proved on the evidence without reference to any presumption.  In such a situation, where there is no evidence of incompetence and the court rules in favour of competence (as in this case), the court is taking a view on the evidence and is not applying any “presumption of competence”.

Capable of receiving just impressions of fact and or of relating them truly on 27.9.2011, 11.1.2012, 19.9.2012, 11.5.2012 and 28.1.2013?

209.  Mr Leiduck moved into a nursing home in Essen on 2 February 2012 and stayed there until 18 April 2013.  Included in the papers were 161 pages of care records kept by this nursing home which detailed Mr Leiduck’s condition and behaviour and changes therein, good or bad, on a daily basis.

210.  In making the defendants’ case that the DLB (or VaD) did not produce the relevant incapabilities under section 3(b) after July 2011, Mr Wong SC referred to and relied on what these care records said about Mr Leiduck on the dates with which we are concerned as well as those immediately before and after them:

(1)  19 September 2012 (date of the witness statement):

Date/Time	Remarks
18/09/2012
9:45 am	Resident Mr Herbert Leiduck was asked about his wishes for meals as well as possible.  Praise and criticism were accepted.
9:50 am	I asked the resident whether he would like to listen to reading out loud; he was very interested, but said that he wanted to wait because he has important appointments today.  But definitely next time.  He was very nice and happy about this information.
1:17 pm	Mr Herbert Leiduck rang at 12:15 pm.  He was standing n the bathroom naked and wanted to shower.  I explained to him that this was not a good time since it was lunch time.  Mr Herbert Leiduck became very loud in response.  Discussion with Mr Gorkowski, which also brought nothing. Consequently Mr Herbert Leiduck was showered during lunch.
Afternoon	Conversations to maintain contact
19/09/2012
Afternoon	Conversations to maintain contact
20/09/2012
1:31 pm	Mr Herbert Leiduck was happy about fried potatoes, eggs sunny side up and iceberg salad — a lunch which was made by some residents in the home group and tasted wonderful.

(2)  15 November 2012 (date of the supplemental witness statement):

Date/Time	Remarks
14/11/2012
Morning	Mr Herbert Leiduck would like to have a shower in the afternoon.
3:29 pm	Ms Leiduck told me that her husband will be receiving a visit from his attorney, Dr Albert Hagerney, tomorrow 3pm.  We should let him see her husband.  She left Mr Leiduck’s personal ID here; it is in the personal ID box.
6:45 pm	Mr Herbert Leiduck wanted to go have a shower, but chose the wrong door.  He was standing n the hallway naked.  I helped him back to his room and into the bath.
15/11/2012	No record
16/11/2012
Morning	Mr Herbert Leiduck would like to have a shower in the afternoon.
9:30 am	Conversation to maintain contact.  Mr Herbert Leiduck is obviously feeling well.  The resident enjoyed telling stories.

(3)  28 January 2013 (date of the answers to interrogatories):

Date/Time	Remarks
27/01/2013
8:35 pm	Mr Herbert Leiduck asked me whether there would be mixed bathrooms now, why I would let women into his bathroom. Once, he took of his clothes in the room during the day, he spread the clothes across the room on the floor and was griping, he waited for over two hours, he said he peed in his pants. When I answered that I only just started my shift he called me bad names, I would be a liar.
8:45 pm	Supplement: In the meantime, he was friendlier again and even said thank you for things done to or for him.
28/01/2013
4:31 am	Mr Herbert Leiduck wanted to fly to China so that he could continue his work there.  Mr Herbert Leiduck told me that he had worked a lot today and had gotten tired, therefore he is indulging himself with a couple bottles of beer.
10:00 am	Resident Mr Herbert Leiduck was informed that fresh potato pancakes will be served today.  The resident was very happy.
Evening	Mr Herbert Leiduck wanted to have potato pancakes with apple sauce again like at lunch.
6:32 pm	Mr Herbert Leiduck rang to call me in the afternoon and immediately griped at me, why I could put the coffee “in front of his nose” without telling him anything about it — apparently he couldn’t remember it — it supposedly had gotten cold now because of my fault, I should bring him a hot coffee immediately.  I brewed it again and brought it to him.
29/01/2013	No record

211.  I have considered these care records very carefully.  While they do show that Mr Leiduck was not in one of his bad days on 19 September 2012, 15 November 2012 and 28 January 2013 (with some qualification for the last‑mentioned date since he did exhibit some BPSD in the small hours and in the evening), they do not on proper reading actually show that those were necessarily good days.  The only notation for 19 September 2011 was that there were conversations between Mr Leiduck and his carer to maintain contact.  There was no entry in respect of 15 November 2012 at all.

212.  And for 27 September 2011 (i.e. the date of the (2^nd) 5^th affidavit) and 11 January 2012 (i.e. the date of the 6^th affidavit) which were before Mr Leiduck’s move to the nursing home, the only matter that Mr Wong SC could draw my attention to was that Mr Leiduck was not in hospital on those dates.

213.  In any event, it is not sufficient for the defendants who bear the burden of proving that Mr Leiduck was not incompetent within the meaning of section 3(b) to just show that Mr Leiduck was not in a bad “swing” on the subject dates.  Accepting that a DLB patient can fluctuate back to normal or near normal cognitive performance, what is required is some evidence that Mr Leiduck did in fact fluctuate back to such a level of performance that he did not appear incapable as defined in section 3(b).

214.  Submissions such as that Mr Leiduck was probably still in an early (or even prodromal) stage of the dementia and that long good moments tend to be more abundant at such a stage do not help in fixing Mr Leiduck’s actual mental condition on the particular dates on which he produced written evidence.

215.  The same goes for the positive observations on Mr Leiduck’s general mental state before the death of his wife provided by the informants interviewed by Dr Förstl, given the fluctuations in cognition and the unpredictability of such fluctuations in terms of periodicity and amplitude.  These informants obviously did not see Mr Leiduck on a daily basis or on any of the subject dates.

216.  Nor can I derive assistance from the contents of the written evidence itself (which Mr Wong SC described as “logical, consistent, coherent and filled with relevant details”).  I have not been told how they were prepared, in particular, whether Mr Leiduck drafted them himself or whether he just gave instructions to his lawyers who then turned his instructions into the affidavits and witness statements in question and, if so, the quality of such instructions.

217.  Lastly, Mr Wong SC reminded me of the fact that Mr Leiduck signed some of the documents in Germany before a notary public who certified that the contents of the documents had been read to Mr Leiduck who understood and approved them.  Of relevance for present purposes are the notary certificates by one Dr Martin Alberts:

(1)  the one dated 19 September 2012 in respect of Mr Leiduck’s witness statement;

(2)  the one dated 15 November 2012 in respect of Mr Leiduck’s supplemental witness statement; and

(3)  the one dated 28 January 2013 in respect of Mr Leiduck’s answers to interrogatories.

218.  These certificates did not actually describe Mr Leiduck’s mental state as observed by the notary public.  In any event, it is not clear if the notary public was qualified to assess Mr Leiduck’s competence or if he did so assess Mr Leiduck at all.  On this, I believe I am entitled to draw on my own personal experience of observing Mr Leiduck give evidence under cross-examination in sessions of 2 hours or so on 15 days from 25 February to 7 June 2013 and having no inkling whatsoever that he was in fact incompetent except on 8 May 2013.  It was not until Mr Leiduck returned in August 2013 that I began to detect that something might be wrong.

219.  On the evidence, I am driven to the conclusion that the defendants have not discharged the burden of proving that Mr Leiduck was not incompetent on 27 September 2011, 11 November 2011, 19 September 2012, 15 November 2012 and 28 January 2013.  It follows that the written evidence signed by Mr Leiduck on those dates are inadmissible on the ground of incompetence of the witness.

220.  In this connection, I do not agree with Mr Wong SC’s construction and understanding of the competency issue directions.  According to counsel, under those directions:

(1)  The inquiry was not one to be conducted by the parties filing evidence of their own.

(2)  It was to be conducted by Dr Förstl as the single joint expert who should then report to the court.

(3)  The parties were just to provide to Dr Förstl only such evidence, documents and information that were requested by him.

(4)  It was therefore up to Dr Förstl to decide what he needed in order to answer the competency issue.

(5)  That being the case, there was no reason for the defendants to think that they were entitled or required to adduce further factual evidence not asked for by Dr Förstl.

221.  I have great difficulty with Mr Wong SC’s position.  I have reviewed the transcript of the hearing at which the competency issue directions were argued.  It was never suggested that the usual adversarial nature of the proceedings before this court should be changed; that this court should abdicate any of its duties to the single joint expert; or that the usual principles governing the incidence of the burden of proof should be disapplied.  Paragraphs 6 and 7 of the Order dated 15 November 2013 (under which the single joint expert should provide the parties with a list of all the documents etc. he would require for the preparation of his report and the parties were to comply with such list) were included in the interest of saving the time and costs that might otherwise be wasted by a general discovery exercise without the expert’s input.  They were not intended to restrict and did not have effect in restricting either party’s right to adduce evidence not sought by the single joint expert.  It was up to either party to decide what further evidence (if any) they should lead upon hearing from Dr Förstl in 2014 that the materials that had been provided to him were sufficient for him to conclude whether Mr Leiduck was competent or incompetent when making his affidavits and witness statements.

222.  Lastly, while I disagree with Prof Chiu’s conclusion of competence, I am mindful that Prof Chiu reached such view largely on the understanding that there is a presumption of competence.  Prof Chiu is not to be criticised.  Whether such a presumption exists or operates is a matter of law.  I repeat what I have said in para 207 above.

Summary of findings

223.  In summary:

(1)  The defendants have discharged the burden of proving that Mr Leiduck was not of unsound mind and therefore not incompetent in 2008 to 2010.

(2)  Mr Leiduck’s 1^st, 2^nd, 3^rd, 4^th and (1^st) 5^th affidavits are admissible.

(3)  The defendants have not discharged the burden of proving that Mr Leiduck was not incompetent on 27 September 2011, 11 November 2011, 19 September 2012, 15 November 2012 and 28 January 2013. 

(4)  Mr Leiduck’s (2^nd) 5^th affidavit, 6^th affidavit, witness statement, supplemental witness statement and answers to interrogatories are inadmissible.

224.  I am grateful to counsel for both parties for their assistance.

225.  I shall hear the parties on the effects of the findings made in this judgment and on costs on 7‑9 December 2016.

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 4089 OF 1994

________________________

________________________

________________________

DECISION

________________________

1. By a Decision handed down on 17 June 2016 ("Decision"), I dismissed with costs the plaintiff's application for leave to serve upon the defendants interrogatories concerning various matters contained in the 21^st Affidavit of Jeremy David Levy dated 23 August 2013 and the 4^th Affidavit of Helge Leiduck dated 23 September 2013 and the exhibits thereto, which interrogatories were appended to the Decision.

2. By a Summons dated 30 June 2016, the plaintiff applies for leave to appeal against the Decision ("Leave Application").  In support, the plaintiff relies upon 5 detailed grounds of appeal that run to 11 pages. Instead of setting these proposed grounds of appeal out in this Decision, I attach them as an appendix hereto.

3. The plaintiff also seeks a stay of these proceedings (including the delivery of judgment on the Competency Issue) and the vacation of all hearing dates that have been fixed ("Stay Application") to enable the plaintiff to proceed with the appeal (if the Leave Application succeeds) or (if the Leave Application fails) to renew its application for leave to appeal before the Court of Appeal and, if the Court of Appeal grants leave, to proceed with the appeal.

4. Unless otherwise stated, I shall continue to use the abbreviations adopted in the Decision.

LEAVE APPLICATION

5. The Court of First Instance can grant leave to appeal against a civil interlocutory judgment or order under section 14AA(4) of the High Court Ordinance (Cap 4) if it is satisfied either that the appeal has a reasonable prospect of success or that there is some other reason in the interests of justice why the appeal should be heard.

Merits

6. A reasonable prospect of success requires the intended appeal to be more than "arguable" or "not fanciful", without having to be "probable": SMSE v KL [2009] 4 HKLRD 125, [17] and Wynn Resorts (Macau) SA v Mong Henry [2009] 5 HKC 515, [19].

7. Even if there is a reasonable prospect of success, the court still retains a residual discretion to refuse leave (though a reasonable prospect of success would weigh heavily in favour of the grant of leave).  For instance, consistent with the underlying objective under Order 1A, rule 1(c) of the Rules of the High Court (Cap 4A) (ie promotion of reasonable proportion and procedural economy in the conduct of proceedings), the court may refuse leave to appeal in the interests of procedural economy and proportionality.  See Ho Yuen Ki Winnie v Ho Hung Sun Stanley under HCA 391/2006, unreported, 25 May 2009, [3] and on renewed application to the Court of Appeal under HCMP 1009/2009, unreported, 24 August 2009, [22].  See also Wong Kar Gee Mimi v Severn Villa Limited [2012] 1 HKLRD 887, [31].  In Ho Yuen Ki Winnie, A Cheung J (as he then was) (at [7 - 9]) and the Court of Appeal (Le Pichon and Hartmann JJA) (at [22]) were not convinced that there was a reasonable prospect of success but indicated obiter that they would not grant leave even if they were of a different view because the intended appeal would merely be an interlocutory skirmish that only served to increase costs and delay adjudication of the litigation.

8. The question whether the plaintiff’s intended appeal against the Decision has a reasonable prospect of success should be addressed in context, which is that the grant or refusal of leave to serve interrogatories is discretionary.  An appellate court would not interfere with a decision made in exercise of discretion unless the judge at first instance had erred in principle of law, or had misapprehended material facts, or had taken into account irrelevant matters or had failed to take relevant matters into account, or where the judge's conclusion was so plainly wrong that it was "outside the generous ambit within which a reasonable disagreement is possible": Cheung Kam Wah v Cheung Hon Wah [2005] 1 HKC 136, [17] and Carlos Manuel Kwong v Lo Kam Wing, CACV 128/2005, unreported, 3 November 2005, [28].

9. I have carefully considered the proposed grounds of appeal and the written and oral submissions made thereon by Counsel for the plaintiff, Mr John Yan SC (leading Ms Sara Tong), which comprehensively challenge almost every aspect of the Decision.  I have further reviewed the Interrogatories and the Decision in light of such proposed grounds and submissions.  I am not persuaded that the plaintiff has a reasonable prospect of convincing the Court of Appeal that the Interrogatories or any of them satisfy the dual requirement of relevance and necessity.

10. Approaching the Leave Application with a sense of proportion, I do not propose to address each and every detailed point made by the plaintiff.  I refer to the Decision.  With the exception of paragraph 27 (which I will deal with in paragraph 37 below), the legal principles set out in other parts of the Decision are not controversial.  I have explained in the Decision why, applying those principles, I believed the answers to the Interrogatories to be not relevant / necessary.  I will not reiterate the reasons already given in the Decision.  I will however make the following further observations, in case this matter be taken further which seems likely in view of the Stay Application.

11. I start by referring to the Interrogatories.  Mr Horace Wong SC (leading Mr Clark Wang) for the defendants described them as prolix.  I did not go so far in the Decision.  However, looking at them, while I appreciated a party's desire to leave no stone unturned by chasing down every possible lead, I was at the same time mindful that resources, both of the parties and the court, are not unlimited.  Subject to the proper application of relevant legal principles established in decided cases, the assessment of the relevance or necessity or otherwise of an interrogatory should be approached with a sense of procedural proportionality and economy.

Proposed Ground (1) - Relevance to, and necessity for fair disposal of, Competency Issue

12. The plaintiff takes issue with my dismissal of Interrogatories 1(ii), 2, 3, 4, 5, 6, 7, 8, 9(v) and (vi), 10, 11(ii) and (iii), 12 and 13(ii) and (iii) as being irrelevant to the Competency Issue. See paragraph 10 of the Decision and proposed Ground (1)(i) and (ii).

13. In identifying the three matters to which he said the Interrogatories would be relevant (Decision §4), Mr Yan SC did not further elaborate on which interrogatory was relevant to which matter.  In support of the Leave Application, Mr Yan SC himself emphasizes that the plaintiff does not have to show that each and every of the Interrogatories is relevant to the Competency Issue as some are relevant to the defendants' conduct of the application for an inquiry as to damages and to the question of costs (paragraph 13 of Mr Yan SC's written submissions dated 9 August 2016).

14. I remain of the view that the 3 matters set out in paragraph 10 of the Decision as being likely to be elicited by Interrogatories 1(ii), 2, 3, 4, 5, 6, 7, 8, 9(v) and (vi), 10, 11(ii) and (iii), 12 and 13(ii) and (iii) are irrelevant to the Competency Issue:

(1)  The Competency Issue is precisely defined.  It inquires about Mr Leiduck's competence or otherwise as a witness on the specific dates when he signed various affidavits / witness statements / statements of truth and gave evidence in court.

(2)  I agree with Mr Wong SC that Mr Leiduck Jr's involvement in the conduct of these proceedings prior to his appointment as next friend on 5 November 2013 is neither here nor there insofar as the Competency Issue is concerned.  Such involvement, if any, could have been due to any number of reasons, not necessarily Mr Leiduck's poor mental health, particularly given Mr Leiduck's multiple physical disabilities and consequential dependency on assistance by others in the management of his affairs.

(3)  I still do not see how Mr Leiduck Jr's instructions to and/or communications with Mr Leiduck's doctors and lawyers about the Hong Kong and Augsburg proceedings involving Mr Leiduck could be relevant to the Competency Issue.

(4)  The times at which and the means by which Mr Leiduck Jr gave instructions to and/or communicated with Mr Leiduck's doctors and lawyers about Mr Leiduck's mental health, etc and the respective times when Mr Leiduck Jr and Robertsons became aware that Mr Leiduck had, or might have, become incompetent are likewise neither here nor there.  The question is when Mr Leiduck became incompetent, not when his son or his lawyers might become aware of it.

15. The plaintiff also takes issue with my dismissal of the remaining interrogatories (numbered 1(i), 9(i) to (vi), 11(i) and 13(i) ) as being unnecessary for the fair disposal of the Competency Issue.  See paragraphs 11 to 17 of the Decision and proposed Ground (1)(iii) and (iv).

16. I weighed the necessity of these interrogatories for the purpose of the Competency Issue against the primary factual evidence that is available on the mental condition of Mr Leiduck (including the six leverarch files of original and translated contemporaneous records kept by independent medical and nursing professionals who cared for Mr Leiduck from November 2001 right up to his death on 23 March 2014; the information provided by various informants to the joint expert (Dr Hans Förstl); and the transcripts of Mr Leiduck's oral testimony) as well as the opinion evidence that has been given on the basis of such primary factual evidence by Dr Förstl and the parties' own experts (Professor Felice Lieh‑Mak for the plaintiff and Professor Helen Chiu Fung Kum for the defendants) [1] who have between them produced seven expert reports of about 300 pages (not including reference materials) and who have altogether been examined in court for 20 days. [2]

17. I have also had the benefit of the parties' closing submissions on the Competency Issue, made both in writing which add up to hundreds of pages (not including authorities) and orally in court (which took three full hearing days) [3].

18. It is against this body of evidence and submissions and with regard to the range of sub‑issues that I have to deal with in order to resolve the Competency Issue that I came to the view that I would not be further assisted on the Competency Issue by the answers to these interrogatories.

19. In particular, Mr Yan SC identified the 5 matters set out in paragraph 8 of the Decision as being relevant to Mr Leiduck's mental condition in 2013.  As stated in paragraphs 27(3)(F) to (L) of the decision handed down herein on 22 April 2014, [4] Dr Förstl has already expressed the view that except for his testimony on 8 May 2013, Mr Leiduck was incompetent within the meaning of section 3(b) of the Evidence Ordinance (Cap 8) ("EO") on all the occasions on which he gave oral evidence which began on 25 February 2013.

20. With regard to the evidence given on 8 May 2013, Dr Förstl is unable to find in the transcripts sufficient material pointing to an inability to receive just impressions of facts or to relate such facts truly on the part of Mr Leiduck though he was indisputably of unsound mind on account of the diagnosis of dementia with Lewy bodies ("DLB").  What I have to determine is whether DLB is characterised by such significant and drastic fluctuations as described by Dr Förstl so that each occasion on which Mr Leiduck gave evidence and each piece of evidence given by him has to be examined and whether Dr Förstl's evaluation of Mr Leiduck's evidence on 8 May 2013 should be accepted.  Mr Leiduck's answers to Interrogatories 1(i), 9(i) to (vi), 11(i) and 13(i) would not shed light on these questions.

21. I have not overlooked the fact that apart from giving oral evidence, in 2013, Mr Leiduck also signed a statement of truth to verify the defendants' Consolidated Points of Reply on 23 January 2013 and an Answer to Interrogatories on 28 January 2013.[5]  As stated in paragraph 15 of the Decision, the month of January 2013 is well covered by the daily nursing records.

22. In support of the Leave Application, Mr Yan SC expanded his argument by taking the point that some of the Interrogatories were worded in open‑ended terms that might elicit pre‑2013 information (eg when Mr Leiduck Jr first observed in Mr Leiduck a symptom of cognitive impairment).

23. In my view, it is important to pay regard to what was actually being said in the affidavits on which the Interrogatories are based:

(1)  Reading Mr Leiduck Jr’s 4^th Affidavit as a whole, he was saying that, apart from some loss of concentration and memory (paragraph 4), his father was fine right up to his mother's funeral in March 2013.  The reasons given by Mr Leiduck Jr for asking Mr Leiduck to give him a general power of attorney, a matter in which the plaintiff seems very interested, were the initial illness and later death of Mrs Barbara Leiduck who had been taking care of Mr Leiduck’s daily affairs.

(2)  As for the loss of concentration and memory, it is significant to note that it is mentioned in the same sentence that says that Mr Leiduck's mind was sober and that he generally knew what he was talking about in February 2013.

(3)  As for Mr Levy, he did not make any personal observations about Mr Leiduck.  And the earliest event mentioned by Mr Levy took place in March 2013.

In light of the contents of the two affidavits, I have no reason to suppose that the open‑ended interrogatories would extract from Mr Leiduck Jr (who was already one of Dr Förstl's informants) information about Mr Leiduck's mental condition before 2013 that would assist me on the Competency Issue to any or any material degree.

24. As for the plaintiff's insistence that Mr Leiduck Jr should be required to provide his knowledge and observations as regards Mr Leiduck's mental condition on oath, rather than simply orally to Dr Förstl (who the plaintiff says is not in a position to assess the credibility of Mr Leiduck Jr's statements), I have been reminded by Mr Wong SC that:

(1)  Prof Lieh‑Mak gave no or little weight to the observations made by the informants, including Mr Leiduck Jr, recorded in Dr Förstl's report dated 24 March 2014.

(2)  In Mr Yan SC's closing submissions on the Competency Issue, the Plaintiff's position on the information provided by members of Mr Leiduck’s family, including Mr Leiduck Jr, is that "they are fully aware of the present proceedings and the significance of the information they may give on this case and hence may not be entirely objective".  Consequently, the plaintiff embraces the approach of Prof Lieh‑Mak, and commends her for “[focusing] on the contemporaneous and objective medical and nursing records which, in [Prof Lieh‑Mak’s] view, were already sufficient to enable her to come to her opinions on competence of”Mr Leiduck.

Proposed Ground (2) — Relevance to, and necessity for fair disposal of, Effects Issue

25. The plaintiff's submission at first instance on the relevance and necessity of the Interrogatories for the purpose of the Effects Issue was simply premised upon it being dependent upon the court’s rulings on the Competency Issue.

26. In support of the Leave Application, the plaintiff takes a new point under proposed Ground (2)(ii) to (v) that in the event that any of Mr Leiduck's affidavits / witness statements are held not be affected by incompetence, the court has a discretion under section 47(1) of the EO to exclude such hearsay evidence if the plaintiff objects to their admission and their exclusion is not prejudicial to the interests of justice.

27. Mr Yan SC further refers to section 49 of the EO which requires the court, in estimating the weight (if any) to be given to hearsay evidence in civil proceedings, to have regard to any circumstances from which any inference can reasonably be drawn as to the reliability or otherwise of the evidence.  Under section 49(2)(d) and (f), two of the relevant circumstances are:

(1)  whether any person involved had any motive to conceal or misrepresent matters; and

(2)  whether the circumstances in which the evidence is adduced as hearsay are such as to suggest an attempt to prevent proper evaluation of its weight.

28. According to Mr Yan SC, answers to the Interrogatories will provide the court with information as to whether the defendants and those acting according to their instructions and on their behalf (including Mr Leiduck Jr and Robertsons) had known about Mr Leiduck's incompetence but chose to conceal such matters from the court and from the plaintiff.

29. I duly note what Mr Wong SC says in response in paragraph 36 of the defendants' Skeleton Submissions dated 10 August 2016.  However, I do not wish to pre‑empt either party's submissions on the merits of the plaintiff's proposed reliance on section 49(2)(d) and (f) of the EO at the hearing of the Effects Issue by addressing the point here in this context.

30. To my mind, on the question whether there has been any delay in alerting the plaintiff and the court about Mr Leiduck's incompetence, it is sufficient to refer to paragraphs 21 and 22 of the Decision.  Although I have referred expressly to just the Stein Report and the Pfeffer Reports, it seems to me what I have said in these paragraphs should apply equally to all the other medical reports on Mr Leiduck.  That is to say, all such medical reports can be taken as being in the hands of Mr Leiduck once they were compiled.

31. Mr Yan SC however complains that I have overlooked the position of the 2^nd defendant.  He seeks to fill that gap by relying on Mr Leiduck Jr's appointment as a director of the 2^nd defendant on 13 February 2013 in place of his mother who died on 3 February 2013. According to Mr Yan SC, knowledge of Mr Leiduck's incompetence on the part of Mr Leiduck Jr ought to be imputed to the 2^nd defendant from the time of his appointment as director of the 2^nd defendant.

32. The position of the 2^nd defendant can be dealt with shortly.  It appears that Mr Yan SC has overlooked the fact that Mr Leiduck had at all material times remained a director of the 2^nd defendant so that his own knowledge of his mental condition can be imputed to the 2^nd defendant.  It is therefore wholly unnecessary to bring in Mr Leiduck Jr for the purpose of fixing the 2^nd defendant with notice of Mr Leiduck's incompetence.

33. To reinforce his submission on proposed Ground (2), Mr Yan SC also referred to the concern that I previously expressed as to why the matter of Mr Leiduck's incompetence had not been drawn to the court and the plaintiff's attention earlier and observed that such question has still not been properly answered or addressed (proposed Ground (2)(iii) and (iv) ).

34. I am afraid I do not understand the plaintiff's determination to extract an explanation on this matter from the defendants.  On the plaintiff’s case, the timing of the disclosure of Mr Leiduck's incompetence goes to the defendants' conduct of the application for an inquiry as to damages, which is material to the court’s exercise of discretion as to whether to order an inquiry as to damages or not (and as to costs).  I repeat what I have already said in paragraphs 21 and 22 of the Decision and paragraphs 30 to 32 above on how the question as to whether there has been delay by the defendants in alerting the plaintiff and the court about Mr Leiduck's incompetence can be adequately addressed on existing materials.  If there has been delay, the presence or absence of a proper explanation therefor would be one of the matters that I would take into account in deciding whether to order an inquiry as to damages and in awarding costs.  I would however not be hampered in my exercise of such discretion by the lack of an explanation for the delay by the defendants.  Where necessary and appropriate, an adverse inference can be drawn when an explanation is called for but not given.  It is a matter for the defendants.  They remain silence at their own risks.

Proposed Ground (3) — Relevance to, and necessity for fair disposal of, the defendants' application for an inquiry as to damages

35. I refer to what I have said in paragraphs 30 to 32 above, which also deals with Ground (3).

Proposed Ground (4) — Relevance to, and necessity for fair disposal of, the question of costs

36. With regard to the question of costs between the plaintiff and the defendants (Ground (4)(iv) to (v) ), while I have not expressly dealt with the same in the Decision under the heading of “Relevance to, and necessity for the fair disposal of the question of costs”, the plaintiff’s case against the defendants on the wasted costs in connection with Mr Leiduck’s evidence is based on the failure on the part of the defendants to disclose Mr Leiduck’s mental state and the relevant medical reports to the court and the plaintiff at the earliest opportunity.  That being the case, I would have thought the same is covered by paragraphs 21 and 22 of the Decision, which I have supplemented by paragraphs 30 to 32 above.

37. As for costs against Mr Leiduck Jr and Robertsons, I accept that I have overstated in paragraph 27 of the Decision the hurdle facing an applicant for costs against a non‑party at the first stage of the procedure under Order 62, rule 6A.  The correct position is that at the first stage, the court will refuse the joinder of the targeted non‑party only if it is “plain and obvious that the application amounts to an abuse of process, by reason of delay or other misconduct on the part of the applicant, or because the application can be seen to be manifestly and fundamentally misconceived as to be an abuse by the applicant”: see Sun Focus Investment Ltd v Tang Shing Bor (No 2) [2012] 5 HKLRD 853, [19] per Mimmie Chan J.

38. Nevertheless, I believe what I went on to summarise in paragraph 29 of the Decision remains valid:

“… the mechanism for seeking costs against a non‑party or a legal representative does not include a roving inquiry into the conduct of the non‑party or legal representative to enable the applying party to gather evidence or other materials to build or support the costs application against the non‑party or legal representative. Rather it is upon the applying party to show at the first stage a case that justifies it being allowed to proceed to the second stage (of hearing and adjudication).”

39. I remain of the view that the Interrogatories is a fishing expedition to obtain materials to boost the plaintiff’s position on costs against Mr Leiduck Jr and Robertsons, if not to put the plaintiff in the position to mount applications for costs against Mr Leiduck Jr and Robertsons.

Proposed Ground (5) — Necessity for Saving Costs

40. The plaintiff questions my assessment that it would have been most unlikely for the plaintiff to be permitted to cross‑examine Mr Leiduck Jr on Mr Leiduck’s mental health given the relatively little weight that Mr Leiduck Jr’s observations would command in view of the whole body of medical and nursing records on Mr Leiduck that has been disclosed by the defendants.

41. Had an application to cross‑examine Mr Leiduck Jr been made by the plaintiff, it would have been within my case management discretion to disallow the same.

42. More importantly, Mr Wong SC has highlighted the fact that the plaintiff had never requested to cross‑examine Mr Leiduck Jr in the inquiry held by the court on the Competency Issue.  In this regard, the inquiry has been conducted through a tailor‑made procedure largely agreed upon by the parties and sanctioned by the court, as obtained in the Order dated 5 November 2013 as amended on 24 December 2013.  Under that procedure, a jointly appointed expert (Dr Förstl) was given unrestricted access and assistance from both parties (in particular the defendants) to inquire into all the relevant circumstances and to report to the court the evidence that he had gathered and his findings and opinions.  Two more experts (Prof Lieh-Mak and Prof Chiu) were subsequently appointed by the parties, with the leave of the court, to assist the court in assessing the opinions provided by Dr Förstl.  Such inquiry has been completed after almost three years including 23 days spent in court.  At no time during the inquiry before the last day of the final submissions on the Competency Issue had it ever been suggested that in addition to the interviews to be conducted by Dr Förstl, any of the informants who had contact with Mr Leiduck at the relevant times (including Mr Leiduck Jr) needed to be tendered for the plaintiff’s cross examination.

“Some other reason”

43. Neither party has referred me to any decided case in which the court granted leave to appeal on this basis, though my attention is drawn to Hong Kong Civil Procedure 2016, Volume 1, §59/2A/4 which points out that it is impossible to give an exhaustive list of the circumstances under which an intended appeal that has no reasonable prospect of success should be heard in the interests of justice but suggests that one such circumstance is where the question raised is one of general principle, decided for the first time, or a question of importance upon which further argument and a decision of the Court of Appeal would be to the public advantage.

44. The issue on which the plaintiff says the Court of Appeal should be given the opportunity to give guidance is whether a litigant who has caused wastage of time, costs and judicial resources by putting forward an incompetence witness ought to be required to provide a full and frank explanation to the court and to the opposing party as to why disclosure of such incompetence was not (or could not have been) made earlier.

45. For the reason already set out in paragraphs 33 and 34 above, I am not persuaded that this justifies the Court of Appeal hearing the intended appeal.

STAY APPLICATION

46. This is not the first time in these proceedings that I am faced with the dilemma whether to stay the trial to enable a party to pursue a proposed interlocutory appeal to the Court of Appeal.

47. In the Decision handed down by me on 2 April 2013, I summarised the relevant principles in paragraphs 7 to 13 as follows:

“7. While I agree with Mr John Yan SC for the Plaintiff that each case turns on its own facts, in particular, the nature and effect of the interlocutory order sought to be appealed against and its bearing on the issues to be decided, it can be stated as a matter of general principle that appeals to the Court of Appeal in the course of trials of actions or other substantial hearings of applications are highly undesirable and greatly discouraged. Apart from disrupting the trial or hearing and adding to the workload of the Court of Appeal, many such interlocutory appeals might eventually turn out to be academic having regard to the final outcome of the trial or hearing. Consequently, the Court of Appeal may hear an interlocutory appeal in the course of a trial or hearing but only in exceptional circumstances. See Hong Kong Civil Procedure 2013, Volume 1, p 458, §20/8/12 (citing the English Court of Appeal’s judgment in McGarry (E) Electrical v Burroughs Machines, unreported, 14 April 1986, Transcript No 346). An example of exceptional circumstances given by the learned authors is where the trial is likely to be lengthy and an application for amendment to pleading is made to the trial judge which is substantial or crucial and which, whether granted or refused, will or may affect the final outcome of the action or is likely to be decisive after litigation. In such a situation, the trial judge may rule on the application and give the parties leave to appeal, and then adjourn the trial before him to enable the parties to appeal with due expedition to the Court of Appeal who may in its discretion hear the appeal speedily, and thereafter the parties will return before the judge to resume the trial in the light of the decision of the Court of Appeal on the proposed amendment.

8. The same statement of principle at p 369, §20/5–8/12 of the Annual Practice was cited with approval by the Court of Appeal in Lam Choi King v Yeung Fook Chi [1991] 1 HKC 219 at 226G–227B, which involved an interlocutory appeal against a ruling made in the course of a trial excluding the evidence of a witness called by the plaintiff on the ground that it was irrelevant to the issues for trial. The Court of Appeal considered the views expressed by the editors of the Annual Practice as to the undesirability of interlocutory appeals in the course of trials to be apposite to the situation before it, although those views were expressed in the context of amendments to pleadings in a system of litigation which envisaged the grant or refusal of leave to bring interlocutory appeals.

9. The general disapproval of interlocutory appeals during trial save in exceptional circumstances was said by the Court of Appeal in To Kan Chi v Pui Man Yau [1998] 3 HKC 371 at 387 per Nazareth VP to be ‘not in doubt’ and to have been ‘reinforced by the increasing emphasis by this court upon case management by the trial judge’ (see further paragraph 11 below). See also CKW Company Limited v Secretary for Justice [2005] 1 HKC 96, an interlocutory appeal against a decision made by a trial judge on the first day of trial refusing to revisit his earlier decision for a split trial of the issues of liability and quantum, at 109A–H per Woo VP citing Lam Choi King and To Kan Chi.

10. Having regard to such general principle, it would be obvious that risks that commonly exist where parties wish to appeal against interlocutory orders and directions when the trial or hearing is still ongoing (for example, that the time and costs incurred for the trial or hearing, if continued, or part thereof would be wasted if the proposed interlocutory appeal were successful) are not exceptional circumstances. See Wang Sin Shin v Nina Kung, HCAP 8/1999, unreported (Chu J, 17 March 2005),§6.

11. On what may constitute exceptional circumstances, apart from the grant or refusal of leave for substantial or crucial amendments to pleadings having a decisive effect on the final outcome of a lengthy trial as identified in the Annual Practice and adopted by the editors of Hong Kong Civil Procedure (or, I suppose, any other interlocutory orders or directions having such an effect), it seems that an interlocutory appeal to the Court of Appeal may also be allowed to proceed in the middle of a trial or hearing where the judge has erred in principle and the particular matter is not capable of being remedied on appeal post trial. In support, in To Kan Chi, supra, the only case cited by the parties in which the Court had exercised its discretion to adjourn a trial pending an interlocutory appeal, the trial judge allowed to stand 5 writs of subpoena deuces tecum directed to 5 Government departments requiring them to produce 32 original files to which the Government as a defendant had in its list of documents referred. The 5 Government departments subpoenaed were however not themselves parties to the proceedings. Nazareth VP said at 387F–H:

'There remains to be dealt with Mr Barlow's point that interlocutory appeals during trial should be discouraged (see Supreme Court Practice 1997, Vol 1, p 364 para 20/5-8/15), also Lam Choi King v Yeung Fook Chi (t/a Yeung Yat Fat Wood Co) & Ors [1991] 1 HKC 219 at 226G-227D).

That principle is not in doubt, and has been reinforced by the increasing emphasis by this Court upon case management by the trial judge. However, here it is a matter of non-parties being vexed and probably also oppressed by having to examine the massive files involved. Moreover, it is not a question of the particular matter being capable of being remedied on appeal post trial, as is ordinarily possible in matters inter partes. While not underrating the disruptive and potentially prejudicial effect of this appeal upon the plaintiffs, particularly in the context of prolonged hearings, I have no doubt that the non-party Government departments must be permitted to proceed with their appeal.'

12. The burden is on the party seeking the adjournment pending the interlocutory appeal to demonstrate that there are exceptional circumstances justifying the adjournment. It is not for the opposing party to show why the trial or hearing should not be adjourned or show urgency in having to proceed with the trial or hearing as scheduled. Urgency will only make it more difficult to justify adjourning the trial or hearing. See Wang Sin Shin v Nina Kung, supra, §5.

13.   Following the coming into force of the Civil Justice Reform which introduces the requirement for leave to bring interlocutory appeals, a party who wishes to appeal against an interlocutory order made in the course of a trial would have to and should issue a summons for leave to appeal within the time prescribed by the rules of the Court for such step to preserve that option.  Unless there are exceptional circumstances justifying the adjournment of the trial pending the interlocutory appeal, adherence to the principle of discouragement of interlocutory appeals during trial would require the judge to continue with the trial as scheduled.  Given that one of the objectives of such principle is to prevent the unnecessary pursuit of potentially academic interlocutory appeals, contrary to Mr Yan SC's submissions, it would in such circumstances be generally appropriate and sensible for the trial judge to adjourn the argument on, and the determination of, the application for leave to appeal sine die with liberty to the applicant to restore after the conclusion of the trial.  Otherwise, the applicant for leave would be compelled by the rules of the Court to proceed with the interlocutory appeal upon leave being granted by the trial judge or to seek leave from the Court of Appeal itself if the trial judge declines leave and then to proceed with the appeal if the Court of Appeal gives leave."

48. Bearing in mind these principles, I have come to the conclusion (not without some initial resistance) that on balance the court and the parties should not press ahead with the determination of the Competency Issue and the Effects Issue and the balance of the trial before the disposal of the plaintiff's intended renewed application to the Court of Appeal for leave to appeal against the Decision and, if leave be granted, the appeal.

49. I have taken into account the following considerations: the resources that has already been put by the parties and the court into the inquiry into Mr Leiduck's competence or otherwise as a witness (not to mention the trial as to whether there should be an inquiry as to damages); the relevance of the Interrogatories to multiple issues asserted by the plaintiff; the place of Mr Leiduck's evidence in the defendants' case; and the potential domino effect that a ruling by the Court of Appeal that I have erred in the Decision might have on the outcome of the Competency Issue and the Effects Issue and consequently on whether there should be an inquiry as to damages.

50. I am however not prepared to grant an open-ended stay.  At the time moment, the hearing of the Effects Issue has been set down for 21, 22 and 23 September 2016.  I will vacate that hearing.  The parties and the court are, in the meantime, to reserve 7, 8 and 9 December 2016 for the adjourned hearing of the Effects Issue.  The court and the parties shall revisit the further conduct of these proceedings upon the disposal of the Plaintiff's renewed leave application before the Court of Appeal.  The Plaintiff is therefore to report to the court the outcome once such application is determined. 

ORDER

51. For the above reasons, I dismiss the Leave Application. I also make an order nisi that the plaintiff should pay the defendants' costs to be assessed summarily.  The defendants should file and serve their statement of costs within 14 days.  The plaintiff should file and serve its statement of objections (if any) within 14 days thereafter.  The defendants should have 14 days to respond to the plaintiff's objections (if any).

52. I further direct that the hearing of the Effects Issues on 21, 22 and 23 September 2016 be vacated and adjourned to 7, 8 and 9 December 2016.

Appendix

The Plaintiff’s grounds of appeal

(1)   The learned judge erred in finding that the Interrogatories are not relevant to the Competency Issue:

(i)  Having accepted that interrogatories on the 5 matters raised in the 21^st Affidavit of Jeremy David Levy dated 23.8.2013 (“JDL’s 21^st Affidavit”) and the 4^th Affidavit of Helge Leiduck dated 23 September 2013 (“HL’s 4^th Affidavit”) (as set out at §8 of the Decision) may be regarded as potentially relevant to the competency or otherwise of Mr. Hebert Heinz Horst Leiduck (“Mr. Leiduck”) during 2013 if couched in terms restricted to eliciting details about Mr. Leiduck’s mental condition, the learned judge erred in finding (at §10 of the Decision) that the bulk of the Interrogatories go beyond this.  The learned Judge ought to have held that answers to the Interrogatories will provide information as to the 5 matters set out at §8 of the Decision.

(ii) The learned Judge erred in finding that the 3 matters set out in §10 of the Decision are irrelevant to the Competency Issue (as defined in §§18-19 of the Decision dated 22 April 2014). The learned Judge ought to have held that the 3 matters are relevant to the Competency Issue in that :

(a) The involvement of Mr. Helge Leiduck (“Helge Leiduck”) in the conduct of these proceedings prior to his appointment as Mr. Leiduck’s next friend in November 2013 is relevant to Mr. Leiduck’s mental condition at the relevant times, particularly his capability of independently handling matters concerning these proceedings and the extent to which he had to rely on Helge Leiduck’s assistance in handling these proceedings e.g. giving instructions to his legal team for the conduct of these proceedings.

(b) Helge Leiduck’s instructions to and/or communications with the doctors who had taken care of and/or examined Mr. Leiduck as well as lawyers acting for Mr. Leiduck concerning the proceedings in Hong Kong and Augsburg with which Mr. Leiduck was concerned, and regarding Mr. Leiduck’s mental health, his examinations by the said doctors and the results of the examinations are relevant to Mr. Leiduck’s mental condition at the relevant times.  As Helge Leiduck purports to have had close contact with his father during the relevant times and personally observed the deterioration of his mental health, his instructions to and/or communications with Mr. Leiduck’s doctors and lawyers would be relevant to Mr. Leiduck’s mental condition at the relevant times.

(c) Similarly, the Interrogatories concerning the events in the Augsburg court, in particular, the alleged inability of Mr. Leiduck to give evidence as a witness in the trial of Mr. Schreiber pursuant to subpoena(s) issued to him leading to the court’s order for a medical examination of Mr. Leiduck (see §§7-8 of the Interrogatories) are plainly relevant to the Competency Issue as the events in the Augsburg court directly or indirectly reflect upon the competency of Mr. Leiduck as a witness in these proceedings.

(d) The time when Helge Leiduck and Messrs. Robertsons respectively became aware that Mr. Leiduck had, or might have become incompetent as a party and as a witness is relevant to the issue as to when Mr. Leiduck first became incompetent.

(iii)  Having found (at §11 of the Decision) that answers to Interrogatories 1(i), 9(i) to (vi), 11(i) and 13(i) may provide information as to when Helge Leiduck first observed symptoms of cognitive impairment in Mr. Leiduck, which are potentially relevant to Mr. Leiduck’s competence, the learned Judge erred in holding (at §§12-16) that such Interrogatories are not necessary and that the Court would not be assisted to any material degree by Helge Leiduck’s answers to such Interrogatories by reason that “extensive” and “voluminous” medical records of Mr. Leiduck have been disclosed:

(a) The availability of medical records does not detract from the relevance and necessity of the Interrogatories in the Court’s determination of the Competency Issue.  In any event, the medical records available in respect of Mr. Leiduck for the period prior to 2011 were limited.

(b) Dr. Hans Forstl (the joint expert) and Professor Helen Chiu (the expert appointed by the Defendants), who gave evidence on the Competency Issue, considered observations from “informants” to be relevant in assessing Mr. Leiduck’s competence at the material times.

(c) As Helge Leiduck was allegedly the person closest to Mr. Leiduck and with whom Mr. Leiduck allegedly had frequent contact and communication, his observations (if given on oath and assessed by the Court to be credible) would be relevant to the Court’s assessment of the experts’ evidence as to Mr. Leiduck’s mental state at different periods in time.

(iv)  The learned Judge erred in finding at §17 of the Decision that since Dr. Forstl has been provided with JDL’s 21^st Affidavit and HL’s 4^th Affidavit, and that he also interviewed Helge Leiduck (and stated the information obtained in his report), and that the Court would take such information into account in ruling on the Competency Issue, it would be unnecessary to require Helge Leiduck to answer the Interrogatories “just so that [the court] can have the same or similar information verified on oath”:

(a) The Interrogatories do not ask for “the same or similar information” as what has already been stated in HL’s 4^th Affidavit and in Dr. Forstl’s report.

(b) If the learned Judge is to take into account the information provided by Helge Leiduck to Dr. Forstl as stated in Dr. Forstl’s report (which is no more than hearsay), it is all the more important for the Court to require Helge Leiduck to provide his observations as to Mr. Leiduck’s mental condition on oath, especially given that the Defendants have chosen not to tender him as a witness for the purpose of proving competency of Mr. Leiduck at the relevant times.

(c) Indeed, the learned Judge’s indication that she would take into account information contained in JDL’s 21^st Affidavit and HL’s 4^th Affidavit and Helge Leiduck’s observations communicated to Dr. Forstl in ruling on the Competency Issue is inconsistent with her finding that the Interrogatories would not assist the Court and would not be necessary by reason of the availability of medical records concerning Mr. Leiduck.

(d) The fact that Helge Leiduck’s answers to the Interrogatories may result in “another source of contention between the parties” should not be a reason to refuse leave for the Plaintiff to serve the Interrogatories if they are relevant to the issues which the Court has to resolve in these proceedings.  Further, the fact that Helge Leiduck’s credibility and reliability as a witness in these proceedings is an issue of contention between the parties renders it even more important that he ought to be required to provide his observations and knowledge as regards Mr. Leiduck’s mental condition on oath, rather than simply orally to the Joint Expert who cannot be in a position to assess the credibility of his statements.

(2)   The learned Judge erred in finding that the Interrogatories are not relevant to the Effects Issue.  The learned Judge ought to have held that the Interrogatories are relevant to the Effects Issue (as defined in §§18-19 of the Decision dated 22 April 2014) in that should the Defendants seek to rely on the affidavits and/or witness statements filed by Mr. Leiduck as hearsay evidence:

(i) Section 50(1) of the Evidence Ordinance (Cap. 8) (“EO”) requires it to be shown that Mr. Leiduck was “competent as a witness” at the time he made such affidavits and/or witness statements.  Therefore, as Interrogatories are relevant to the Competency Issue (which is what the learned Judge ought to have found), they are also relevant to the Effects Issue.

(ii) Further, the Court has a discretion to exclude hearsay evidence under section 47 EO where an objection is made by the Plaintiff and it is not prejudicial to the interests of justice to exclude such evidence.  In the exercise of such discretion, and in assessing whether it is “prejudicial to the interests of justice” to exclude hearsay evidence in a particular case, the Court is to have regard to all circumstances, and the matters set out in section 49 EO are relevant to the exercise of discretion, in particular whether any person involved had any motive to conceal or misrepresent matters, and whether the circumstances in which the evidence is adduced as hearsay are such as to suggest an attempt to prevent proper evaluation of its weight.  Answers to the Interrogatories will provide the Court with information as to whether the Defendants and those acting according to their instructions and on their behalf (including Helge Leiduck and the Defendants’ solicitors) had known about Mr. Leiduck’s incompetence but chose to conceal such matters from the Court and from the Plaintiff.

(iii) Indeed, at the hearing on 5 November 2013 (in respect of the Defendants’ application for the appointment of a next friend), the learned Judge had herself expressed concern as to why the matter of Mr. Leiduck’s incompetence had not been drawn to the Court’s attention in early June 2013.  Such questions have not been properly answered or addressed by the Defendants.

(iv) In the learned Judge’s decision dated 22 April 2014 (relating to the Plaintiff’s application to adduce evidence from its own expert on the competence of Mr. Leiduck), it was rightly held at §50 that “a party does owe a duty to the Court and to the opposite party not to knowingly, recklessly or negligently put forward an incompetent witness”. The learned Judge went on to state at §51:

“On the facts presently disclosed by the Defendants and known to the Court and the Plaintiff, by early June 2013 at the latest if not earlier[6], the question was raised within the Defendants’ camp regarding Mr Leiduck’s fitness to be questioned as a witness because that was what Dr Pfeffer was specifically asked to examine Mr Leiduck for.  The 1^st Pfeffer Report, though brief, concluded in no uncertain terms that Mr Leiduck was “legally incompetent, incapable of being questioned and unfit to face proceedings in view of his cognitive and emotional disturbances as well as his physical impairment”.  That being the case, that report should have been brought to the attention of the Court and the Plaintiff as soon as it was available to the Defendants in June 2013.  Had that been done, the preparation for the hearing and determination of the Competency Issue could have been set in motion months earlier than November 2013.”

(v) In the Plaintiff’s submissions to the Court in relation to the Competency Issue, the Plaintiff has raised other matters which go to demonstrate that the Defendants (and those acting on their behalf and in accordance with their instructions) had deliberately taken steps to conceal Mr. Leiduck’s incompetence.

(3)   The learned Judge erred in finding that the Interrogatories are not relevant to the exercise of the Court’s discretion as to whether or not the Defendants should be allowed to proceed with the inquiry as to damages:

(i) As rightly stated at §18 of the Decision, in exercise of the Court’s discretion whether or not to enforce the cross-undertaking in damages, all circumstances of the case including, in particular, the conduct of the Defendants in the enforcement of the cross-undertaking are relevant (see, for example, F. Hoffmann-La Roche & Co. A.G & Ors. v. Secretary of State for Trade and Industry [1975] A.C. 295, per Lord Diplock at 361D-F and Cheltenham & Gloucester Building Society v Ricketts & Ors [1993] 1 W.L.R. 1545, per Peter-Gibson L.J. at pp.1554H-1556F).

(ii) The Interrogatories are relevant to the conduct of the Defendants in these proceedings, in particular, whether they had deliberately concealed and/or failed to disclose to the Court and to the Plaintiff the incompetency of Mr. Leiduck at an earlier stage, and as soon as they had knowledge of such incompetency.

(iii) The learned Judge erred in finding at §22 of the Decision that given that (i) Helge Leiduck was not a party to these proceedings until his appointment as Mr. Leiduck’s next friend on 5 November 2013; (ii) Messrs. Robertsons are the Defendants’ solicitors; and (iii) the Defendants’ acceptance that the Stein report and Pfeffer Reports can be treated as being in Mr. Leiduck’s hands once they were compiled, the fixing of the time of Messrs. Robertsons’ knowledge would  not  add to the Plaintiff’s argument as regards the Defendants’ conduct of these proceedings.  The learned Judge failed to take into account the following:

(a) The 2^nd Defendant is also one of the applicants for leave to proceed with the inquiry as to damages.

(b) Given that Helge Leiduck was, since 13 February 2013, a director of the 2^nd Defendant, his knowledge ought to be attributed to the 2^nd Defendant insofar as Mr. Leiduck’s competence is concerned (Mr. Leiduck was the witness for both himself and the 2^nd Defendant).  As stated in §5 of HL’s 4^th Affidavit, Mr. Leiduck had also executed a power of attorney in favour of Helge Leiduck on 27 March 2013 to enable him to take care of his affairs.

(c) Given that Messrs. Robertsons is and was at all material times solicitors for both the 1^st and 2^nd Defendants and thus must be presumed to have been acting in accordance with their instructions in these proceedings, their knowledge is also relevant to the Defendants’ conduct herein. 

(d) Therefore, the knowledge of Helge Leiduck and Messrs. Robertsons as regards Mr. Leiduck’s incompetence and mental condition is relevant to the Defendants’ conduct in these proceedings, in particular, whether they had deliberately concealed and/or failed to disclose to the Court and to the Plaintiff the incompetency of Mr. Leiduck at an earlier stage.

(e) The decision not to disclose relevant information to the Court must presumably have been made by the 1^st Defendant, Helge Leiduck as the controlling mind of the 2^nd Defendant or persons who had authority to act on the Defendants’ behalf.  The Defendants cannot seek to hide behind those acting with their authority and for and on their behalf.

(4)   The learned Judge erred in finding that the Interrogatories are not relevant to the question of costs:

(i) The Court has a wide discretion in respect of making orders as to costs of proceedings.  Order 62 r.5 RHC provides that the Court in exercising its discretion as to costs shall take into account, inter alia, the underlying objectives set out in Order 1A, rule 1 (including to ensure “fairness” between the parties) and the conduct of all the parties, which would include (a) the manner in which a party has pursued or defended his case or a particular allegation or issue; and (b) conduct before, as well as during, the proceedings.  Litigation misconduct and abuse of process are also factors justifying indemnity costs orders against litigants.

(ii) The failure on the part of the Defendants to disclose Mr. Leiduck’s mental state and the relevant medical reports to the Court and to the Plaintiff at the earliest opportunity is directly relevant to the Court’s exercise of discretion when deciding the issue of costs in these proceedings.

(iii) As rightly stated by the learned Judge at §24 of the Decision, the wastage of costs in connection with Mr. Leiduck’s evidence could be substantial.

(iv) The learned Judge erred in finding at §25 that since the Interrogatories seek to ascertain the knowledge of Helge Leiduck and Messrs. Robertsons of Mr. Leiduck’s incompetence, the Plaintiff is only contemplating costs as between the Plaintiff and Helge Leiduck and Messrs. Robertsons.  It is clear from §43 of the Plaintiff’s Skeleton Submissions dated 10 January 2014 and §§38-41 of the Plaintiff’s Skeleton Submissions dated 14 January 2014 (in relation to P’s Summons), that the Plaintiff’s case is that the Interrogatories are relevant to costs as between the Plaintiff and the Defendants.

(v) As set out in §(3)(ii) above, the knowledge of Helge Leiduck (being a director of the 2^nd Defendant since 13 February 2013) and Messrs. Robertsons (being solicitors of the Defendants and acting in accordance with their instructions) as regards Mr. Leiduck’s incompetence and mental condition is relevant to the Defendants’ conduct in these proceedings, in particular, whether they had deliberately concealed and/or failed to disclose to the Court and to the Plaintiff the incompetency of Mr. Leiduck at an earlier stage.  Therefore, the knowledge of Helge Leiduck and Messrs. Robertsons is relevant to the costs liability of the Defendants themselves.

(vi) The learned judge also erred in finding (at §§26-30 of the Decision) that the Interrogatories are not relevant to the liability for costs on the part of Helge Leiduck and/or Messrs. Robertsons:

(a) Whether an application for a wasted costs order as against the Defendants’ legal team is appropriate or justified in the circumstances would depend, inter alia, on the evidence disclosed and to be disclosed, the answers to the Interrogatories and the Court’s determination of the Competency Issue and the Effects Issue.

(b) The fact that no application has yet been made by the Plaintiff to hold Helge Leiduck and/or Messrs. Robertsons personally liable for costs cannot be a reason to refuse leave to serve the interrogatories, especially in the light of the fact that the Court has itself raised concerns as to why the matter of Mr. Leiduck’s possible incompetence had not been drawn to the Court’s attention earlier.

(c) The incidence of costs is a matter which this Court will have to determine in these proceedings and the Interrogatories are plainly relevant in respect thereof.

(d) Contrary to the Judge’s agreement with the Defendants’ submission that the Interrogatories is a “fishing expedition”, the Interrogatories are based on the precise allegations raised in HL’s 4^th Affidavit and/or JDL’s 21^st Affidavit and the findings in the medical reports exhibited thereto, and only seek further details as regards, inter alia, the timing of various events (which the Defendants admit had occurred), the persons involved and/or who were informed in respect thereof.  

(5)   The learned Judge erred in finding at §32 of the Decision that the Interrogatories are not necessary for saving costs by reason that cross-examination of Helge Leiduck would “most unlikely” be allowed due to the “little weight” that his evidence would command in view of the “whole body of medical and nursing records on Mr. Leiduck that has been disclosed by the Defendants”:

(i) The relevance of Helge Leiduck’s answers to the Interrogatories as regards the Competency Issue is set out in §(1) above.

(ii) Given Helge Leiduck’s alleged close contact with his father during the relevant times and his personal observations as to the deterioration of his mental health as stated in his 4^th Affidavit, the Defendants ought to have called him as a witness for the purpose of proving Mr. Leiduck’s competence at the relevant time.

(iii) In any event, as stated in §§(2), (3) and (4) above, the Interrogatories are relevant not only to the Competency Issue, but also to the Effects Issue, the exercise of the Court’s discretion as to whether or not the Defendants should be allowed to proceed with the inquiry as to damages, and the question of costs.  The Defendants’ answers to the Interrogatories may lead to costs and time being saved in that:

(a) JDL’s 21^st Affidavit and HL’s 4^th Affidavit were filed at a very late stage in the proceedings when all of the Defendants’ factual witnesses had already given evidence.

(b) Subject to an application by the Plaintiff for Helge Leiduck to be recalled for the purpose of cross-examining him on the contents of his 4^th Affidavit and/or for Mr. Jeremy Levy to be tendered for cross-examination on the contents of his 21^st Affidavit, the Plaintiff has no opportunity to challenge the contents thereof or to request for further information and particulars of the allegations raised, which would be inherently unfair to the Plaintiff.

(c) The answers which the Defendants may give to the Interrogatories could obviate the need for cross-examination of the deponents or at least shorten any such cross-examination, which will lead to a saving of costs and time.

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4089 OF 1994

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DECISION

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1.   Before the court is the Plaintiff’s Summons dated 2 December 2013 for leave to serve upon the Defendants the interrogatories in Appendix 1 to this Decision (“Interrogatories”) concerning various matters contained in the 21^st Affidavit of Jeremy David Levy (“Mr Levy”) dated 23 August 2013 and the 4^th Affidavit of Helge Leiduck (“Mr Leiduck Jr”) dated 23 September 2013 and the exhibits thereto. 

2.   For the contents of Mr Levy’s 21^st Affidavit and Mr Leiduck Jr’s 4^th Affidavit and for the circumstances leading to the filing of these affidavits and with reference to which the Plaintiff sought to justify the Interrogatories, I believe it is sufficient for me to refer to paragraphs 2 to 19 of the Decision that I handed down on 22 April 2014, which I shall not repeat.  Unless otherwise stated, I shall in this Decision continue to use the abbreviations adopted in my said earlier Decision.

Summary of the Plaintiff’s grounds for serving the Interrogatories

3. It is well settled that the party seeking to interrogate has to demonstrate that the interrogatories are both relevant and necessary (either for the fair disposal of the cause or matter or for saving costs).  See, for example, Kao, Lee & Yip v Koo Hoi Yan, HCA 8847/1993, unreported, 23 April 2001, per Ma J (as he then was) at [7].  

4. Mr John Yan SC (with him Ms Sara Tong), Counsel for the Plaintiff, identified 3 matters to which he said the Interrogatories would be relevant:

(1) the determination of the Competency Issue and, consequently, also the Effects Issue as respectively defined in paragraphs 18 and 19 of my Decision dated 22 April 2014;

(2) the exercise of the court’s discretion as to whether or not to enforce the cross undertaking as to damages upon which the Plaintiff applied for and obtained the Injunction; and

(3) the question of costs.

5. As for necessity, Mr Yan SC argued:

(1) First, given the relevance of the Interrogatories, they would obviously be necessary for the purpose of fairly disposing of the issues to which they relate.

(2) Second, the Plaintiff has reserved the right to require the Defendants to tender Mr Levy and/or Mr Leiduck Jr for cross-examination on their said respective affidavits. However, the Defendants’ answers to the Interrogatories might possibly obviate the need for, or at least shorten, such cross-examination, which would lead to a saving of costs and time.

6. I shall consider Mr Yan SC’s submissions on relevance and on necessity based on relevance (which can be dealt together) first.

7. In this regard, Mr Yan SC reminded me that:

(1) The test of relevance is a fairly wide one.  The right to interrogate is not confined to facts directly in issue, but extends to any facts the existence or non-existence of which is relevant to the existence or non-existence of the facts directly in issue: Marriott v Chamberlain (1886) 17 QBD 154 (CA), per Lord Esher MR at 163.  The test of relevance is satisfied if the potential relevance of the subject matter interrogated suffices: Lau Tak Wah Andy v Hang Seng Bank Ltd, CACV 612/2011, unreported, 18 July 2001, per Stone J at [17].

(2) It is not necessary that the answers to interrogatories should be conclusive of the question at issue.  It is enough that they should have some bearing on the question and that they might form a step in establishing liability: Blair v Haycock Cadle Company (1917) 34 TLR 39 (HL), per Lord Finlay LC at 40.

(3) Interrogatories which go to support the applicant’s case or to impeach or destroy the opponent’s case are admissible: Plymouth Mutual Co-operative and Industrial Society Limited v Traders’ Publishing Association Limited [1906] 1 KB 403 (CA), per Stirling LJ at 416-417.

Relevance to, and necessity for the fair disposal of, the Competency and Effects Issues

8. According to Mr Yan SC, the following matters raised in Mr Levy’s 21^st Affidavit and Mr Leiduck Jr’s 4^th Affidavit are relevant to Mr Leiduck’s mental condition in 2013:

(1) Mr Leiduck Jr’s personal observations of Mr Leiduck’s deteriorating condition since March 2013;

(2) Mr Leiduck’s alleged reliance on Mr Leiduck Jr to deal with his personal affairs which led to his execution of a power of attorney to Mr Leiduck Jr on 27 March 2013;

(3) Mr Leiduck’s inability to testify in the Augsburg court and the circumstances leading to the examination of Mr Leiduck by Dr Stein and the Stein Report;

(4) the circumstances leading to the first examination of Mr Leiduck by Dr Pfeffer in May/June 2013 and the 1^st Pfeffer Report; and

(5) the circumstances leading to the second examination of Mr Leiduck by Dr Pfeffer in August 2013 and the 2^nd Pfeffer Report.

9. I am prepared to accept that interrogatories on these 5 matters may be regarded as potentially relevant to Mr Leiduck’s competency or otherwise during 2013, provided that they are couched in terms that are restricted to eliciting details about Mr Leiduck’s mental condition which may throw light on whether and, if so, when Mr Leiduck was of unsound mind and, if so, whether he appeared, by reason of his being of unsound mind, to be incapable of receiving just impression of the facts respecting which he was examined or relating such facts truly.

10. However, the bulk of the Interrogatories go well beyond this.  They are notably Interrogatories 1(ii), 2, 3, 4, 5, 6, 7, 8, 9(v) and (vi), 10, 11(ii) and (iii), 12 and 13(ii) and (iii).  I have considered these interrogatories closely.  It appears to me that, if answered, they would only pin Mr Leiduck Jr and Messrs Robertsons (“Robertsons”) down on the following:

(1) Mr Leiduck Jr’s involvement in the conduct of these proceedings before his appointment as Mr Leiduck’s next friend in November 2013;

(2) Mr Leiduck Jr’s instructions to and/or communications with the doctors who had taken care of and/or examined Mr Leiduck (namely, Dr Funk, Dr Pfeffer and Dr Stein) as well as the lawyers acting for Mr Leiduck (namely, Robertsons before this court and Dr Kirsch before the Augsburg court) concerning the proceedings in Hong Kong and Augsburg with which Mr Leiduck was concerned and regarding Mr Leiduck’s mental health, his examinations by the said doctors and the results of such examinations; and

(3) the time when Mr Leiduck Jr and Robertsons respectively became aware that Mr Leiduck had, or might have, become incompetent as a party and as a witness.

Such matters are irrelevant to the Competency Issue (and, therefore, the Effects Issue).

11. As for the remaining Interrogatories (numbered 1(i), 9(i) to (vi), 11(i) and 13(i)), to the extent that the answers thereto may tell us when Mr Leiduck Jr first observed various symptoms of cognitive impairment in Mr Leiduck (i.e. losing concentration and memory, having to pause to think, being frequently lost for words, having hallucinations, mistakenly thinking that he was still living in Langenberg away from which he had moved more than a decade ago, asking whether his daughter-in-law was an Asian when she is not, being unaware of reality, over-estimating himself, taking his delusions seriously and having considerable mental performance deficiencies), these interrogatories may at first glance be potentially relevant (in the broad sense of the word for this purpose) to Mr Leiduck’s competence or otherwise in 2013.

12. However, it does not follow that the answers to Interrogatories 1(i), 9(i) to (vi), 11(i) and 13(i) are therefore necessary for the fair disposal of the Competency Issue, to which they relate.  Indeed, this case illustrates that necessity does not necessarily follow from relevance.

13. In this connection, in support of his case for relevance to the Competency Issue, Mr Yan SC made the point that Mr Levy’s 21^st Affidavit and Mr Leiduck Jr’s 4^th Affidavit contained the only factual evidence then available as regards the Competency Issue; that the Interrogatories sought further details and particulars as to the allegations made in those affidavits; and that the Defendants’ answers would provide the joint expert (Dr Förstl) with relevant facts (confirmed on oath) to consider and take into account in providing his opinion on the Competency Issue.

14. In my view, the Plaintiff acted in haste.  The Plaintiff’s Summons predated the disclosure of Mr Leiduck’s medical records, which was required of the Defendants by the Competency Issue Directions.  In fact, the Plaintiff acted even before the expiry of the time allowed to the Defendants to comply with such directions.

15. As one would expect in view of the Competency Issue Directions, the Defendants have provided the court, the Plaintiff and the experts with the medical and nursing records enumerated (in a chronological order) in the list in Appendix 2 to this Decision.  These records (together with their English translations) are voluminous, filling up 6 leverarch files (Trial Bundles 18, 19, 22, 23(1), 23(2) and 24).  They are extensive, spanning over the period from November 2001 right up to Mr Leikduck’s death.  They are contemporaneous.  Their independence cannot be questioned, having been created by Mr Leiduck’s doctors, nurses and carers (who have nothing to do with these proceedings) in the course of discharging their professional/work duties.  Some of the documents are very comprehensive.  In particular, I would like to highlight the 161 pages of care records kept by the nursing home in Essen at which Mr Leiduck stayed from 2 February 2012 to 18 April 2013.  These care records detail Mr Leiduck’s condition and behaviour and changes therein, good or bad, on a daily basis. 

16. In light of the abundance of contemporaneous and independent medical and nursing records that are available in respect of Mr Leiduck, I do not anticipate being further assisted by Mr Leiduck Jr’s answers to Interrogatories 1(i), 9(i) to (vi), 11(i) and 13(i) to any or any material degree. 

17. In any event, Dr Förstl has been provided with Mr Levy’s 21^st Affidavit and Mr Leiduck Jr’s 4^th Affidavit and the exhibits thereto.  He also interviewed Mr Leiduck Jr, no doubt bearing in mind the matters deposed to in these affidavits.  Dr Förstl has set out the information obtained by him from Mr Leiduck Jr at pages 39-40 and 43-44 of his first report dated 25 March 2014.  I will take such information into account in ruling on the Competency Issue.  It is to my mind unnecessary to make Mr Leiduck Jr answer Interrogatories 1(i), 9(i) to (vi), 11(i) and 13(i) just so that I can have the same or similar information verified on oath.  Indeed, if Mr Leiduck Jr were ordered to answer these interrogatories, I fear from my experience of adjudication in these proceedings that his answers may just serve to provide yet another source of contention between the parties.  Mr Leiduck Jr is a key witness on various issues relevant to whether there should be an inquiry as to damages.  He gave evidence in court for about 8 days from 14 to 25 February 2013.  It is clear from his cross-examination by Mr Yan SC that the Plaintiff is very skeptical of Mr Leiduck Jr’s personal interest and involvement in these proceedings as well as his credibility and reliability as a witness.

Relevance to, and necessity for the fair disposal of, the Defendants’ application for an inquiry as to damages caused by the Injunction

18. According to Mr Yan SC, this arises because in exercise of the Court’s discretion whether or not to enforce the Plaintiff’s cross-undertaking as to damages, all the circumstances of the case including, in particular, the Defendants’ conduct in the enforcement of such undertaking are relevant.  See, for example, F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295 (HL) per Lord Diplock at 361D-F and Cheltenham & Gloucester Building Society v Ricketts [1993] 1 WLR 1545 (CA) per Peter Gibson LJ at 1554H-1556F.

19. The Defendants’ conduct that the Plaintiff had in mind in this context was the failure to disclose information and documents concerning Mr Leiduck’s competence to the court and to the Plaintiff until late August 2013 and to explain such delay.

20. The Plaintiff questioned the timing of the disclosure that called into question Mr Leiduck’s competence as a party and as a witness, having regard to the fact that the 1^st Pfeffer Report, which came into existence on 11 June 2013, clearly identified the capacity being assessed to be Mr Leiduck’s fitness to be questioned as a witness in legal proceedings and expressed the view that Mr Leiduck was “legally incompetent, incapable of being questioned and unfit to face proceedings in view of his cognitive and emotional disturbances as well as his physical impairment”.

21. Insofar as we are concerned with the conduct of these proceedings by Mr Leiduck himself, as noted by Mr Horace Wong SC (with him Mr Clark Wang), Counsel for the Defendants, in paragraph 43 of his Skeleton Submissions, the Stein Report and the Pfeffer Reports are reports of the 1^st Defendant.  They can be taken as being in his hands once they were compiled.

22. The difficulty that I have with the Interrogatories, insofar as we are concerned with the Defendants’ conduct of these proceedings, is that what they seek to establish is the time when Mr Leiduck Jr and Robertsons became aware that Mr Leiduck had, or might have, become incompetent.  Mr Leiduck Jr is not a party to these proceedings until his appointment as Mr Leiduck’s next friend on 5 November 2013.  As for Robertsons, they are the Defendants’ solicitors herein.  Given the Defendants’ acceptance that the Stein Report and the Pfeffer Reports can be treated as being in Mr Leiduck’s hands once they were compiled, I do not see how fixing the time of Robertsons’ knowledge would add to the Plaintiff’s argument as regards the Defendants’ conduct of these proceedings.

23. In conclusion, I do not find the Interrogatories necessary, or even relevant, to the Defendants’ conduct of these proceedings.

Relevance to, and necessity for the fair disposal of, the question of costs

24. Depending on my finding as to when Mr Leiduck became incompetent,[1] I do not disagree with the Plaintiff that the wastage of costs in connection with Mr Leiduck’s evidence could be substantial.

25. It is plain from the Interrogatories, which are set to ascertain knowledge of Mr Leiduck’s incompetence on the parts of Mr Leiduck Jr (a non-party until 5 November 2013) and Robertsons (the Defendants’ solicitors), that the issues of costs that the Plaintiff is contemplating are that between the Plaintiff and Mr Leiduck Jr and Robertsons.  Paragraph 45 of Mr Yan SC’s Skeleton Submissions said as much as regards Robertsons. 

26. However, paragraph 45 of Mr Yan SC’s Skeleton Submissions merely asserted that “[t]he failure of the Defendants’ legal team to raise the need for the appointment of a next friend for Mr Leiduck notwithstanding their knowledge of his likely incompetence is also relevant to the issue whether they should be made personally liable for the costs of the proceedings or part thereof.”  Counsel did not go on to explain how it was said that Robertsons acquired the relevant knowledge earlier than what they have already disclosed or that substantial costs have been wasted by Robertsons not acting upon such knowledge earlier than they did.  In a nutshell, while there is a veiled suggestion that the Plaintiff might have grounds to seek costs against Mr Leiduck Jr and Robertsons, I have been left very uncertain of the existence of a present issue of costs between the Plaintiff and Mr Leiduck Jr or Robertsons, to which the Interrogatories could relate. 

27. The making of an order against a non-party to pay costs, which is empowered by s 52A(2) of the High Court Ordinance (Cap 4) when the court is satisfied that it is in the interest of justice to make such an order, is procedurally governed by Order 62, rule 6A of the Rules of the High Court.  Rules 6A contemplates a two-stage process, the first of which is to consider whether the targeted non-party should be joined as a party for the purposes of costs.  The applicant would normally be expected to explain the nature of claim against the intended party. The claim would only be allowed to proceed if there is a good arguable case. See Hong Kong Civil Procedure 2016, Volume 1, paragraphs 62/6A/5 and 62/6A/11.

28. The making of a wasted costs order against a legal representative personally is regulated by Order 62, rules 8, 8A, 8B and 8C.  For present purposes, I note in particular that this is also a two-stage process and that the first stage is for the court to be satisfied, inter alia, that it has before it evidence or other material which, if unanswered, would be likely to lead to a wasted costs order being made.  See rule 8B(1)(a)(i).  At this stage, the court has to take into account the strength of the prima facie case shown by the applicant: Ma So So v Chin Yuk Lun [2004] 3 HKLRD 294, per Li CJ at [16].  Section 52A(6) of the High Court Ordinance defines “wasted costs” to mean any costs incurred by a party as a result of an improper or unreasonable act or omission or any undue delay or other misconduct or default on the part of a legal representative etc.  Rule 8C prohibits a party from indicating to another party or any of that party’s legal representatives that he intends to apply for a wasted costs order unless he is satisfied that he is able to particularise the behaviour of the legal representative from which the wasted costs concerned are alleged to result and to identify the evidence or other materials on which he relies in support of the allegation.

29. It can be seen that the mechanism for seeking costs against a non-party or a legal representative does not include a roving inquiry into the conduct of the non-party or legal representative to enable the applying party to gather evidence or other materials to build or support the costs application against the non-party or legal representative.  Rather it is upon the applying party to show at the first stage a case that justifies it being allowed to proceed to the second stage (of hearing and adjudication).

30. While I pass no comment on whether the Plaintiff presently has sufficient evidence to raise the issue of wasted costs against Mr Leiduck Jr or Robertsons, it is plain from the terms of the Interrogatories that they are sought with a view to obtaining materials to boost the Plaintiff’s position on costs against Mr Leiduck Jr and Robertsons, if not to put the Plaintiff in the position to mount applications for costs against Mr Leiduck Jr and Robertsons.  I agree with Mr Wong SC that the Interrogatories is a fishing expedition.  This is not permissible.  See, e.g. Lee Nui Foon v Ocean Park Corp (No 2) [1995] 2 HKC 395, per Cheung J at 396I-397F.

Whether necessary for saving costs

31. This applies only to Interrogatories 1(i), 9(i) to (vi), 11(i) and 13(i)) concerning Mr Leiduck Jr’s first observation of symptoms of cognitive loss on the part of Mr Leiduck which, for the reasons explained in paragraphs 11 to 17 above, may potentially be relevant to, but are not necessary for the fair disposal of, the issue of Mr Leiduck’s competence in 2013.

32. Mr Yan SC’s alternative case of necessity based on potential costs saving was advanced on the notion that the Plaintiff might otherwise have to require the affirmants to be tendered for cross-examination on the affidavits from which the Interrogatories arose.  I can deal with this shortly.  It would have been most unlikely that such cross-examination would be allowed given the relatively little weight that Mr Leiduck Jr’s observations would command in view of the whole body of medical and nursing records on Mr Leiduck that has been disclosed by the Defendants.

Order

33. For the above reasons, I dismiss the Plaintiff’s Summons dated 2 December 2013.  I also make an order nisi that the Plaintiff should pay the Defendants’ costs to be assessed summarily.  The Defendants should file and serve their statement of costs within 14 days.  The Plaintiff should file and serve its statement of objections (if any) within 14 days thereafter.  The Defendants should have 14 days to respond to the Plaintiff’s objections (if any).

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4089 OF 1994

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DECISION

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1.   The issue arising for decision is whether the Plaintiff should be allowed to adduce evidence from its own expert after a single expert who has been jointly instructed by the parties has made a report and given oral evidence.

Circumstances giving rise to need for expert evidence & issue for expert evidence

2.   As explained in the Reasons for Decision that I handed down on 12 March 2013, before the Court is an application (“Inquiry Application”) by both Defendants for an inquiry as to the damages suffered by them by reason of the Mareva injunction made against them on 29 April 1994 (“Injunction”), in enforcement of the cross undertaking as to damages upon which the Plaintiff applied for and obtained such injunction.

3.  The trial of the issues relevant to whether there should be an inquiry was originally set down for 16 days from 4 to 28 February 2013.

4.  In support of the Inquiry Application, Mr Herbert Leiduck (“Mr Leiduck”)[1] signed Statements of Truth to verify the Defendants’ pleadings[2] on 16 November 2010, 15 December 2012 and 23 January 2013.  He further swore/signed a number of affidavits/witness statements on 7 January 2008, 9 December 2008, 25 June 2009, 30 March 2010, 6 April 2010, 27 September 2011, 11 January 2012, 19 September 2012, 15 November 2012 and 28 January 2013, all of which have been adopted as his evidence in chief. 

5.  Mr Leiduck was then cross-examined by Mr John Yan SC (with him Ms Sara Tong) for the Plaintiff on the following days in 2013: 25 and 27 February; 1, 5, 6 and 7 March; 10 and 11 April; 8, 9, 14 and 15 May; 6 and 7 June and 16 August.  His re-examination by Mr Horace Wong SC (with him Mr Clark Wang) commenced on 16 August 2013 and continued on 19 and 21 August 2013. 

6.  In this regard, Mr Leiduck testified from a business centre in Germany (where he resided) via video link pursuant to leave granted by the Court of Appeal on 29 January 2013 in CACV 12/2013.[3]  Further, on the days when Mr Leiduck testified, the Court sat for such purpose from 6 pm to 8 pm (from 25 February to 10 April 2013[4]) or from 5 pm to 7 pm (from 11 April 2013 onwards).  Quite apart from the time difference between Hong Kong and Germany, those late and short sitting hours were adopted to prevent Mr Leiduck from being over-stressed by giving evidence having regard to his advanced age (over 80 years), physical disabilities (blindness and considerable age-related hearing impairment) and medical conditions (particulars of which can be found in §§6-7 ofthe Court of Appeal’s said judgment) as well as to allow Mr Leiduck enough time after waking up to wear off the effects of the overnight medication that he was taking. I believe it is not unfair for me to say that the accommodation of the special needs of Mr Leiduck as a witness is a significant reason (though not the only reason) why this trial has overrun so seriously.    

7.  However, while the Plaintiff and the Court were made aware of Mr Leiduck’s physical disabilities and ailments, they have not been alerted to the facts that:

    (1) On 7 July 2011[5], following a report by Mr Leiduck’s wife of incidents of visual hallucinations (some scenic) and disorientation, a Dr A Gallard, a specialist in neurology, diagnosed Mr Leiduck to be suffering from dementia with Lewy-bodies (“DLB”).

     (2) On 3 January 2012[6], a Dr F Sondhauss, a consultant/specialist for psychiatry and psychotherapy, made psychological findings of, inter alia, erratic and long-winded thought processes, reduced attention and concentration, impaired long-term memory, paranoid thoughts, misperceptions in the form of visual hallucinations and impaired relation to reality and diagnosed Mr Leiduck to be suffering from moderate dementia. 

8.  On 22 August 2013 (i.e. the 34^th day of this trial), at 5 pm, when Mr Leiduck was due to continue his evidence in re-examination, Mr Wong SC handed up to the Court the English translation of a medical report dated 12 June 2013 (“Stein Report”) by a Dr Albrecht Stein (“Dr Stein”) which on its face:

(1) recorded that Mr Leiduck had been summonsed twice by the court in Augsburg, Bavaria, Germany for questioning as a witness in respect of certain criminal proceedings against one Karlheinz Schreiber for tax evasion but was neither willing nor able to appear due to his illness;

(2) was commissioned by the Augsburg court as a result of Mr Leiduck’s unwillingness and inability to testify;

(3) addressed the question “whether Mr Leiduck is able to make a statement as a witness” in terms of his abilities to reasonably express his interests during the court room proceedings, to formulate his statement as a witness in a comprehensible manner, to answer specific questions of the parties in the case adequately and truly, to follow court proceedings adequately, to meet the obligation to tell the truth, to understand questions and statements of other parties in the proceedings and to adequately and actively assert his own legal interests;

(4) noted that Mr Leiduck was suffering from dementia and cerebral-organic psycho-syndrome and taking medication for dementia (exelon); and

(5) concluded that Mr Leiduck was then completely unable to participate as a witness in court proceedings, with no prospect of recovery.  In particular, it was said, inter alia, that Mr Leiduck had considerable deficiencies in both long and short-term memory; that due to the considerable reduction in his memory function, particularly the long-term memory, he could not be questioned “responsibly” on things that happened many years ago; that many experiences were increasingly processed by Mr Leiduck in a delusional manner as a result of his advanced age and the illness pattern of dementia and the cerebral-organic psycho-syndrome which would only intensify; and that he could no longer answer sophisticated questions which went beyond his personal situation in a manner which was adequate and met his obligation to tell the truth.

9.  In addition to the Stein Report, Mr Wong SC also mentioned that Mr Leiduck had also been examined by some other doctor.  Counsel was however not then in a position to provide any further detail to the Court and the Plaintiff save that the other doctor also concluded that Mr Leiduck was “in bad shape” and that there was another, albeit shorter, medical report on Mr Leiduck.

10.  The trial was adjourned to 28 August 2013 for the Defendants to make full and proper disclosure of all the information that they had at hand regarding Mr Leiduck’s mental health and capacity and for both parties to consider the implications of such information on the status of the evidence already given by Mr Leiduck and prepare submissions on what the Court can and should do in the circumstances.

11.  The Stein Report and its English translation were formally produced by the 21^st Affidavit of Mr Jeremy Levy (“Mr Levy”) of Messrs Robertsons, solicitors for the Defendants, made on 23 August 2013 which also exhibited 2 other medial reports on Mr Leiduck dated 11 June 2013 and 16 August 2013[7] (“1^st Pfeffer Report” and “2^nd Pfeffer Report” respectively and “Pfeffer Reports” collectively) by a Dr Klaus-Dieter Pfeffer (“Dr Pfeffer”) with English translations as well as the following explanations:

Regarding the Stein Reports:

(1) Mr Leiduck was summonsed by the Bavarian Superior State Court in Augsburg to testify at the trial of Karlheinz Schreiber in about March 2013.  In order to ascertain whether Mr Leiduck was fit to give evidence, on 4 June 2013, the Augsburg court ordered Dr Stein to examine Mr Leiduck.  Dr Stein’s examination of Mr Leiduck was conducted in about June 2013, following which the Stein Report was compiled.

(2) After the Stein Report was submitted to the Augsburg court, Mr Leiduck Jr asked the lawyer who represented Mr Leiduck before the Augsburg court, a Dr Stefan Kirsch (“Dr Kirsch”), to obtain a copy of the Stein Report.  On 19 August 2013, Dr Kirsch sent Mr Leiduck Jr a copy of the Stein Report (written in German), which was soon forwarded to Mr Levy.  Mr Levy obtained an English translation in the morning on 22 August 2013.

Regarding the Pfeffer Reports

(3) Since about June 2013, the people taking care of Mr Leiduck at the senior home where he was staying became aware that his condition was deteriorating and that he was having hallucinations.  Dr Christine Funk (“Dr Funk”), the general practitioner in charge of Mr Leiduck’s medical treatment, then made arrangements for Mr Leiduck to be examined by Dr Pfeffer, a specialist in psychiatry and psychotherapy.  Dr Pfeffer first examined Mr Leiduck on 7 June 2013 and compiled the 1^st Pfeffer Report.

(4) Concerned with his father’s condition, Mr Leiduck Jr requested Dr Pfeffer to examine him again, which Dr Pfeffer did on 9 August 2013, following which he compiled the 2^nd Pfeffer Report. 

12.  Turning then to the Pfeffer Reports, insofar as it is material for present purpose:

(1) Dr Pfeffer stated in his 1^st report that the “patient is facing various legal proceedings, e.g. in Hong Kong or Augsburg.  The issue is whether he is fit to be questioned.  He has been called as a witness on several occasions, but could no longer remember things from the past correctly, became tired quickly and was not able to stand up to the stress.”

(2) He considered “the patient to be legally incompetent, incapable of being questioned and unfit to face proceedings in view of his cognitive and emotional disturbances as well as his physical impairment”.

(3) He stated in his 2^nd report that according to Mr Leiduck Jr, “his father is often unaware of reality, over-estimates himself, takes his delusions seriously”.

(4) Dr Pfeffer concluded in his 2^nd report that Mr Leiduck “remained mentally incompetent, unfit to be questioned, legally incompetent and unable to defend his own interests”.

13.  By the resumed hearing on 28 August 2013, it was recognised by all concerned that the contents and conclusions of the Stein Report and the Pfeffer Reports put into question Mr Leiduck’s fitness both as a party and as a witness.

14.  At the invitation of the Defendants, I stayed all further proceedings in this action pending an application to be made for the appointment of Mr Leiduck Jr as next friend for Mr Leiduck for the purpose of carrying on these proceedings on Mr Leiduck’s behalf (“Next Friend Application”). 

15.  In support of the Next Friend Application which was made by Summons dated 25 September 2013, Mr Leiduck Jr swore his 4^th Affidavit on 23 September 2013 to depose to the following:

(1) After his wife’s death on 3 February 2013, Mr Leiduck had “lost some concentration and memory”.

(2) Mr Leiduck executed a general power of attorney on 27 March 2013 to enable Mr Leiduck Jr to take care of his affairs.  Mr Leiduck Jr had after May 2013 been practically managing most if not all of Mr Leiduck’s personal affairs on his own using the power of attorney as Mr Leiduck no longer gave him specific instructions anymore.

(3) In mid May 2013, Mr Leiduck Jr observed a clear deterioration of the mental capability of Mr Leiduck who started to talk about a lot of incoherent and imaginative matters and was having hallucinations.

(4) Mr Leiduck Jr reported his father’s condition to Dr Funk who then asked Dr Pfeffer to examine Mr Leiduck and assess his condition, as result of which Dr Pfeffer produced the 1^st Pfeffer Report to Dr Funk.

(5) The court order pursuant to which the Stein Report was compiled was made following Mr Leiduck’s absence before the Augsburg court despite having been twice subpoenaed and after submissions were made by Dr Kirsch that due to Mr Leiduck’s medical condition, he could not travel to the court to testify.

(6) Mr Leiduck’s condition worsened rapidly between June and August 2013 so much so that Mr Leiduck Jr asked Dr Pfeffer to examine his father again at the beginning of August, as result of which the doctor compiled the 2^nd Pfeffer Report”. 

(7) Meanwhile, Mr Leiduck Jr asked Dr Kirsch to request for a copy of the Stein Report which he received on 19 August 2013 and immediately forwarded to Mr Levy.

16.  I have set out the detailed circumstances from which the issue regarding Mr Leiduck’s fitness as a party and as a witness arose because they appear to me to be relevant to one of the objections raised by Mr Wong SC to the present application by the Plaintiff.  

17.  Coming back to the chronology, on 5 November 2013, I heard and granted the Next Friend Application, thereby dealing with Mr Leiduck’s fitness as a party.

18.  On the same day and subsequently on 8 November and 3 December 2013, with a large measure of agreement between the parties, I also gave and revised directions (“Competency Issue Directions”) for resolving what has become known as the “Competency Issue”, which encompasses the following aspects:

 (1) whether Mr Leiduck was, at the time of his examination by the Joint Expert (defined in §19(1) below) incompetent to give evidence in these proceedings within the meaning of s 3(b) of the Evidence Ordinance (Cap 8)[8];

 (2) if so, since which date had he become so incompetent;

 (3) in particular, whether Mr Leiduck was so incompetent on the dates when he swore/signed his affidavits/witness statements, signed statements of truth and gave oral evidence; and

 (4) whether and, if so, how likely Mr Leiduck might recover from his incompetence in the future.

19.  It is unnecessary for present purpose for me to set out the Competency Issue Directions save to mention that they provided for:

     (1) the appointment of a single joint expert specialising in medical psychiatry (“Joint Expert”) to assess Mr Leiduck’s mental condition at the various times material to the Competency Issue; and

     (2) a tight timetable, not just for the hearing and determination of the Competency Issue, but also for the further conduct of the Inquiry Application up to the completion of evidence as follows:

14-17 April 2014	Oral evidence of the Joint Expert and Submissions on the Competency Issue
22 April 2014	Court’s ruling on the Competency Issue
25, 28 & 30 April 2014	Submissions by the parties on the effects of the findings on the Competency Issue on Mr Leiduck’s evidence and the further conduct of the trial (“Effects Issue”)
Before 13 May 2014	Court’s ruling on the Effects Issue
13 May 2014	Hearing of the Plaintiff’s application (if any) arising from the Court’s decision on the Effects Issue
13-16, 19-23, 26-30 May 2014	Oral evidence of the Plaintiff’s only witnesses as to fact, Mr Rene Von Samson-Himmelstjerna (whose cross-examination has already begun in the morning on 22 August 2013) and Mr Lim Chu Hoon, and oral evidence of the parties’ respective expert witnesses on Russian company law and company registration system (see §9 of Reasons for Decisions dated 12 March 2013)

20.  For the sake of completeness, pending sight of the Joint Expert’s report, I declined the Plaintiff’s request to give the parties leave to apply, within 21 days after receipt of the Joint Expert’s report, for permission to adduce further evidence on the Competency Issue from their own expert.  However, I expressly left it open to the parties to apply for further directions, if thought appropriate, upon seeing the Joint Expert’s report.

21.  Pursuant to the Competency Issue Directions and by a joint letter of instructions dated 27 December 2013 from the parties’ solicitors (settled by the Court failing full agreement between the parties), a Professor Dr med Hans Förstl (“Dr Förstl”)[9], a neurologist, psychiatrist and psychotherapist as well as the Geriatrics Director of the Department of Psychiatry and Psychotherapy, Technicshe Universität München, was appointed as the Joint Expert.

Dr Förstl’s opinion

22.  Before I come to Dr Förstl’s opinion, in response to his request for clarification of the relevant meaning of incompetence, by Robertsons’ letter dated 25 February 2014 to Dr Förstl (again settled by the Court failing agreement between the parties), it was explained to Dr Förstl, inter alia, that a person falls within s 3(b) of the Evidence Ordinance if and only if:

 (1) he is of unsound mind (which Dr Förstl calls “Criterion (1)” as a matter of shorthand in his report); and

 (2) by reason of his being of unsound mind, he appears incapable of

(a) receiving just (in the sense of “right”, “proper” or “correct”) impressions of the facts respecting which he is examined (“Criterion (2a)” in Dr Förstl’s report); or

(b) relating such facts truly (“Criterion (2b)” in Dr Förstl’s report).

A person is not incompetent simply by reasons of his having any particular mental illness or condition, unless he thereby appears incapable of receiving just impressions of the facts respecting which he is examined or of relating such facts truly.

23.  Dr Förstl has had the benefit of (1) reviewing the pleadings, affidavits, witness statements and transcripts of the oral testimony in question; (2) studying the 5 tranches of medical and nursing records in respect of Mr Leiduck in Trial Bundles 18-24 in their original texts (i.e. in German); (3) interviewing (and/or obtaining further information from) various doctors and nursing staff who had treated/taken care of Mr Leiduck as well as Mr Leiduck Jr, Ms Herlinde Leiduck (Mr Leiduck Jr’s wife), Dr Linda Koiran (Mr Leiduck’s daughter), Dr med Lother Schumann (Mr Leiduck’s wife’s cousin and long-term friend and himself an orthopaedic surgeon) and Mrs Schumann; and (4) personally examining Mr Leiduck twice on 30 January and 9 February 2014 at his nursing home.

24.  Dr Förstl submitted a 75-page written report on 25 March 2014 and attended court to answer the parties’ and the Court’s questions arising from his report on 14 to 16 April 2014.

25.  Dr Förstl correctly understands s 3(b) to be triggered if criteria (1), (2a) and (2b) are met in the following ways: (1) and (2a) are true; or (1) and (2b) are true; or (1) and (2a) and (2b) are true.

26.  With this understanding, in respect of each the 3 criteria, Dr Förstl has looked for and considered:

 (1) Criterion (1) (“unsound mind”): the diagnosis of DLB or evidence of other significant neuropsychiatric disease;

 (2) Criterion (2a) (“incapable of receiving just impressions”): evidence of impaired recollection and comprehension of facts, more specifically, facts respecting which Mr Leiduck was examined; and

 (3) Criterion (2b) (“incapable of relating facts truly”): evidence of impaired ability to present those facts.

27.  For present purpose, briefly stated (and hopefully without doing injustice to Dr Förstl’s very comprehensive explanation of his opinion):

(1) Dr Förstl is in no doubt that Mr Leiduck was incompetent on the 2 occasions when he was examined by Dr Förstl.  More specifically, Mr Leiduck showed a moderately severe form of dementia syndrome with predominant amnesia, disorientation and attention deficits (Criterion (1)).  By reason of his being demented, he was disoriented, unable to concentrate and to learn simple facts (Criterion (2a)) and to present the facts properly and realistically during attentional, delayed recall, definition and planning tasks (Criterion (2b)).

(2) Nor is Dr Förstl in any doubt that Mr Leiduck would not recover from the state of incompetence because he suffered from an irreversible brain disease with a relentless course and limited life expectancy.  Even though there might be fluctuations in his performance, it would be highly unlikely (<99%) that he would even for very short periods (in terms of hours) attain levels of cognition observed in previous years.  Longer periods (in terms of days) of sufficient cognitive performance can be ruled out with final certainty.

(3) As to when Mr Leiduck became incompetent and, more specifically, whether Mr Leiduck was incompetent on the various dates he prepared his written evidence and gave his oral testimony:

(A) A diagnosis of DLB was first made on 7 July 2011 and the clinical diagnostic features of DLB (cognitive impairment with a great deal of fluctuations, occasional visual hallucinations and (mild) Parkinsonism) have been satisfied ever since.

(B) Further, Dr Förstl also sees from the cranial Computed Tomography (cCT) images recorded on the same day[10] clear evidence of severe vascular brain changes in Mr Leiduck, which is diagnostic for vascular dementia (or a vascular contribution to cognitive impairment).

(C) The correct etiological diagnosis is therefore mixed dementia with vascular and neurodegenerative brain changes (vide infra).

(D) However, while some earlier medical reports mentioned suspicious symptoms, there is no sufficient medical evidence reliably pointing to earlier significant cognitive deficits or other relevant psychopathology that might account for “unsound mind” before July 2011.

(E) Hence, criterion (1) (“unsound mind”) could not be satisfied for the period prior to July 2011.

(F) However, even for the period after July 2011, Mr Leiduck did not have to suffer from signs of dementia everyday even if he had this disease (which was a type of brain change).  The course of both DLB and vascular dementia, though downhill, is characterised by fluctuations, the amplitudes of which can be quite significant and drastic.  The patient may on some days be capable of performing quite well, not appearing to be demented at all.  On other occasions, especially under pressure, he may show clear signs of dementia.  Some of these fluctuations may even arise spontaneously.  They can occur within a matter of hours.

(G) The typical changeability of these forms of dementia means that criteria (2a) and (2b) could be satisfied differently at different times and under different circumstances.  Sitting in a familiar environment (like one’s own study) drafting, giving instructions for the preparation of, approving or signing a written statement with the assistance of an attorney and holding out during cross-examination in a strange setting (like a court room or interview room) present different situational demands.

(H) In this regard, Mr Leiduck’s mental state and competence had been significantly and almost constantly affected after his wife’s death on 3 February 2013 and became obvious with the beginning of his oral testimony on 25 February 2013.  Even then, remarkable changes - including occasional and transient recoveries – were to be observed between February and August 2013.

(I) Therefore, each occasion on which Mr Leiduck gave evidence, and each piece of evidence given by him, has to be examined and evaluated individually.

(J) Fully appreciating that it is not for him to examine the truth or falsity of Mr Leiduck’s evidence, Dr Förstl focuses less on contents but more on the form of presentation.

(K) Dr Förstl is satisfied that Mr Leiduck was incompetent in the relevant sense on all the occasions on which he gave oral evidence, save for the 8 May 2013 session.  Dr Förstl finds in the transcripts of the examination of Mr Leiduck in Court (which provide the most reliable evidence) proof of Mr Leiduck’s impaired recall (of names, dates and other detailed facts) from his verbatim memory and persistent resort to his gist memory.  Mr Leiduck was also verbose and at times incoherent and became unable to relate the facts properly when he did not take in the questions or directions or while he was occupied with his thoughts and intent on presenting his side of the story.

(L) Dr Förstl however cannot find in the transcript of Mr Leiduck’s cross-examination on 8 May 2013 sufficient material pointing to fulfilment of criteria (2a) and (2b).

(M) As for the evidence contained in Mr Leiduck’s various statements of truth, affidavits and witness statements, Dr Förstl cannot find sufficient evidence upon which he can conclude whether Mr Leiduck was competent or incompetent when making them, even after 7 July 2011.  That is because Dr Förstl does not feel able to assume, without reliable evidence, whether Mr Leiduck drafted, gave instructions for, approved or signed a particular written proof in a good or bad moment during the fluctuating course of his dementia.

Plaintiff’s application for leave to adduce further medical expert evidence on Mr Leiduck’s incompetence before February 2013

28.  On 14 April 2014, before the commencement of Dr Förstl’s oral evidence, Mr Yan SC handed up a report dated 14 April 2014 by Professor Felice Lieh Mak (“Prof Lieh Mak”), a specialist in psychiatry, which is prepared on the basis of the English translations of the same 5 tranches of medical and nursing records made available to and considered by Dr Förstl and which expresses:

(1) agreement with Dr Förstl’s opinion that Mr Leiduck was incompetent from February 2013 onwards; and

(2) the contrary opinion that Mr Leiduck had become incompetent from 2008 and remained so throughout the material time up to January 2013.

29.  Mr Yan SC, however, he did not there and then make any application in respect of Prof Lieh Mak’s report.  He reserved the option to do so after Dr Förstl’s evidence in Court.

30.  At the conclusion of Dr Förstl’s evidence in Court on 16 April 2014, Mr Yan SC confirmed that he had instruction to apply for leave to adduce additional expert medical evidence from Prof Lieh Mak on the Competency Issue, more particularly, Mr Leiduck’s competence or otherwise prior to February 2013.

31.  I heard the application on 17 April 2014.

Relevant principles governing admission of additional expert evidence following appointment of single joint expert

32.  The appointment of a single joint expert (“SJE”), whether by agreement between the parties or imposed by the Court, does not per se bar a party from seeking leave to instruct its own expert to challenge the SJE’s evidence or aspects thereof. 

33.  Leave should and would be granted if, upon balancing all relevant considerations, it is just and accords with the underlying objectives of the Civil Justice Reform (as set out in the Rules of the High Court Order 1A, rule 1) to do so.  See Daniels v Walker [2000] 1 WLR 1382 (CA), per Lord Woolf MR at 1386H and L v L, HCMC 1/2003, unreported, 20 April 2005, per Lam J (as he then was) at §§22 and 25.  See also Hodgkinson, Expert Evidence: Law and Practice (3^rd Edition) at §5-005 p 158.

34.  In Cosgrove v Pattison [2001] CP Rep 68, Neuberger J identified 9 factors for consideration in deciding whether to allow the evidence of a second expert, in addition to the evidence of an expert instructed jointly, under Civil Procedure Rules Part 35:

 (1) the nature of the dispute;

 (2) the number of disputes on which the expert evidence is relevant;

 (3) the reason for requiring the second report;

 (4) the amount at stake or the nature of the issues at stake;

 (5) the effect of permitting a second expert report on the conduct of the trial;

 (6) the delay in making the application;

 (7) the delay that might be caused in the conduct of the proceedings;

 (8) any other special features;

 (9) the overall justice to the parties.

35.  With regard to the reason for requiring own-party expert evidence, in Daniels v Walker, supra, Lord Woolf MR held (at 1387E) that additional expert evidence may be permitted where the dissatisfied party’s reasons for wishing to adduce such evidence are “not fanciful”.  The same judge then seemed to suggest, obiter[11], a more stringent test in Peet v Mid-Kent Healthcare Trust [2002] 1 WLR 210 (CA) at §28, in that “good reasons”, as opposed to “reasons which are not fanciful”, must be shown. 

36.  In L v L, supra, Lam J was referred to both cases and the language of §17 of his Lordship’s judgment[12] appears more consistent with a preference for the “not fanciful reasons” test in Daniels v Walker.  Further, it is observed in Hodgkinson, Expert Evidence: Law and Practice, supra, p 158 at footnote 34 that the later dicta was probably perincuriam.  The distinction seems to me to be a fine one.  I do not think the application before me would turn on which of these tests should be followed.  However, I am inclined to think that, for what is essentially a case management decision to be made to achieve justice and upon balancing all material factors of which the reasons for challenging the SJE’s opinion is but one, it should be sufficient if those reasons are not fanciful, particularly if the other considerations also point to own-party expert evidence being appropriate.

37.  While on the reasons for own-party expert evidence, Mr Wong SC refers to and highlights precedents of such evidence being allowed where the SJE was found to have been instructed by a party’s solicitors many times before (Smolen v Solon Co-operative Housing Services Limited [2003] EWCA Civ 1240) or where a party’s solicitors had secret communications with the SJE (Oldham Metropolitan Borough Council v GW & Ors [2007] EWHC 136 (Fam)).  However, the situations in which own-party expert evidence is allowed are not confined to these rather unusual circumstances.  Certainly, a case can be made with reference to the materiality, significance and quality of the additional expert evidence in respect of which leave is sought.

38.  Neuberger J’s list is acknowledged to be non-exhaustive. The learned authors of Hodgkinson, Expert Evidence: Law and Practice, supra, mention at §5-005 p 159 other examples, two of which are to my mind relevant to the present application: (1) whether the SJE’s report can be challenged by cross-examination without the need for a further report; and (2) whether the parties have already engaged own-party experts.

Whether leave should be given

39.  Turning then to the instant case, although the Court is not at this stage conducting the actual inquiry as to damages, the amounts at stake are potentially enormous if an inquiry be ordered.  As stated in my Reasons for Decision dated 12 March 2013, there is a claim for damages by the 2^nd Defendant (“IRC”) for loss of the value of its business or alternatively by Mr Leiduck for loss of the opportunity to sell his IRC shares.  In this regard, the Defendants put forward an agreement that they claim had been reached in principle with a third party in early 1994 to purchase of 70% of the shares of IRC at US$20 million and to bring the investment in IRC up to US$40 million.  There is also a claim for damages for loss of the opportunity to earn commission on a project to build 15,000 houses in the Leningrad and Tula Regions to the tune of €90 million minus expenses to be assessed.

40.  While the Court is yet to hear submissions on how the exclusion of almost the entirety of the evidence given by Mr Leiduck under cross-examination while incompetent (which Mr Wong SC seems to have accepted) would affect the treatment of his remaining evidence (which is the Effects Issue), subject to and pending such submissions, I proceed on the basis that what is left of Mr Leiduck’s evidence that is untainted by incompetence (i.e. his various affidavits and witness statements) would bear upon the question whether an inquiry as to damages ought to be directed.  This seems to be implied by the equally strenuous efforts by the Plaintiff to question, and by the Defendants to support, Dr Förstl’s opinion regarding the evidence given by Mr Leiduck before February 2013.

41.  Prof Lieh Mak’s proposed evidence will be limited to addressing Mr Leiduck’s competence or otherwise before February 2013.  Although, as pointed by Mr Yan SC, the Court is not obliged to accept Dr Förstl’s conclusions and analysis leading to such conclusions but is required to assess the same in light of all other evidence before it, such expert evidence is, by nature, difficult to effectively challenge simply by cross-examination of the SJE without the support of a different opinion, backed by reasons, from another expert. Without pre-judging the matter, in the absence of additional expert evidence to the contrary, it is much more likely that I would attach the greatest of weight to and accept Dr Förstl’s assessment.

42.  Mr Wong SC doubts the usefulness of input from another medical expert who would not enjoy the same advantages as Dr Förstl in terms of being able to read the original German texts (often in scribbled handwriting) of the available medical and nursing records and of having spoken to material informants. The short answer to such objection is that the English translations should be verified to be full and accurate (if necessary by involving some who can read doctors’ handwriting in German) and that Dr Förstl has already included in his report summaries of the information that he has obtained from the various interviewees.

43.  Mr Wong SC also questions the validity of Prof Lieh Mak’s views by making the following points:

(1) The medical records in respect of Mr Leiduck from before 2008 contained no hint whatsoever of any cognitive deficit.

(2) Prof Lieh Mak’s conclusion of Mr Leiduck’s incompetence in 2008 is prima facie based on the contents of his 1^st and 2^nd Affidavits dated 7 January and 9 December 2008, which may implicitly suggest judgment being passed on the truth or falsity of such evidence.  

(3) Insofar as Prof Lieh Mak seeks to draw support for such conclusion from other materials (namely, Dr Sondhauss’ report, the Stein Report, the 2^nd Pfeffer Report and what Mr Leiduck Jr told Dr Pfeffer), they cover a much later time frame.

(4) In fact, as far as 2008 is concerned, a report dated 27 March 2008 recorded normal psychological findings and one dated 27 May 2008 described Mr Leiduck as “orientated” and showing organised line of thoughts and adequate responses.  Also, a nursing report covering a short period of hospitalisation in late May 2008 stated that Mr Leiduck was alert, oriented to identity, situation, location and time, cooperative and active with no dementia.

(5) Prof Lieh Mak’s conclusion of Mr Leiduck’s incompetence in 2009 is prima facie based on the contents of his 3^rd Affidavit dated 25 June 2009 and the same criticism can be made.  In fact, no neurological or psychiatric symptoms were noted in 2 medical reports covering the period from October to December 2009.

(6) Prof Lieh Mak’s conclusion of Mr Leiduck’s incompetence in 2010 rests entirely upon the premises that Mr Leiduck showed an early presentation of DLB in 2008 and that DLB is an irreversible condition.  However, a medical report dated 28 February 2010 recorded “normal” “general neurological examination findings”.

(7) Prof Lieh Mak’s conclusion of Mr Leiduck’s incompetence in 2011 is based on Dr Gallard’s report and the cCT images dated 7 July 2011.  However, Mr Wong SC points out that Dr Gallard actually noted Mr Leiduck’s “relatively good memory performance”.

(8) While Prof Lieh Mak’s conclusion of Mr Leiduck’s incompetence from January 2012 to January 2013 is based on medical and nursing notes from that period which documented numerous incidents of manifestation of symptoms of Mr Leiduck’s dementia, the expert has not at all addressed the fluctuating course of the forms of dementia suffered by Mr Leiduck, which has greatly influenced Dr Förstl’s assessment.

44.  While these do appear to me to be valid points to be put to Prof Lieh Mak in cross-examination, what I am unable to assume is that she would have no or no cogent answers to all such queries.  In this regard, I am mindful that the retrospective assessment of the mental capacity and competence of a witness is clearly not an exact science.  On the materials presently available to me, I cannot say that the views set out in Prof Lieh Mak’s report are patently fanciful, certainly not without hearing her. 

45.  Mr Wong SC also expresses concern about the increased costs and delay that would inevitably result from the reception of additional medical expert evidence at this stage.  If Prof Lieh Mak’s report is in, one anticipates an application for reciprocal leave by the Defendants and the recall of Dr Förstl so that he is given a fair opportunity to deal with the new evidence.

46.  First, on a proper view, the prejudice is suffered equally by both sides to these proceedings. 

47.  Second, the additional costs should be viewed and weighed in the perspective of the magnitude of costs that has no doubt been already incurred in this matter.  Anyway, each of the parties has already engaged its own expert.  In this regard, the Defendants have admittedly also enlisted the assistance of an expert, albeit for the more limited purposes of helping them understand Dr Förstl’s report and formulate questions for the cross-examination of Dr Förstl.

48.  Third, yes, the timetable carefully laid down before for the determination of the Competency Issue and the Effects Issue and for the conclusion of evidence on the Inquiry Application will no doubt slip.

49.  However, I think one can be forgiven for not showing the Defendants the sympathy that is usually extended to the party at the receiving of this kind of application.  I have already set out in some details how the Competency Issue arose.  I agree with Mr Yan SC that the Defendants are very much the engineer of the delay and consequential anxieties they now moan about.

50.  Mr Wong SC disputes the existence of any obligation on the part of a party to constantly update the Court with information of his health condition or that of a witness he calls or intends to call.  I am of the view that a party does owe a duty to the Court and to the opposite party not to knowingly, recklessly or negligently put forward an incompetent witness.  Given the subtle course by which how a lot of diseases affecting the human mind can develop, generalisation is not helpful.  Much depends on the particular facts of the case. 

51.  On the facts presently disclosed by the Defendants and known to the Court and the Plaintiff, by early June 2013 at the latest if not earlier[13], the question was raised within the Defendants’ camp regarding Mr Leiduck’s fitness to be questioned as a witness because that was what Dr Pfeffer was specifically asked to examine Mr Leiduck for.  The 1^st Pfeffer Report, though brief, concluded in no uncertain terms that Mr Leiduck was “legally incompetent, incapable of being questioned and unfit to face proceedings in view of his cognitive and emotional disturbances as well as his physical impairment”.  That being the case, that report should have been brought to the attention of the Court and the Plaintiff as soon as it was available to the Defendants in June 2013.  Had that been done, the preparation for the hearing and determination of the Competency Issue could have been set in motion months earlier than November 2013. 

52.  Further, the possibility of an application for leave to adduce own-party medical expert evidence after sight of the Joint Expert’s report was expressly flagged by the Plaintiff and left open by the Court at the hearing on 5 November 2013 so that, contrary to Mr Wong SC’s submissions, the Defendants could have no “legitimate expectation” that there would be no such additional evidence.  

53.  As it is, the Plaintiff has acted as quickly and efficiently as it can in the circumstances in having Prof Lieh Mak’s report ready by 14 April 2014 after receiving Dr Förstl’s report on 25 March 2014.

54.  While on delay, I observe that in L v L (supra), notwithstanding the application being made in the course of closing submissions and the need for re-opening of the evidence, leave was given for the issue of a subpoena against a bank for the production of a valuation report because there was no reason to believe that such valuation was not bona fide and the difference between such valuation and that of the SJE was too large to be discounted away as within the reasonable range of disagreement between experts (§17).

55.  For these reasons, I give the Plaintiff leave to adduce additional expert evidence of Prof Lieh Mak on whether Mr Leiduck was incompetent from January 2008 to January 2013.

56.  I will hear the parties on costs and consequential directions for further conduct on 25 April 2014.

Mr John M Y Yan SC and Ms Sara Tong, instructed by Messrs Baker & McKenzie, for the Plaintiff

Mr Horace Wong SC and Mr Clark Wang, instructed by Messrs Robertsons, for the Defendants

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4089 OF 1994

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------------------------

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DECISION

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1. Before the Court is the Defendants’ application by Summons dated 5 April 2013 (“Inspection Summons”) for the production by the Plaintiff within 7 days of the “originals of Extract A, Extract B, and Extract C of the Croci Report that were referred to in the Plaintiff’s Answer to Interrogatories dated 9 August 2012”[1] (“Extract A”, “Extract B” and “Extract C” respectively and “Extracts” collectively) for inspection by the Defendants.

2. Although the Inspection Summons asks for the originals, it will become apparent from paragraph 21 below that the Extracts were themselves copy documents when they were, according to the Plaintiff, first passed to the Plaintiff in 1994.  Hence, by the expressions “Extract A”, “Extract B”, “Extract C” and “Extracts” (without being qualified with the word “original”), I mean the actual copy documents first received by the Plaintiff in 1994.

Rules pursuant to which application is made

3.  The margin of the Inspection Summons cites Order 24, rules 10 and 11 of the Rules of the High Court (Cap 4) which, together with rule 9, make provisions for inspection of documents by parties to litigation as follows:

“Inspection of documents referred to in list

9. A party who has served a list of documents on any other party, whether in compliance with rule 2 or with an order under rule 3, must allow the other party to inspect the documents referred to in the list (other than any one which he objects to produce) and to take copies thereof and, accordingly, he must when he serves the list on the other party also serve on him a notice stating a time within 7 days after service thereof at which the said documents may be inspected at a place specified in the notice.

Inspection of documents referred to in pleadings and affidavits

10. (1) Any party to a cause or matter shall be entitled at any time to serve a notice on any other party in whose pleadings, affidavits or witness statements served under Order 38, rule 2A, or experts' reports, reference is made to any document requiring him to produce that document for the inspection of the party giving the notice and to permit him to take copies thereof.

(2) The party on whom a notice is served under paragraph (1) must, within 4 days after service of the notice, serve on the party giving the notice a notice stating a time within 7 days after the service thereof at which the documents, or such of them as he does not object to produce, may be inspected at a place specified in the notice, and stating which (if any) of the documents he objects to produce and on what grounds.”

Order for production for inspection

11.(1) If a party who is required by rule 9 to serve such a notice as is therein mentioned or who is served with a notice under rule 10(1)-

(a) fails to serve a notice under rule 9 or, as the case may be, rule 10(2), or

(b) objects to produce any document for inspection, or

(c) offers inspection at a time or place such that, in the opinion of the Court, it is unreasonable to offer inspection then or, as the case may be, there, then, subject to rule 13(1), the Court may, on the application of the party entitled to inspection, make an order for production of the documents in question for inspection at such time and place, and in such manner, as it thinks fit.

(2) Without prejudice to paragraph (1), but subject to rule 13(1), the Court may, on the application of any party to a cause or matter, order any other party to permit the party applying to inspect any documents in the possession, custody or power of that other party relating to any matter in question in the cause or matter.

(3) An application for an order under paragraph (2) must be supported by an affidavit specifying or describing the documents of which inspection is sought and stating the belief of the deponent that they are in the possession, custody or power of the other party and that they relate to a matter in question in the cause or matter.”

4.  For the sake of completeness, insofar as it is material, rule 13 stipulates that no order for the production of any documents for inspection unless the Court is of the opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs.

Relevant background: the Extracts and their significance

5.  This action was commenced by the Plaintiff to recover certain monies[2] (together with interest) that had been advanced by it to one Intercontinental Resources Societe Anonym Monegasque (“IRSAM”), a company incorporated in the Principality of Monaco and of which the 1^st Defendant (“Mr Leiduck”) was the sole owner and president, pursuant to an agreement contained in or evidenced by a letter dated 8 July 1993 from the                             Plaintiff to IRSAM.

6.  On 29 April 1994, the Plaintiff applied for and obtained a Mareva injunction (“Injunction”) against both Mr Leiduck and Intercontinental Resources Company Limited (“IRC”), a company incorporated in Hong Kong and of which Mr Leiduck was a 99.998% shareholder and a director, upon the usual cross-undertaking as to damages (“Undertaking”). 

7.  The factual basis put forward by the Plaintiff in joining IRC as the 2^nd Defendant to this action was that the Plaintiff had received information (“Information”) that after the monies paid by the Plaintiff to IRSAM had been credited to IRSAM’s account with Banque Nagelmackers 1747 (Luxembourg) S.A. (“Banque Nagelmackers”), US$6 million thereof was misapplied towards the repayment of a loan (“Loan”) owed to Banque Nagelmackers jointly by IRC and one Vernal Establishment, a Liechtenstein company wholly owned by Mr Leiduck, in July 1993.

8.  In this regard, in paragraph 13 of his Affidavit made on 29 April 1994 in support of the application for the Injunction (“Carolan Affidavit”), after mentioning the fact that Mr Leiduck was then being incarcerated and subject to criminal investigation in Monaco, Mr Paul John Carolan (then a partner of Messrs Baker & McKenzie (“B&M”), solicitors for the Plaintiff) gave one Monsieur Jacques Lefort (“Monsieur Lefort”), a magistrate in Monaco investigating the criminal complaints against Mr Leiduck, as the source of the Information as follows:

“The Investigating Magistrate in Monaco, M Lefort, has seized files relating to the bank accounts of IRSAM and [Mr Leiduck]. The Plaintiff’s Paris lawyer, Maître Georges Fridmanis, met with the Investigating Magistrate on 5 April 1994 who believes that he has found evidence of the following movements of money. After filing its penal suit in Monaco, Maître Fridmanis was given access to the Investigating Magistrates files on 22 and 26 April 1994.”

9.  In fact, the Information was wrong.  The monies advanced by the Plaintiff to IRSAM had not been used by or for the benefit of IRC.  By an Affirmation made on 9 May 1994, Mr Philip Yip Tai Yick, IRC’s director and general manager, explained (with the support of a letter dated 6 May 1994 from the lawyer of Banque Nagelmackers) that the Loan had not been repaid and was still outstanding. 

10.  Such evidence was not accepted by the Plaintiff whose solicitors, B&M, wrote to IRC’s then solicitors, Messrs Denton Hall (“DH”), on 11 May 1994 as follows:

“2. Our client’s Paris lawyer is now permitted … to inspect documents in the possession of the investigating magistrate which support the evidence of [the Carolan Affidavit] (namely, to the effect that the loan in question was repaid).

3. However, the magistrate will not release these documents or allow us to take copies.  Accordingly our client’s Paris lawyer will prepare a report which we will have translated that will be exhibited to a further affidavit to be put before the Court … You will therefore appreciate that we are unable to advise our client to discharge the injunction against your client and nor should you expect that we could do so.”

11.  The Plaintiff, however, changed position within a few days.  By a letter dated 14 May 1994 from B&M to DH, the Plaintiff advised IRC that:

“We have now received instructions from our client following a report by its Paris lawyer on the banking records in the possession of the Investigating Magistrate.

This report indicates (contrary to earlier information which had been provided by the Magistrate) that the loan in question has not been repaid out of the funds advanced to the 1^st Defendant by our client.

Accordingly, we will discharge the Mareva injunction against the 2^nd Defendant. …

We would not seek to resist the order for costs in favour of your client provided you can confirm there will be no claim for damages pursuant to our client’s undertaking. …”

12.  The parties’ solicitors then agreed over the telephone and confirmed by letters on 16 May 1994 that the Plaintiff would pay IRC’s costs and disbursements on an indemnity basis and that IRC would make no claim for damages pursuant to the Undertaking (“Settlement Agreement”).

13.  The Injunction was discharged by consent, and the action discontinued, as against IRC on 17 May and 22 August respectively.

14.  As against Mr Leiduck, the service of the Writ of Summons herein on him in Monaco was finally set aside and the Injunction against him discharged on 26 July 1995 for want of jurisdiction over him by the Hong Kong Courts.

15.  Then, by a Summons issued on 23 July 2007, in enforcement of the Undertaking, the Defendants apply for an inquiry as to the damages suffered by them by reason of the Injunction and for payment of the sum(s) found due upon such inquiry.

16.  However, having agreed not to enforce the Undertaking, it is incumbent upon IRC to have the Settlement Agreement set aside first before it can claim damages.

17.  Insofar as it is relevant to the present application, as pleaded in paragraphs 7, 9, 10(1), (3), (4) and 11 of the Consolidated Points of Claim filed on 18 December 2012, IRC’s case for setting aside the Settlement Agreement is premised partly upon the Plaintiff having made the following representations (“Representation”) to IRC between 29 April and 14 May 1994 which induced IRC to enter into the Settlement Agreement but which were false and made by the Plaintiff fraudulently or, alternatively, negligently:

(1)   that at the time of the application for the Injunction, the Plaintiff genuinely believed that, in July 1993, Mr Leiduck had applied US$6 million out of the US$20 million advanced by the Plaintiff to discharge the Loan;

(2)   that such belief was based on information obtained from:

(A) what Monsieur Lefort, had informed the Plaintiff’s lawyer in Paris, Maître Fridmanis, during their meeting on 5 April 1994;

(B) what Maître Fridmanis was able to extract from the files of Monsieur Lefort to which he was given access on 22 and 26 April 1994;

(3)   that, at least up to 14 May 1994, the Plaintiff did not have any copy of the files in Monsieur Lefort’s possession as he did not release the same to the Plaintiff or allow the Plaintiff to take copies;

(4)   that, at the time of the application for the Injunction, the Plaintiff had discharged its duty to make full and frank disclosure and had exhibited all relevant documents available to the Plaintiff in the Carolan Affidavit;

(5)   that it was only during the period between 11 and 14 May 1994 when the Plaintiff found out, for the first time, that the Information was false after considering, and as a result of, a report made by Maître Fridmanis; and

(6)   that the use of and reliance on the Information in the Carolan Affidavit was a genuine mistake on the part of the Plaintiff, which mistake was only discovered by the Plaintiff on about 14 May 1994.

18.  The Defendants say that the Representations were false and were either negligent or fraudulent because, according to the Defendants:

(1)   The Plaintiff had obtained from Monsieur Lefort on 12 April 1994 a copy of an Expert Report dated 11 March 1994 and prepared by one Jean-Humbert Croci (“Croci Report”), which was ordered by and submitted to Monsieur Lefort for the purpose of analysing the accounts of Mr Leiduck and companies controlled by him, including IRC’s account with Banque Nagelmackers.

(2)   Alternatively, the Plaintiff obtained a copy of at least a part or parts of the Croci Report from Monsieur Lefort prior to the application for the Injunction on 29 April 1994 and during the currency of the Injunction (from 29 April to 17 May 1994).

(3)   It was clear from the Croci Report that the Information was false.  

(4)   The Plaintiff did not disclose either to the Court or the Defendants the Croci Report, or the fact that the Plaintiff had knowledge or possession of the same, or part thereof, until 2010.

19.  The Defendants say that it was clear from the Croci Report that the Information was false because pages 20, 35 47 and 48 thereof showed the Loan to be still outstanding even as at 30 September 1993.

20.  Insofar as the Defendants are concerned, they first became aware of the existence of the Corci Report in early February 2010 when the Plaintiff disclosed, upon the Defendants’ request, the “report” prepared by the Plaintiff’s lawyer in Paris mentioned in B&M’s said letter dated 14 May 1994 to DH.  Such “report” took the form of a facsimile dated 13 May 1994 from Maître Fridmanis to B&M enclosing the cover page and pages 20 and 24 of the Croci Report (“Fridmanis Report”).  A full copy of the Fridmanis Report was provided to the Defendants under cover of B&M’s letter dated 26 June 2012 to Messrs Robertsons, solicitors for the Defendant.

21.  The Plaintiff’s case as to its receipt of the Croci Report is set out in the Answers to Interrogatories dated 9 August 2012 and filed on 14 August 2012 (“Answers”) by which Mr René von Samson-Himmelstjerna (“Mr RVS”), the Plaintiff’s in-house Senior Legal Counsel since 1998, stated, in answer to the Defendants’ interrogatory as to when the Plaintiff, either through its own employee or through its agent or representative, including but not limited to Maître Fridmanis, first obtained the Croci Report, that:

“Due to the passage of time since the relevant events took place in 1994, i.e. more than 18 years ago, the Plaintiff and its legal advisors are unable to ascertain the exact time when the Plaintiff first obtained the Croci Report. To the best of my information and belief, the Plaintiff first obtained part of the Croci Report (consisting of pages 47 to 53) sometime on or around 27 April 1994 (“Extract A”) from the Plaintiff’s solicitors in Paris. On an unknown date after 27 April 1994, the Plaintiff obtained another part of the Croci Report (consisting of pages 31 to 53) (“Extract B”) from the Plaintiff’s solicitors in Paris. Between 11 and 13 May 1994, the Plaintiff obtained a further part of the Croci Report (consisting of the cover page, page 20 and page 24) (“Extract C”) from the Plaintiff’s solicitors in Paris. Copies of Extract A and Extract B are attached herewith. A copy of Extract C has been provided to the Defendant under cover of a letter from Baker & McKenzie to Robertsons dated 2 February 2010. Due to the lapse of time, the Plaintiff is unable to ascertain whether, and if so, when, the Plaintiff obtained a full copy of the Croci Report during the relevant period up to 17 May 1994 (the “Relevant Period”). Under cover of Baker & McKenzie’s letter to Robertsons dated 26 June 2012, a full copy of the Croci Report was provided to the Defendants. This was first obtained by the Plaintiff in November 2011 through the Plaintiffs’ solicitors in Monaco, who obtained a full copy of the Croci Report from the Office of the Public Prosecutor of Monaco in or about October 2011.”

Defendants’ request for inspection and Plaintiff’s response in correspondence

22.  The Defendants first asked for, inter alia, the Extracts, to be produced for inspection by Robertsons’ letter dated 14 February 2013 to B&M, which was followed up by chasers dated 1, 15 and 27 March 2013.  None of these letters specifically referred to Order 24, rule 10(1).

23.  B&M responded by letters dated 15 February, 1, 8 and 28 March 2013 which said either that they were taking instructions or that they and the Plaintiff were still making inquiries.  Needless to say, the Plaintiff did not serve any notice under rule 10(2).

Plaintiff’s grounds of opposition to order for production for inspection

24.  The Plaintiff takes the following preliminary points of objection:

(1)   First, in the absence of any reference to Order 24, rule 10, the Defendants’ said request for inspection cannot fairly be regarded as a proper “notice” under rule 10(1) such that the Plaintiff was required to respond to such request within the 4 day time limit prescribed under rule 10(2).  Consequently, rule 11 (1)(a) cannot be said to have been triggered so as to entitle the Defendants to issue the Inspection Summons.

(2)   Second, the Defendants are not entitled to request for inspection of the Extracts under rule 10 or rule 11(1).  Although, reference was made in the Answers to the Extracts, copies of these extracts had already been provided to the Defendants.  If the Defendants wish to seek inspection of the originals, they ought only be entitled to make an application under rule 11(2), in which case it must be, but has not been, shown that the documents are in the possession, custody or power of the Plaintiff.

25.  The main substantive ground upon which the Plaintiff opposes the Inspection Summons is that it does not have possession, custody or power of the Extracts.  Despite an exhaustive search through the Plaintiff’s records, these documents can no longer be located.  It is thus impossible for the Plaintiff to produce them for inspection.

26.  In this regard, the Plaintiff’s evidence has developed as follows.  First, by his Third Affirmation filed on 10 April 2013, Mr RVS deposed that:

“I have caused a thorough search to be conducted for the original of the Extracts but such originals could not be found. In addition, I also searched for the relevant originals myself and could not locate any originals of the Extracts.” (paragraph 6)

“… I was unable to conduct the search for the originals of the Extracts myself during the period between 14^th February 2013 and 6^th March 2013. However, during that period, I instructed my colleague to undertake a search, but he could not locate any such originals of the Extracts.” (paragraph 8)

“In order to the sure that the Plaintiff no longer had the originals of the Extracts, I personally conducted a further search upon my return to my offices in Beijing after the adjournment of the Trial. I was unable to locate any such originals.” (paragraph 9)

27.  Then, by his Fourth Affirmation filed on 22 April 2013 (which Counsel for the Defendants could not have reviewed and taken into account before they lodged written submissions in support of the Inspection Summons on the same day), Mr RVS further explained that:

(1)   He has no direct knowledge of the various relevant events in 1994 that are the subject of these proceedings.

(2)   The persons within the Plaintiff who had direct knowledge of such events are no longer available to provide information or evidence due to the passage of time since those events.

(3)   He provided the Answers based on his understanding (true to the best of his information and belief) derived from information obtained by the Plaintiff and its legal advisors at the relevant time when the subject events took place.

(4)   In providing the Answers regarding when the Plaintiff first obtained the Croci Report, he had reviewed all the Plaintiff’s records relating to all disputes involving the Plaintiff and the Defendants which were passed on to him after he took over responsibility for handling those disputes in 1999, and he also had B&M reviewed their relevant records. 

(5)   He located, not Extract A or Extract B themselves, but copies of the same (“Plaintiff’s Copy Extract A” and “Plaintiff’s Copy Extract B” respectively). 

(6)   He was not able to locate Extract C or a copy of it within the Plaintiff’s records.  He therefore relied on a copy of the same extract that was attached to the Fridmanis Report which was provided to him by B&M (“B&M’s Copy Extract C”).

(7)   In providing the Answers, he did not have the Extracts, but relied on copies of these documents.

(8)   He learnt from B&M just recently in April 2013 that some handwritten markings/notations on the Plaintiff’s Copy Extract A and Copy Extract Bhad been redacted by them by reason of legal professional privilege. 

(9)   He and his colleague have conducted a thorough search of the Plaintiff’s records for the Extracts but were unable to locate them.  As far as he was aware, if they still exist, they would have been found within those records.  There are no other records in the Plaintiff’s possession, custody or power, apart from the ones that he and his colleague have searched, where the Extracts, if they still exist, can be found.

(10)        He has no knowledge as to the whereabouts of the Extracts.  Due to the lapse of time since they were received, neither he nor the Plaintiff can ascertain why the Extracts are no longer within the Plaintiff’s records or what may have become of them.  The records before 1999 were not kept by him and were only passed on to him in 1999.  The persons within the Plaintiff who kept the pre-1999 records are no longer available to provide information about such records.  Due to the long lapse of time since the Extracts were received, it is most likely that they no longer exist.

28.  Ms Kareena Teh, a partner of B&M having the conduct of this action on behalf of the Plaintiff, also disclosed in paragraph 7 of an Affidavit filed on 6 May 2013 (which was after Counsel for the Defendants have lodged supplemental written submissions in support of the Inspection Summons on 2 May 2013) that a part of B&M’s Copy Extract C, i.e. page 24 of the Croci Report which formed part of the Fridmanis Report, had been redacted by B&M before a copy of the same was provided to the Defendants on 2 February 2010 on the ground of irrelevance to these proceedings. 

29.  Ms Teh then goes on to say in paragraph 15: 

“I confirm that the redactions to the copies of Extracts A and B were made by reason of legal professional privilege or possible legal professional privilege and the redaction of the copy of Extract C was made by reason of irrelevance to these proceedings. I also wish to point out that the copy of the Croci Report provided to the Defendants under cover of B&M’s letter of 26 June 2012 had some handwritten markings / notations which were redacted at the time by reason of possible legal professional privilege. Since the redactions were made, B&M has been able to ascertain that the handwritten markings / notations on the copies of the Croci Report and Extract B are unlikely to be subject to legal professional privilege, whilst some of the handwritten markings / notations on the copy of Extract A are. Nonetheless, as the Plaintiff has nothing to hide, it is prepared to waive legal professional privilege in respect of the handwritten markings / notations on the copy of Extract A that are subject to legal professional privilege on the condition that the waiver is for the limited purpose of allowing the Defendants to consider the handwritten markings / notations on such extract and to make such use of them for the purposes of these proceedings only, and that such waiver should not be taken as a collateral waiver of legal professional privilege in respect of any other documents or correspondence. In the event that the Defendants accept and agree to the limited waiver in the aforesaid terms in writing, the un-redacted copy of Extract A can be made available to the Defendants for their inspection at a mutually convenient time. For avoidance of doubt, this waiver of legal professional privilege is a limited purpose waiver and should not be constructed as a waiver of legal professional privilege generally. The un-redacted copies of Extract B and the Croci Report can also be made available for inspection. In the meantime, copies of the un-redacted copies of Extract B and the Croci Report appear at Tab 8 and Tab 9 respectively. I wish to clarify that B&M does not have the original copies of three extracts of the Croci Report as they were received by the Plaintiff at the relevant time, and, as affirmed by Mr. von Samson at paragraphs 6 of the 3^rd affirmation and at paragraph 12 of the 4^th Affirmation of Rene von Samson-Himmelstjerna dated 17 Aril 2013 and filed and served on 22 April 2013, neither does the Plaintiff.”

No order should be made in respect of the Extracts

30.  As a result of the Plaintiff’s said evidence, though not giving up on the Inspection Summons entirely, Mr Horace Wong SC (with him Mr Clark Wang) for the Defendants (rightly in my view) do not press for the production of the Extracts (i.e. the actual original copies as received by the Plaintiff in 1994).

31.  Nevertheless, to do justice to the submissions that Counsel have made in respect of these original copies, I shall briefly explain why I consider Mr Wong SC to have taken the right course in this regard.

32.  I see nothing in either of the preliminary objections to the Inspection Summons mentioned in paragraph 24 above:

(1)   First, the only provisions for the production by a party of documents for inspection by another party are Order 24, rules 9 to 11, which cover documents referred to in a list of documents (rule 9), documents referred to in pleadings, affidavits, witness statements and expert reports (rule 10) and any other relevant documents in the possession, custody or power of a party (rule 11(2)).  The Extracts are not referred to in any list of documents.  In fact, there has not been any general or Court ordered discovery for the purposes of the Defendants’ application for inquiry.  Robertsons’ letter of 14 February 2013 to B&M, though not specifically citing rule 10(1), did refer to the Answers as being the document making references to the Extracts.  An affidavit filed in answer to interrogatories is an “affidavit” for the purposes of Order 24, rule 10: see Zida Technologies Ltd v Tiga Technologies Ltd[2001] 3 HKLRD 698, §35 per Deputy High Court Judge McCoy SC (following Moore v Peachey [1891] 2 QB 707 at 708 per Denman and Willes JJ).  It should, in my view, be clear to the Plaintiff that the Defendants were seeking inspection under rule 10(1).  That being the case, there is no reason why Robertsons’ 14 February 2013 cannot be regarded as a rule 10(1) notice so that the Plaintiff’s failure to serve a notice under rule 10(2) within the time prescribed triggered off the power of the Court to make an order under rule 11(1).

(2)   Second, I do not follow why (and the Plaintiff has not suggested any reason why) the provision of copies of the Extracts by the Plaintiff to the Defendants prior to Robertsons’ 14 February 2013 letter would displace the application of rule 10 so that an application for inspection of the originals of the Extracts must then be made under rule 11(2).  The documents remain having been referred to in an affidavit.

33.  Turning then to the Plaintiff’s substantive ground of opposition, I can find no cause for doubting the Plaintiff’s evidence that it no longer has within its possession, custody or power any of the Extracts, particularly, having regard to the facts that the documents were received by the Plaintiff some 19 years ago in 1994 and that the Plaintiff would have no reason to hold onto them at least after July 1995 when it would appear to them that this action had concluded.

34.  An order for production of document for inspection will not be made if “good cause” is shown.  The absence of possession, custody or power of the documents sought to be inspected, while not depriving the Court of the jurisdiction to order inspection under Order 24, rules 10 and 11(1)[3], may amount to good cause and is a factor to be taken into account by the Court in deciding the discretion whether to order inspection on the particular facts of the case.

35.  The Defendants initially rely heavily on Rafidain Bank and Zida Technologies Ltd in which production for inspection was ordered despite the defendants’ professed lack of possession, custody or power of the documents.  However, I note that in both of these cases, the evidence suggested that the party against whom inspection was sought, though not in possession, custody or power of the documents in question, would be able to obtain them from third parties (i.e. the Patriotic Union of Kurdistan whose right to receive the money claimed was asserted by the first defendant in Rafidain Bank[4] and the mainland manufacturers who appeared to be the customs agent for the defendant in Zida Technologies[5]).

36.  I agree with Mr John Yan SC (with him Ms Sara Tong) for the Plaintiff that the fact that a party from whom inspection is sought does not have, and has no means to obtain, the documents sought to be inspected (which is the case here) ought to be regarded as a sufficient reason for the Court not to order inspection: see Quilter v Heatly (1883) Ch D 42, per Jessel MR at p 49.

37.  For the above reasons, had my ruling been required, I would have declined to order production of the Extracts.

Defendants’ alternative argument

38.  Unfortunately, that is not the end of the matter.

39.  Following Ms Teh’s said Affidavit, by a letter dated 15 May 2013 from Robertsons to B&M, the Defendants, whilst standing by the submissions which we have made in support of the Inspection Summons and considering the Plaintiff’s explanations in respect of the Extracts to be entirely unsatisfactory, indicated that they would be prepared to withdraw the Inspection Summons on the conditions:

(1)   that the Plaintiff pays the Defendants’ costs of the summons incurred up to date to be assessed on a gross sum basis;

(2)   that the Plaintiff provides for inspection by the Defendants the un-redacted Plaintiff’s Copy Extract B and the entire (presumably un-redacted) Croci Report within 14 days on a date and at a time to be mutually agreed;

(3)   that the Plaintiff provides for inspection by the Defendants the un-redacted Plaintiff’s Copy Extract A within 14 days on a date and at a time to be mutually agreed.  As for the conditions sought to be imposed by the Plaintiff for allowing inspection of this document, the Defendants consider them to be entirely unnecessary as there is in any event an implied undertaking given by the Defendants not to use these documents for any collateral purposes.

40.  Upon rejection of this proposal for the disposal of the Inspection Summons by the Plaintiff, Mr Wong SC then contends that the wording of paragraph 1 of the Inspection Summons (quoted in paragraph 1 above) is capable of including the copies which the Plaintiff or its solicitors had used to make the copies of the Extracts provided to the Defendants, i.e. the Plaintiff’s Copy Extract A, the Plaintiff’s Copy Extract B and B&M’s Copy Extract C (“Copy Extracts” when referred to collectively), but without any redactions.

41.  In short, according to Mr Wong SC, a request for the original of a document can be construed as a request for an intermediate copy of the document that was used to be reproduce an end copy. 

42.  I am unable to agree with Mr Wong SC that paragraph 1 of the Inspection Summons, as it is presently drafted and without amendment, can include the Copy Extracts.

43.  First, if one goes back to the Answers, the terms “Extract A”, “Extract B” and “Extract C” are plainly shorthand expressions used by Mr RVS to refer to the three partial documents actually received by the Plaintiff on various dates in 1994.  As such, they must refer to the very documents that were actually received by the Plaintiff in 1994.  These shorthand expressions have been adopted in Robertsons’ 14 February 2013 letter and paragraph 1 of the Inspection Summons to identify the documents the production of which is required for inspection.

44.  Second, presumably to prevent any doubt from arising, the Defendants add the word “originals” in the description of the documents that are the subject matter of the request/application in Robertsons’ 14 February 2013 letter and paragraph 1 of the Inspection Summons.  Such word can only have been used to make it clear that the Defendants are after the actual Extracts that were received by the Plaintiff in 1994.  Indeed, at the time of the issue of Inspection Summons, the Defendants were unaware that the Plaintiff no longer had those documents or that the attachments to the Answers had been reproduced with the use of copies of the Extracts.

45.  Third, on 11 April 2013, the 22^nd day of this trial, in answer to my question, Mr Wong SC clarified and confirmed that the Defendants are seeking inspection of the “original” Croci Report Extracts, as they were first received by the Plaintiff.

46.  For these reasons, I am of the view that the Copy Extracts are plainly not the documents sought in the Inspection Summons.  In Mr Yan SC’s words, the application that the Plaintiff has been summonsed to meet is not for the production of the Copy Extracts.

Orders

47.  I dismiss the Inspection Summons.

48.  On costs, subject to any submissions that the parties may wish to make, in my opinion, the Defendants are entitled to issue the Inspection Summons and to maintain the application made thereby up to a reasonable time after being served with Mr RVS’s Fourth Affirmation (which explains for the first time that the copies of the Extracts that have been provided to the Defendants were made, not from the Extracts, but copies thereof) but should thereafter have reconsidered their stance.  Looking at the matter in the round, in particular, the amount of work done by the parties before and after Mr RVS’s Fourth Affirmation, I make an order nisi that there be no order as to costs.

Postscripts

49.  Although I refuse to order the Plaintiff to produce the Copy Extracts under the Inspection Summons, I would like to make the following observations with a view to assisting the parties.

50.  Now that the Plaintiff has referred to the un-redacted copies of the Plaintiff’s Copy Extract A, the Plaintiff’s Copy Extract B and the Croci Report in Mr RVS’s Fourth Affirmation and Ms Teh’s Affidavit, there is no reason why the Defendants cannot ask to inspect them under rule 10(1).

51.  In view of paragraph 15 of Ms Teh’s Affidavit, there should be no difficulty regarding the un-redacted Plaintiff’s Copy Extract B and Croci Report.

52.  As for the un-redacted Plaintiff’s Copy Extract A, I note that, while asserting legal professional privilege in respect of the handwritten markings/notations on the document, the Plaintiff is prepared to waive such privilege if the Defendants accept the waiver to be limited to allowing them to consider the said markings/notations (and not to be extended to any other documents or correspondence) and agree to use those markings/notations only for the purposes of these proceedings (and not any other collateral purposes).  Although the Defendants take issue with these conditions, as I understand it, they are not refusing to be bound in the way demanded by the Plaintiff.  Rather, they have taken and expressed the view that the conditions are unnecessary as they would in any event be implicitly imposed by the implied undertaking.  That being the case, there is no real or meaningful difference between the parties regarding the scope of the Plaintiff’s waiver or the use to which the handwritten markings/notations can be put by the Defendants.  I would be very surprised and disappointed if the parties should see fit to waste any time and costs on debating this matter.

[1] This description of the documents sought to be produced for inspection is taken from paragraph 1 of the Inspection Summons.

[2] US$20 million less US$5 million which had been recovered by the Plaintiff under a bank guarantee provided by IRSAM.

[3] See Zida Technologies Ltd, supra,per DHCJ McCoy SC at §42, applying Rafidain Bank v Agon Universal Sugar Trading Co [1987] 1 WLR 1606 (CA).

[4] See Nourse LJ at 1612B-C.

[5] See DHCJ McCoy SC at §47.

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4089 OF 1994

------------------------

BETWEEN

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DECISION

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1.   This Decision should be read with reference to the Reasons for Decision that I handed down on 12 March 2013 (“Reasons”) to explain the Order that I had made on 5 February 2013 (“Order”), refusing to strike out the Expert Report of Mr Andrei Dontsov dated 20 December 2012 on the ground that “Mr Dontsov is not a suitable person to be an expert witness for the Plaintiff” and further giving leave to the Plaintiff to adduce and rely on Mr Dontsov’s Supplemental Expert Report dated 1 February 2013.  I shall in this Decision continue to use the abbreviations adopted in the Reasons. 

2.   By a Summons issued on 18 February 2013, the Defendants apply for leave to appeal against the Order (“Leave Application”).  If leave is granted, the Defendants intend to press for the striking out of Mr Dontsov’s 2 reports. 

3.  Leaving aside whether the Defendants should have leave to appeal against the Order, the parties are also divided as to when this Court should deal with the Leave Application. 

4.  To put this controversy in context, the present trial commenced before me on 4 February 2013.  It was originally set down for 16 days up to and including 28 February 2013.  The trial has overrun and was adjourned part heard on 7 March 2013 after 4 more days in Court on 1, 5, 6 and 7 March 2013.  It is presently scheduled to resume in April, May and June with 10 and 11 April, 8, 9, 13, 14 and 15 May and 6 and 7 June 2013 reserved.  Direction has been given earlier for the expert evidence to be taken after the conclusion of the factual testimony, which is still underway.

5.  Against this background, although the Defendants are the intended appellants, they have no desire to press ahead with the Leave Application (or the appeal itself) right away but have asked for the hearing of the Leave Application to be adjourned sine die pending the conclusion of, and judgment in, the present trial.  Notwithstanding their view that I have erred in not excluding Mr Dontsov as the Plaintiff’s expert witness, the Defendants are content for this Court to continue with the trial, including receiving Mr Dontsov’s evidence, and to render judgment taking into account the same.  Depending on the final outcome of the trial, the Defendants may appeal against the judgment or cross appeal in response to an appeal against the judgment by the Plaintiff, as the case may be.  Any such appeal or cross appeal against the Order, if required to be pursued by the Defendants having regard to the final outcome of the trial and if leave be granted by this Court or the Court of Appeal, would then be heard together with the appeal against the judgment.  In short, the Defendants take out the Leave Application to preserve its option to appeal against the Order, which it would press only if it should become necessary for it to do so having regard to the final outcome of the trial.

6.  On the other hand, the Plaintiff is adamant that the Leave Application should be ruled on forthwith by this Court, leaving the Defendants to make up their minds whether (if the Leave Application succeeds) to proceed with the appeal or (if the Leave Application fails) to renew its application for leave to appeal before the Court of Appeal and, if the Court of Appeal grants leave, to decide whether to proceed with the appeal, all in accordance with the rules of the High Court.  In the meantime, the taking of the evidence of the remaining factual witnesses can continue uninterrupted.  However, the expert evidence should be adjourned until all applications for leave to appeal, and the appeal (if any), against the Order have been finally disposed of.  In this way, should the Court of Appeal agree with the Defendants and strike out Mr Dontsov’s reports, the Plaintiff can substitute Mr Dontsov with another expert on Russian company law and company registration system before this Court hears the expert evidence.

Interlocutory appeals to Court of Appeal during trials only in exceptional circumstances

7.  While I agree with Mr John Yan SC for the Plaintiff that each case turns on its own facts, in particular, the nature and effect of the interlocutory order sought to be appealed against and its bearing on the issues to be decided, it can be stated as a matter of general principle that appeals to the Court of Appeal in the course of trials of actions or other substantial hearings of applications are highly undesirable and greatly discouraged.  Apart from disrupting the trial or hearing and adding to the workload of the Court of Appeal, many such interlocutory appeals might eventually turn out to be academic having regard to the final outcome of the trial or hearing.  Consequently, the Court of Appeal may hear an interlocutory appeal in the course of a trial or hearing but only in exceptional circumstances.  See Hong Kong Civil Procedure 2013, Volume 1, p 458, §20/8/12 (citing the English Court of Appeal’s judgment in McGarry (E) Electrical v Burroughs Machines, unreported, 14 April 1986, Transcript No 346).  An example of exceptional circumstances given by the learned authors is where the trial is likely to be lengthy and an application for amendment to pleading is made to the trial judge which is substantial or crucial and which, whether granted or refused, will or may affect the final outcome of the action or is likely to be decisive after litigation.  In such a situation, the trial judge may rule on the application and give the parties leave to appeal, and then adjourn the trial before him to enable the parties to appeal with due expedition to the Court of Appeal who may in its discretion hear the appeal speedily, and thereafter the parties will return before the judge to resume the trial in the light of the decision of the Court of Appeal on the proposed amendment.

8.  The same statement of principle at p 369, §20/5-8/12 of the Annual Practice was cited with approval by the Court of Appeal in Lam Choi King v Yeung Fook Chi [1991] 1 HKC 219 at 226G-227B, which involved an interlocutory appeal against a ruling made in the course of a trial excluding the evidence of a witness called by the plaintiff on the ground that it was irrelevant to the issues for trial.  The Court of Appeal considered the views expressed by the editors of the Annual Practice as to the undesirability of interlocutory appeals in the course of trials to be apposite to the situation before it, although those views were expressed in the context of amendments to pleadings in a system of litigation which envisaged the grant or refusal of leave to bring interlocutory appeals. 

9.  The general disapproval of interlocutory appeals during trial save in exceptional circumstances was said by the Court of Appeal in To Kan Chi v Pui Man Yau [1998] 3 HKC 371 at 387 per Nazareth VP to be “not in doubt” and to have been “reinforced by the increasing emphasis by this court upon case management by the trial judge” (see further paragraph 11 below).  See also CKW Company Limited v Secretary for Justice [2005] 1 HKC 96, an interlocutory appeal against a decision made by a trial judge on the first day of trial refusing to revisit his earlier decision for a split trial of the issues of liability and quantum, at 109A-H per Woo VP citing Lam Choi King and To Kan Chi. 

10.  Having regard to such general principle, it would be obvious that risks that commonly exist where parties wish to appeal against interlocutory orders and directions when the trial or hearing is still ongoing (for example, that the time and costs incurred for the trial or hearing, if continued, or part thereof would be wasted if the proposed interlocutory appeal were successful) are not exceptional circumstances.  See Wang Sin Shin v Nina Kung, HCAP 8/1999, unreported (Chu J, 17 March 2005),§6.

11.  On what may constitute exceptional circumstances, apart from the grant or refusal of leave for substantial or crucial amendments to pleadings having a decisive effect on the final outcome of a lengthy trial as identified in the Annual Practice and adopted by the editors of Hong Kong Civil Procedure (or, I suppose, any other interlocutory orders or directions having such an effect), it seems that an interlocutory appeal to the Court of Appeal may also be allowed to proceed in the middle of a trial or hearing where the judge has erred in principle and the particular matter is not capable of being remedied on appeal post trial.  In support, in To Kan Chi, supra, the only case cited by the parties in which the Court had exercised its discretion to adjourn a trial pending an interlocutory appeal, the trial judge allowed to stand 5 writs of subpoena deuces tecum directed to 5 Government departments requiring them to produce 32 original files to which the Government as a defendant had in its list of documents referred.  The 5 Government departments subpoenaed were however not themselves parties to the proceedings.  Nazareth VP said at 387F-H:

“There remains to be dealt with Mr Barlow's point that interlocutory appeals during trial should be discouraged (see Supreme Court Practice 1997, Vol 1, p 364 para 20/5-8/15), also Lam Choi King v Yeung Fook Chi (t/a Yeung Yat Fat Wood Co) & Ors [1991] 1 HKC 219 at 226G-227D).

That principle is not in doubt, and has been reinforced by the increasing emphasis by this Court upon case management by the trial judge.  However, here it is a matter of non-parties being vexed and probably also oppressed by having to examine the massive files involved.  Moreover, it is not a question of the particular matter being capable of being remedied on appeal post trial, as is ordinarily possible in matters inter partes.  While not underrating the disruptive and potentially prejudicial effect of this appeal upon the plaintiffs, particularly in the context of prolonged hearings, I have no doubt that the non-party Government departments must be permitted to proceed with their appeal.”         

12.  The burden is on the party seeking the adjournment pending the interlocutory appeal to demonstrate that there are exceptional circumstances justifying the adjournment.  It is not for the opposing party to show why the trial or hearing should not be adjourned or show urgency in having to proceed with the trial or hearing as scheduled.  Urgency will only make it more difficult to justify adjourning the trial or hearing.  See Wang Sin Shin v Nina Kung, supra,§5.

13.  Following the coming into force of the Civil Justice Reform which introduces the requirement for leave to bring interlocutory appeals, a party who wishes to appeal against an interlocutory order made in the course of a trial would have to and should issue a summons for leave to appeal within the time prescribed by the rules of the Court for such step to preserve that option.  Unless there are exceptional circumstances justifying the adjournment of the trial pending the interlocutory appeal, adherence to the principle of discouragement of interlocutory appeals during trial would require the judge to continue with the trial as scheduled. Given that one of the objectives of such principle is to prevent the unnecessary pursuit of potentially academic interlocutory appeals, contrary to Mr Yan SC’s submissions, it would in such circumstances be generally appropriate and sensible for the trial judge to adjourn the argument on, and the determination of, the application for leave to appeal sine die with liberty to the applicant to restore after the conclusion of the trial. Otherwise, the applicant for leave would be compelled by the rules of the Court to proceed with the interlocutory appeal upon leave being granted by the trial judge or to seek leave from the Court of Appeal itself if the trial judge declines leave and then to proceed with the appeal if the Court of Appeal gives leave.

No sufficiently exceptional circumstances

14.  Mr Yan SC observes that it is unusual for an applicant for leave to appeal against an interlocutory order made in the course of a trial to advocate the continuation of the trial and the adjournment of the hearing of the leave application until after the conclusion of the trial.  That may well be the case.  However, the course proposed by the Defendants is on authorities correct unless the Plaintiff can point to the existence of exceptional circumstances. 

15.  After careful consideration of the competing submissions forcefully made for both sides by Counsel, for which I am grateful, I am not persuaded that there are any such circumstances for the following reasons.

16.  First, I agree with Mr Horace Wong SC for the Defendants that, on a proper analysis of the nature of the determination to be made by the Court at the end of this trial and of the significance to that determination of the particular issue to which the expert evidence relates, it is uncertain that the evidence to be given by Mr Dontsov, whether accepted or rejected, would be decisive of this trial.  In this regard:

(1)     I have for present purpose reviewed the pleadings and the evidence so far adduced again. Without going into unnecessary details, it is sufficient to say that they raise a multitude of factual and legal issues of liability and quantum. 

(2)     Even if one focuses just on quantum, the Defendants present their case on damages under 3 different heads, of which Mr Leiduck’s alleged loss of the opportunity to sell his IRC shares to Stern-Stroy is only one.  The Plaintiff challenges both the credibility in fact and viability in law of those 3 claims.

(3)     Even if one zooms in on Mr Leiduck’s alleged loss of the opportunity to sell his IRC shares to Stern-Stroy, the expert evidence goes to the existence or otherwise of Stern-Stroy in 1994.  It is but one of the many facets of the whole body of evidence relevant to Stern-Stroy’s status in 1994.  Mr Leiduck Jr, Dr Olga Salman and Ms Mitsie Johnson, the Defendants’ factual witnesses on damages, have also testified as to their respective alleged dealings relating to Stern-Stroy in 1994. 

(4)     It is further clear from the pleadings, the cross-examination of the Defendants’ said witnesses and the Plaintiff’s opening submissions on Mr Leiduck’s claim that the Injunction had deprived him of the opportunity to sell 70% of his shares in IRC to Stern-Stroy in 1994 that the non-existence of Stern-Stroy in 1994 is but one of a number of bases upon which the Plaintiff disputes the credibility and viability of such claim. 

(5)     In short, the expert evidence is directly relevant to only a sub-issue arising under one of the 3 heads of damages claimed by the Defendants. 

(6)     Even if the Court should reject Mr Leiduck’s case of loss of the opportunity to sell his IRC shares to Stern-Stroy as being incredible, whether due to Mr Dontsov’s evidence or not, it may still direct an inquiry if it is satisfied that the other 2 heads of damages are arguable.

17.  I have not overlooked the effect that a finding of the non-existence of Stern-Stroy in 1994 may have on the general credibility of Mr Leiduck Jr and therefore on the sustainability of the Defendants’ case on damages under the other 2 heads given that Mr Leiduck is the only witness on such claims.  However, this has to be put in perspective.  Due to the peculiar preceding procedural history (which need not be gone into for present purpose), the current trial is not the inquiry of damages itself.  What this Court is required to determine at the end of the trial is whether it should exercise the discretion to order an inquiry.  Insofar as the aspect of damages is concerned, this Court would refuse to order an inquiry only if it is satisfied that none of the claimed heads of damages is sustainable.  See Yukong Line v Rendsburg[2001] 2 Lloyds Rep 113 at 120, §35.  Given that the Court is only required to form a provisional view as to the sustainability of the claimed heads of damages, it is only concerned with credibility in the sense of whether the testimony on damages is capable of being believed.  It is not necessary for this Court to form or express any final view on damages unless it is satisfied that the evidence thereon is so incapable of belief that none of the 3 claimed heads of damages is sustainable. 

18.  Second, it also follows from the above analysis of the significance of the expert evidence that:

(1)     Depending on whether an inquiry is eventually ordered and, if not, the reasons therefor, it might not even be necessary at the end of the day for the Defendants to appeal against the Order.

(2)     Even if the Defendants should have to pursue, and further succeed in, the appeal against the Order, the striking out of Mr Dontsov’s evidence is likely to cause a retrial but only of a limited scope.

19.  Given the multiple issues of liability and quantum raised by the Defendants’ claim for damages pursuant to the Undertaking, I believe Mr Wong SC is right in pointing out that his clients would find it necessary to appeal against the Order only if they establish liability on the part of the Plaintiff to pay damages if loss or damage was caused to the Defendants as a result of the Injunction but fail to show a prima facie case on damages wholly or primarily because of the Court’s acceptance of Mr Dontsov’s evidence.

20.  The possibility of a retrial on fresh evidence and the prejudices normally associated with such a retrial (for example, that the time and costs of the original trial or part thereof would have been wasted; that strategy for the cross-examination of the relevant witnesses would have revealed; that the Court and the parties would have to reconsider all the other relevant evidence after a long lapse of time etc) are inherent in every appeal on the ground that the Court has erred in receiving or excluding particular evidence and therefore cannot usually be exceptional circumstances. 

21.  That said, I should make it clear that I am not indifferent to the fact that this trial is lengthy. Indeed, it has become far more prolonged than originally estimated by the parties.  Both the parties and the Court have invested considerable time and/or costs in this trial and will have to continue to do so until its conclusion. In approaching the question whether the Defendants should be compelled to take a course of action that would bring final resolution to the argument over Mr Dontsov’s standing as the Plaintiff’s expert witness before Mr Dontsov and the Defendants’ expert witness give evidence, the Court is naturally concerned about the potential prejudice to the parties arising from the prospect of a retrial necessitated by an interlocutory error on its part. 

22.  However, as submitted by Mr Wong SC, under Order 59 rule 11(3) of the Rules of the High Court, the Court of Appeal may order a new trial on any question without interfering with the finding or decision on any other question or on a part of the matter in controversy.  Given the place that the expert evidence has in the whole scheme of things, even if the Defendants should succeed in their appeal against the Order after the conclusion of this trial, it is to my mind unlikely that the Court of Appeal would not fashion its order to avoid any unnecessary wastage of costs and time by exercising its power under Order 59 rule 1(3) and order a re-trial of the whole proceedings, rather than limiting the retrial only to the questions to which the expert evidence relates.  In my view, all that is likely to be required is for the same Court to rehear the expert evidence, from a new expert insofar as the Plaintiff is concerned, and to review all the findings that have taken into account the expert evidence, including if required a reassessment of Mr Leiduck Jr’s general credibility in his testimony on all 3 heads of damages. 

23.  In this connection, Mr Yan SC invites me to bear in mind the worst case scenario of the parties not being able to fix the retrial before the same Court so that there would have to be a complete retrial of the whole question of whether there should be an inquiry as to damages before another judge.  While there is in theory such a risk, I can presently see no or no apparent circumstance that suggests that it would materialise in this case.

24.  Lastly, Mr Yan SC also highlights the window of opportunity that has been presented by the particular course that this trial has taken.  However, the objective of avoidance of interlocutory appeals during trials that might turn out to be academic would as a matter of principle dictate against propelling the Defendants’ intended appeal against the Order simply on the ground that it may be expedient to do so in the circumstances of this trial.

25.  Further, adopting the course suggested by the Plaintiff, while the dates in April, May and June now allotted for the continuation of the trial may not all go to waste because of the outstanding testimony from the factual witnesses, the further application for leave to appeal (if required) and the appeal before the Court of Appeal by the Defendants (if any) would cause disruption to the trial if those proceedings cannot be concluded before this Court is otherwise ready to hear the expert witnesses.  Given the state of the Court of Appeal’s workload and diary, such timely hearing and determination by the Court of Appeal is highly unlikely unless an early date be given.  I am, however, unable to say with any degree of confidence whether the Court of Appeal would be prepared to expedite this matter.  This is particularly so in light of the Court of Appeal’s general disapproval of interlocutory appeals during trials.  The suitability of Mr Dontsov as an expert witness for the Plaintiff is different from say the issue as to whether Mr Leiduck should be permitted to give evidence at this trial via video link, in respect of which the Court of Appeal had intervened at very short notice on what was practically the eve of this trial because any delay would have rendered nugatory the appeal against Mr Justice L Chan’s decision refusing to allow Mr Leiduck to testify via video link.  Mr Leiduck would have had to either travel from Germany to personally attend Court in Hong Kong against medical advice or let the trial proceed without his evidence.  In contrast, as analysed above, the erroneous admission of expert evidence for the Plaintiff from Mr Dontsov can be remedied on appeal post trial by a retrial of the issues to which such evidence relates.    

26.  For these reasons, I adjourn the hearing of the Leave Application with liberty to the Defendants to restore the same within the time limited for it to appeal against the final judgment herein or to cross appeal in the event of an appeal against such judgment by the Plaintiff, as the case may be, failing which the Leave Application shall stand dismissed.

27.  I shall hear the parties on costs on 11 April 2013.

Mr John M Y Yan SC and Ms Sara Tong, instructed by Messrs Baker & McKenzie, for the Plaintiff

Mr Horace Wong SC and Mr Clark Wang, instructed by Messrs Robertsons, for the Defendants

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4089 OF 1994

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BETWEEN

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REASONS FOR DECISION

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1.   On 5 February 2013, the second day of this trial, I dismissed the Defendants’ application by Summons dated 30 January 2013 to strike out the Expert Report of Mr Andrei Dontsov (“Mr Dontsov”) dated 20 December 2012 on the ground that “Mr Dontsov is not a suitable person to be an expert witness for the Plaintiff” and further gave leave to the Plaintiff to adduce and rely on Mr Dontsov’s Supplemental Expert Report dated 1 February 2013.  I now give my reasons.

The issue for expert evidence and how it arises

2.   On 29 April 1994, the Plaintiff applied for and obtained a Mareva injunction (“Injunction”) against both Defendants in this action upon the usual cross undertaking as to damages (“Undertaking”). 

3.  The Injunction was subsequently discharged and the action discontinued as against the 2^nd Defendant (“IRC”) on 17 May 1994 and 22 August 1994 respectively as the matter relied upon by the Plaintiff to attach IRC with liability as a constructive trustee of its money was wrong.  As for the 1^st Defendant (“Mr Leiduck”), the service of the Writ of Summons herein on him in Monaco was finally[1] set aside and the Injunction against him discharged on 26 July 1995 for want of jurisdiction over by Hong Kong Courts.

4.  By a Summons issued on 23 July 2007, in enforcement of the Undertaking, the Defendants apply for an inquiry as to the damages suffered by them by reason of the Injunction and for payment of the sum(s) found due upon such inquiry.

5.  Insofar as it is material for present purposes, it is the Defendants’ case that the Injunction ruined IRC.  IRC claims damages for loss of the value of its business.  Alternatively, Mr Leiduck, holding 99,998 out of the 100,000 shares of and in IRC, claims to have lost the opportunity to sell his IRC shares.  Among various potential buyers identified is one Stern-Stroy Limited (“Stern-Stroy”), a Russian company.  More particularly, the evidence of Mr Leiduck’s son, Mr Helge Leiduck (“Mr Leiduck Jr”) is that he started to negotiate with Stern-Stroy’s representatives in November 1993; that Stern-Stroy had by February/March 1994 agreed in principle to purchase 70% of the shares of and in IRC at US$20 million and to bring the investment in IRC up to US$40 million; and that Stern-Stroy backed out of the transaction due to the Injunction.

6.  In support, Mr Leiduck Jr has produced what appear to be (1) Stern-Stroy’s letter dated 25 February 1994 confirming its interest in purchasing all of Mr Leiduck’s shares in IRC at US$40 million; (2) a memorandum of a meeting between Mr Leiduck Jr and Stern-Stroy’s representatives on 16 March 1994 in Sofia, Bulgaria recording, inter alios, an agreement by Stern-Stroy to buy the IRC shares through a Cayman Islands company and to negotiate the detailed terms; and (3) Stern-Stroy’s letter dated 1 July 1994 withdrawing from the purchase for the reason that the value of IRC had become negligible and its reputation damaged beyond repair due to the Injunction against both Mr Leiduck and IRC.

7.  One Ms Mitsie Johnson who was Mr Leiduck Jr’s personal assistant in 1993 and 1994 and one Dr Olga Salman who claims to work for Stern-Stroy from September 1992 to January 1995 would testify as to the existence of Stern-Stroy and the negotiations between Mr Leiduck Jr and Stern-Stroy for the sale and purchase of IRC shares in 1993 and 1994.

8.  The Plaintiff takes the position that this is a bogus claim, disputing the existence of Stern-Stroy as at 25 February 1994 and 1 July 1994 and the authenticity of the letters bearing those dates.  It is the Plaintiff’s case that Stern-Stroy was not formed until December 2002.

9.  By an Order dated 30 November 2012, Mr Justice L Chan gave the parties leave to adduce expert evidence on “Russian company law and on the Russian company registration system in relation to the issue as to the date on which [Stern-Stroy] with the Individual Taxpayer Identification Number 7725214235 was first established in Moscow, and whether it was an existing company in Moscow as at 25 February 1994 and 1 July 1994” (“Issue”). 

10.  His Lordship further directed the filing and mutual exchange of expert reports on the Issue within 21 days, to be followed by a without prejudice joint meeting of the experts within 7 days thereafter and a signed joint expert report within 14 days from the joint meeting identifying (1) the issue(s) on which the experts have reached a common opinion and the common opinion in respect of each such issue; (2) the issue(s) on which the experts have failed to reach a common opinion and the competing views on each such issue and the reasons for the opposing views.

Facts and circumstances giving rise to Defendants’ application

11.  In anticipation of expert evidence direction, on 16 January 2012, Mr Jeremy David Levy (“Mr Levy”) of Messrs Robertsons, the Defendants’ solicitors, telephoned a Mr Eric Michailov (“Mr Michailov”), a partner in the Moscow Office of White & Case LLP (“W&C Moscow”) with a view to obtaining expert evidence in relation to the issue of the existence of Stern-Stroy.  This was followed up by an email from Mr Levy to Mr Michailov, a printout of which was produced with the substantive contents (consisting of 5 lines) redacted.  A Ms Ekaterina Palagina (“Ms Palagina”), an associate in W&C Moscow, responded by an email of the same date, a printout of which was also produced with the substantive contents (consisting of 7 lines) redacted.  On the next day, Mr Levy sought clarification from Ms Palagina by email, a printout of which was produced with the substantive contents (consisting of 13 lines) redacted.  Ms Palagina reverted on the same day by 2 emails, one setting out in blue her answers to the questions raised on Mr Levy’s email and the other enclosing an attachment.  Printouts of both emails were also produced, with the questions asked by Mr Levy and the answers given by Ms Palagina (adding up to about 1½ pages) redacted and without the attachment.

12.  At the end of each of the said emails emanating from Robertsons was this confidentiality notice:

“Information in this message is confidential and may be legally privileged. It is intended solely for the person to whom it is addressed. If you are not the intended recipient, please notify the sender, and please delete the message from your system immediately.”

13.  Likewise, each of the said emails despatched by W&C Moscow was indorsed with the following note:

“This email message is confidential. It is intended only for the individual(s) or entity named above and others who have been specifically authorized to receive it, and may be privileged or otherwise protected by attorney work product immunity or other legal rules. If you have received it by mistake, please do not read, copy or use it, or disclose its contents to others. Please notify the sender that you have received this email by mistake by replying to the email, and then delete the email and any copies if it. Thank you.”

14.  The Defendants did not retain W&C Moscow to give expert evidence on the Issue.  The Expert Report dated 20 December 2012 filed on behalf of the Defendants is by one Mr Karl-Heinz Klenke (“Mr Klenke”).  However, the Defendants assert privilege and confidence, which they do not waive, in respect of the said communications between Robertsons and the W&C Moscow as they were conducted by Robertsons on behalf of the Defendants for the purpose of seeking Russian law advice in preparation for these proceedings.

15.  Mr Dontsov is a partner of W&C Moscow.  After receiving his Expert Report on 24 December 2012, by Robertsons’ letters dated 31 December 2012 to Messrs Baker & McKenzie (“B&M”), the Plaintiff’s solicitors, and W&C Moscow, the Defendants demanded for the withdrawal of Mr Dontsov as the Plaintiff’s expert witness on the ground that Robertsons had consulted with W&C Moscow with regard to the Issue through a series of privileged and confidential communications, which put W&C Moscow in a position of conflict in then acting as the Plaintiff’s expert witness.  Robertsons’ letter of 31 December 2012 to W&C Moscow stressed that:

“all information between our firm and yourselves relating to the issue of the existence of Stern-Stroy are strictly confidential and subject to privilege, all our clients’ rights are expressly reserved should you attempt to reveal or pass on information contained in such communications to Messrs Baker & McKenzie or anyone else on behalf of the Plaintiff”.

16.  In their reply dated 16 January 2013 (which was copied to B&M), W&C Moscow stated:

“In January 2012 Robertsons asked White & Case solely to: (i) retrieve publicly available information about the Russian company, Stern-Stroy Limited, having registered number 7725214235, from the public electronic data base corresponding to Russia’s unified state register of legal entities and (ii) describe to Mr. Levy the contents of that information. Mr. Levy specifically declined to name his client or the purpose of the query referred to above, and nor did we receive any other background from Mr Levy. White & Case was not formally or informally engaged by Robertsons to perform this work, and was asked to obtain this information as a professional courtesy (with no engagement or fee). White & Case’s response to Robertson was made on that basis only, and essentially as a favour.

To be clear, neither Mr Dontsov nor White & Case received any confidential information from Robertsons that would preclude Mr Dontsov from acting as an expert witness for the Plaintiff in relation to the case.  None of the information provided by Robertsons to White & Case could possibly lead to any conflict of interest or in any way affect the independence of Mr. Dontsov as expert witness for the Plaintiff and his duties to the Court in such capacity.  In any event, the content of the Communications was not relevant to the Expert Report of Mr. Dontsov dated 20 December 2012 and was not used in the preparation of that report.  Mr Dontsov was not privy to and has not read the content of the Communications.  White & Case undertakes not to provide to Mr Dontsov and Mr Dontsov undertakes not to read the content of the Communications for the purposes of preparing any supplemental expert report or his evidence at the upcoming trial.”

17.  Apart from disagreeing with W&C Moscow’s assessment of that firm and Mr Dontsov’s position, the Defendants also take issue with W&C Moscow’s summary of Robertson’s “instructions” to be partial and misleading and do not accept that Mr Dontsov has not read the communications between Robertsons and W&C Moscow as the latter’s letter of 16 January 2013 was signed by Mr Dontsov himself.

18.  Further correspondence followed, including a letter dated 18 January 2013 from Robertsons to White & Case LLP’s head office in New York for the attention of its chairman.  But it is unnecessary for present purpose to set out these subsequent exchanges.

19.  In the meantime, neither party had taken any steps to comply with the directions for a joint expert meeting or joint expert report. 

20.  On 21 January 2013, this action came on before Mr Justice L Chan for a second pre-trial review.  Despite the proximity of the trial, the parties were then still embroiled in various interlocutory issues.  Insofar as it is relevant to the present application, by paragraph 45 of the Skeleton Submissions lodged on 17 January 2013, the Plaintiff proposed a revised direction for the parties’ respective experts to each prepare a written supplemental report in response to the other’s report and for such supplemental reports to be mutually exchanged and filed with the Court by 25 January 2013.  The reason put forward was that it would not be fruitful for the experts to meet or try to issue a joint report with the trial only 2 weeks away as there is virtually nothing in common between Mr Klenke and Mr Dontsov. 

21.  However, no such or other direction on expert evidence was obtained.  According to Mr John Yan SC (and with him Ms Sara Tong), Counsel for the Plaintiff, the further preparation of expert evidence got overlooked in the midst of other matters all requiring the Court’s urgent attention within a very short hearing.

22.  Notwithstanding, on 2 February 2013 (Saturday), the Plaintiff served Mr Dontsov’s said Supplemental Report, to which the Defendants object as a step taken by the Plaintiff very late without prior notice to the Defendants and without prior leave of the Court.

Generally no property in an expert witness subject to protection of legal professional privilege and confidence

23.  Before I go into the specific grounds on which the Defendants sought to exclude Mr Dontsov from giving evidence for the Plaintiff, as in the case of a witness as to fact, the general rule is that there is no property in an expert witness regarding the facts he has observed and his own independent opinion on them.  The safeguard against an expert witness giving evidence for one side after having advised the other lies in such expert’s inability to exploit or testify as to communications, arising in the course of his being instructed by one party, which are protected by privilege and/or confidence.

24.  The question whether an expert witness can, after having been consulted by and given his opinion to one side, thereafter be consulted by and give evidence for the other side arose in Harmony Shipping Co SA v Saudi Europe Line Ltd [1979] 1 WLR 1380.  In that case, the authenticity of one or other of what purported to be carbon copies of a letter was in question.  A handwriting expert, who had had a consultation with the plaintiffs’ solicitors, was later approached by the solicitors for the defendants.  After giving the defendants’ solicitors an opinion, the expert realised that they concerned the same matter for which he had already been consulted by the plaintiffs.  He declined further instructions from the defendants' solicitors but was served with a subpoena ad testificandum.  The plaintiffs applied, but failed, to have the subpoena set aside and the expert excluded from giving evidence for the defendants.

25.  After stating the well-established principle that there is no property in a witness of fact because the Court has to ascertain the truth by the best evidence available, Lord Denning MR (with whom Waller LJ and Cumming-Bruce LJ[2] agreed) analysed the position of an expert witness at 1385C-H:

“The question in this case is whether or not that principle applies to expert witnesses. They may have been told the substance of a party's case. They may have been given a great deal of confidential information on it. They may have given advice to the party. Does the rule apply to such a case?

Many of the communications between the solicitor and the expert witness will be privileged. They are protected by legal professional privilege. They cannot be communicated to the court except with the consent of the party concerned. That means that a great deal of the communications between the expert witness and the lawyer cannot be given in evidence to the court. If questions were asked about it, then it would be the duty of the judge to protect the witness (and he would) by disallowing any questions which infringed the rule about legal professional privilege or the rule protecting information given in confidence — unless, of course, it was one of those rare cases which come before the courts from time to time where in spite of privilege or confidence the court does order a witness to give further evidence.

Subject to that qualification, it seems to me that an expert witness falls into the same position as a witness of fact.  The court is entitled, in order to ascertain the truth, to have the actual facts which he has observed adduced before it and to have his independent opinion on those facts. … In this particular case the court is entitled to have before it the documents in question and it is entitled to have the independent opinion of the expert witness on those documents and on those facts — excluding, as I have said, any of the other communications which passed when the expert witness was being instructed or employed by the other side.  Subject to that exception, it seems to me (and I would agree with the judge upon this) that the expert witness is in the same position when he is speaking as to the facts he has observed and is giving his own independent opinion on them, no matter by which side he is instructed.”

26.  As Lord Denning further explained at 1386F-G, the public policy consideration against the monopoly of an expert witness by one party is obvious:

“If an expert could have his hands tied by being instructed by one side, it would be very easy for a rich client to consult each of the acknowledged experts in the field.  Each expert might give an opinion adverse to the rich man — yet the rich man could say to each, “Your mouth is closed and you cannot give evidence in court against me.” We were told that in the Admiralty courts, where there are a very limited number of experts, one side may consult every single one of them.  Does that mean that the other side is debarred from getting the help of any expert evidence because all the experts have been taken up by the other side?  The answer is clearly No.”

27.  Waller LJ added at 1387B-C:

“As Lord Denning M.R. has said, the general principle must be that no party has any property in a witness; and the argument before us has partly involved a discussion as to whether there is a difference between a witness of fact and an expert. In my view, there is no difference between those two kinds of witnesses as a matter of general rule. Were it otherwise, as Lord Denning M.R. has indicated, in a sphere of a small number of specialists it might be possible for one party to buy up all the possible experts, and clearly such a situation is not right. …

The safeguard against an expert witness giving evidence on more than one side is the existence of professional privilege, …”

28.  Harmony Shipping was applied in R v King (1983) 77 Crim App R 1 to compel the production by a handwriting expert of the documents provided to him by the defendant’s solicitors and upon which he based his opinion, including an incriminating forgery manufactured for the purpose of the defence.

29.  However, the proper protection of a party’s privilege and/or confidence may, in appropriate circumstances, prevent an expert who has given his opinion to that party, from thereafter assisting the other party.

30.  In this regard, Harmony Shipping and R v King were both distinguished by May LJ in R v Davies [2002] EWCA Crim 85, §§24-28 on the ground that the expert’s opinion was expressed by reference to documents which, though provided to him by a party’s solicitors, were material for which that party could not claim privilege.  In Harmony Shipping, the handwriting expert formed his view on the subject documents (which were not privileged or confidential) through an examination of the same.  Such view did not depend on any privileged or confidential information that the plaintiffs’ solicitors had provided to him. He would only give evidence on what he himself had observed from such non-privileged documents.  See 1387G-1388B per Waller LJ.  In R v King, it was expressly conceded that if the forged document had been in the possession of the defendant, no privilege would have attached to it and accordingly no greater privilege could attach to the document because it passed to the expert through the hands of his solicitor (p 4).

31.  Where the opinion of an expert is based on privileged/ confidential material provided to him by one side in privileged/ confidential circumstances or where it would be difficult for the expert to separate in his mind the privileged/confidential matters from those which are not, then the expert is not free to give evidence for the other side.

32.  In R v R [1995] 1 Crim App R 183, an expert opinion on the DNA properties of the defendant’s blood based on tests carried out by her on a blood sample provided by the defendant to his general practitioner at the request of his solicitors for the purposes of his defence in criminal proceedings was held by the English Court of Appeal to be inadmissible against the defendant upon the application of the prosecution because the blood sample was “subject to legal privilege” under s 10(1)(c) of the Police and Criminal Evidence Act 1984 and the expert could not have given her evidence without reference to it.  It would have been different if the blood sample examined and tested by the expert had been obtained in non-privileged circumstances, e.g. by the police lawfully when the defendant was in custody.

33.  In R v Davies, the defendant’s solicitors instructed a consultant psychiatrist to examine and report on the defendant who was charged with murder, with a view to substantiating a defence of diminished responsibility. The psychiatrist was provided with a proof of evidence prepared by the defendant’s solicitors on his instructions.  She also examined the defendant on one occasion for about 1½ hours.  The defendant had told her himself at such interview that he had been drinking steadily throughout the morning in question and he had also consumed a variety of drugs.  She initially concluded that there was no evidence of psychiatric illness at the time of the alleged offence.  Subsequently, having heard the evidence of the consultant clinical neuropsychologist for the defendant, she accepted that the defendant did suffer from abnormality of mind at the time of the killing due to brain damage from either disease or injury but maintained that it did not substantially diminish his responsibility for it.  The contribution of abnormality of mind was in her opinion outweighed by intoxication with drugs and alcohol.  The English Court of Appeal set aside the murder conviction on the ground that the trial judge wrongly admitted the psychiatrist’s evidence on the application of the prosecution.  The defendant’s solicitors’ instructions to the psychiatrist and what the defendant said to her when she interviewed him were both privileged communications.  The psychiatrist may also have observed in the course of the interview facts about the defendant which did not depend on him consciously communicating with her but the occasion itself was privileged.   Her opinion was based, at least to a material extent, on such privileged communications as she would have to quote the same in order to substantiate her conclusion.  Her opinion would remain inextricably dependent on privileged material even insofar as it may also have been in part based on mere observation.

34.  To sum up, the mere fact that an expert has been consulted, and has in the course of such consultation been provided with privileged/confidential information, by one party who has decided not to call him would not prevent the expert from subsequently giving an opinion to and testifying for the opposite party on the same subject-matter, provided that the expert’s opinion is not based, or inseparably dependent, on the privileged/confidential material provided to him by the party who approached him first so that he can (and does) give evidence without having to refer to or deploy any such privileged/confidential material.

Defendants’ grounds for excluding Mr Donstov

35.  The Defendants maintain that, in the course of their communications in January 2012, W&C Moscow had received from Robertsons information that is subject to legal professional and litigation privileges as well as an obligation of confidence.  They assert, through Counsel, that in compiling his 2 reports, Mr Dontsov did have access to, and had taken into account, the privileged and confidential communications between Robertsons and W&C Moscow.

36.  However, Mr Horace Wong SC (and with him Mr Clark Wang), Counsel for the Defendants, do not argue the application to exclude Mr Dontsov on the basis that Mr Dontsov has actually deployed any privileged/confidential material of the Defendants because the Defendants cannot demonstrate any breach of privilege or confidence without waiving privilege or confidence, which they are not prepared to do. 

37.  Instead, in support of the challenge to Mr Dontsov acting as expert for the Plaintiff, the Defendants:

(1)     firstly, complain that Mr Dontsov clearly lacks impartiality and therefore cannot be trusted to properly discharge his duty as an expert witness to the Court; and

(2)     secondly, rely on Prince Jefri Bolkiah v KPMG [1999] AC 222 (HL).

Lack of impartiality

38.  An expert witness has a duty of impartiality and independence to the Court that overrides any duty to the party who engages him.  The role of an expert witness was restated by Cresswell J in National Justice Compania Naviera SA v Prudential Assurance Co Ltd [1993] 2 Lloyd’s Rep 68 at 81-82:

“The duties and responsibilities of expert witnesses in civil cases include the following:

1. Expert evidence presented to the Court should be, and should be seen to be, the independent product of the expert uninfluenced as to form or content by the exigencies of the litigation …

2. An expert witness should provide independent assistance to the Court by way of objective unbiased opinion in relation to matters within his expertise … An expert witness in the High Court should never assume the role of an advocate.

3. An expert witness should state the facts or assumption upon which his opinion is based. He should not omit to consider material facts which could detract from his concluded opinion …

4. An expert witness should make it clear when a particular question or issues fall outside his expertise …

5. If an expert’s opinion is not properly researched because he considers that insufficient data is available, then this must be stated with an indication that the opinion is no more than a provisional one … In cases where an expert witness who has prepared a report could not assert that the report contained the truth, the whole truth and nothing but the truth without some qualification, that qualification should be stated in the report …

6. If, after exchange of reports, an expert witness changes his view on a material matter having read the other side’s expert’s report or for any other reason, such change of view should be communicated (through legal representatives) to the other side without delay and when appropriate to the Court.

…”

Cresswell J’s statement was cited with approval by the English Court of Appeal in Stanton v Callaghan [2000] 1 QB 75 at 107F-108 A, per Otton LJ.

39.  Under Order 38, rule 37C of the Rules of the High Court (Cap 4A), expert evidence (whether written or oral) is not admissible in evidence in this Court unless the expert declares that:

(1)  he has read the code of conduct set out in Appendix D to those rules and agrees to be bound by it;

(2)  he understands his duty to the Court; and

(3)  he has complied with and will continue to comply with that duty.

40.  Paragraphs 2 to 4 of the code of conduct for expert witnesses relevantly reaffirm that:

“2. An expert witness has an overriding duty to help the Court impartially and independently on matters relevant to the expert’s area of expertise.

3. An expert witness’ paramount duty is to the Court and not to the person from whom the expert has received instructions or by whom he is paid.

4. An expert witness is not an advocate for a party.”

41.  With regard to the particular scenario where an expert witness has a conflict of interest, the English Court of Appeal gave the following guidance in Toth v Jarman [2006] 4 All ER 1276:

“[100]  We start with the point of principle.  Does the presence of a conflict of interest automatically disqualify an expert?  In our judgment, the answer to that question is no: the key question is whether the expert’s opinion is independent.  It is now well-established that the expert’s expression of opinion must be independent of the parties and the pressures of the litigation.  Authority for this can be found in paragraphs 1 and 2 of the guidance which Cresswell J gave in National Justice Compania Naviera SA Prudential Assurance Co Ltd (“the Ikarian Reefer”) [1993] 2 Lloyd’s Rep. 68 as summarised on pages 938-9 of Civil Procedure (2006):

“1. Expert evidence presented to the court should be, and should be seen to be, the independent product of the expert uninfluenced as to the form or content by the exigencies of litigation (Whitehouse v Jordan [1981] 1 W.L.R. 246, HL, at 256, perLordWilberforce).

2.  An expert witness should provide independent assistance to the court by way of objective unbiased opinion in relation to matters within his expertise (see Pollivitte Ltd v Commercial Union Assurance Company Plc (1987) 1 Lloyds Rep. 379 at 386, per Garland J., and Re J (1990) F.C.R. 193, per Cazalet J.  An expert witness in the High Court should never assume the role of an advocate.  …”

[101] Moreover, CPR 35.3 sets out the overriding duty of an expert witness. His duty is to assist the court in relation to matters which fall within his expertise. The need for the expert to give an independent opinion flows also from this duty, which is stated to override any duty which the expert may owe to his client:

“(1) It is the duty of an expert to help the court on the matters within his expertise.

(2) This duty overrides any obligation to the person form whom he has received instructions or by whom he is paid.”

[102] However, while the expression of an independent opinion is a necessary quality of expert evidence, it does not always follow that it is sufficient condition in itself. Where an expert has a material or significant conflict of interest, the court is likely to decline to act on his evidence, or indeed to give permission for his evidence to be adduced. This means it is important that a party who wishes to call an expert with a potential conflict of interest should disclose details of that conflict at as early a stage in the proceedings as possible.”

42.  Mr Wong SC relies on these authorities in making the Defendants’ first objection.  On this note, I now turn to the reason why the Defendants take the view that Mr Dontsov is not impartial. 

43.  According to the Defendants, Mr Dontsov’s conduct demonstrates that he has taken a stance against the Defendants because he has disregarded the following repeated clear warnings given and/or claims made on behalf of the Defendants of privilege (both legal professional privilege and litigation privilege) and confidentiality:

(1)     the confidentiality notice appearing at the end of every email of Robertsons; and

(2)     Robertsons’ letter dated 31 December 2012 to W&C Moscow, which expressly warned the latter not to release to B&M or anyone acting for the Plaintiff the communications that had passed between Robertsons and W&C Moscow.

44.  Mr Dontsov is said to have ignored these warnings by reading the communications between Robertsons and W&C Moscow in January 2012 (which the Defendants say is contrary to the assertion in W&C Moscow’s said letter of 16 January 2013 that he has not done so) and by giving, in the same letter (which was copied by him to the Plaintiff’s solicitors), a summary of the nature and scope of such communications, in a “partial and misleading” manner according to the Defendants. 

45.  Mr Wong SC also urges me to take a serious view of such conduct, having regard to the fact that Mr Dontsov is a partner in a law firm who should know (and does know) that his firm had communications with Robertsons who was acting on behalf of a client in circumstances that would give rise to a privileged relationship.

46.  I have no difficulty with the proposition that the fact as to how W&C Moscow had actually answered Robertsons’ queries in January 2012 is confidential and privileged. Mr Dontsov has not disclosed the same. 

47.  Applying the authorities discussed in paragraphs 23 to 34 above, Mr Dontsov cannot be criticised for working out afresh and giving the same answers in response to the same queries raised by B&M on behalf of the Plaintiff unless those answers should depend on privileged/confidential information belonging to the Defendants and provided by them through Robertsons to W&C Moscow in their communications in January 2012. 

48.  Further, unless W&C Moscow had indeed received privileged/confidential information belonging to the Defendants from Robertsons in the course of their communications in January 2012 and Mr Dontsov has indeed disclosed and/or misused such information in acting as expert witness for the Plaintiff, the conduct complained of on his part cannot be objectionable either.  This is so because, as submitted by Mr Yan SC, in the absence of the passing of privileged/confidential information to W&C Moscow, or misuse thereof by Mr Dontsov, then all that Mr Dontsov was trying to do was to clarify with all concerned that he has no conflict of interest contrary to the suggestion of the Defendants and to defend his professional reputation which has been put into question by the Defendants.  In those circumstances, he cannot be said to have disrespected the Defendants’ privilege or confidence, or to have thereby taken a stance against the Defendants as such, in any event, not in relation to the Issue.  

49.  Thus, to my mind, the matter still boils down to the questions whether privileged/confidential information had been provided by Robertsons to W&C Moscow in the course of their communications in January 2012 and, if so, whether Mr Dontsov has disclosed or misused such information in acting as expert witness for the Plaintiff. 

50.  In this regard, to attach privilege or confidentiality to a piece of information imparted in a communication by a solicitor with a third party on behalf of his client, that information must itself be information for which privilege can be claimed by the solicitor’s client against others or which has the essential quality of being confidential.  The third party cannot be restrained from receiving the same information from another client or obtaining it from public avenues or from using the information so received or obtained for such other client, merely because he has been given it first by the earlier client.  I do not understand Mr Wong SC to be arguing otherwise in oral submission.  If he does so argue, I have to disagree with him. 

51.  I am mindful of the stance taken by the Defendants and fully appreciate the difficulty they face in establishing the validity of such position.  See paragraphs 35 and 36 above.

52.  However, I am afraid the Court is not bound to take the party or their representatives’ words, at least not where there is credible objective evidence before the Court which throws light on the matter.  For the avoidance of doubt and misunderstanding, I say so, not because I harbour any question about the integrity of Robertsons (in particular Mr Levy) or Mr Wong SC, but because whether a communication attracts privilege or an obligation of confidence is a matter on which sound and reasonable persons may legitimately come to different views and is therefore subject to argument.

53.  Notwithstanding Mr Wong SC’s invitation, I do not feel able to draw any inference one way or the other as to the nature of the communications from the emails themselves with all the substantive contents redacted.  Nor do I find the confidentiality notice of any real assistance as it is accepted that it appears in every email that is sent from Robertsons.

54.  In my opinion, in the particular circumstances of this case, the most objective and reliable guide for resolving the existence or otherwise of communication of privileged/confidential information and of a breach of privilege/confidence are: (1) the nature of the issue on which expert evidence is directed to be adduced and (2) the contents of the expert evidence objected to.

55.  Dealing first with the nature of the Issue (set out in paragraph 9 above), what it raises are the general questions of Russian law and practice in relation to the registration of companies and how reliably the system of registration established pursuant to such law and practice operated in reality at the material time and the particular questions of what information about Stern-Stroy is available through such company registration system and whether one can conclude from such information when Stern-Stroy came into existence.  I do not see these to be questions on which an expert would require contribution of, or is likely to receive, instruction or information from the party retaining him for which that party can claim privilege or confidence.

56.  My view on the nature of the Issue and what it requires of the experts is reinforced by an examination of Mr Dontsov’s 2 reports and supporting exhibits, which I have undertaken with some care ahead of his oral evidence in Court in order to resolve the Defendants’ application.  

57.  In order not to prolong this judgment unnecessarily, with regard to Mr Dontsov’s Expert Report dated 20 December 2012, it is sufficient for me to set out the material substantive headings and sub-headings which, I believe, are self-explanatory and self-evident:

(1)  General Information on the Registration System of Legal Entities in Russia:

(A)   The system before year 2002; and

(B)   The system since year 2002 and up to now;     

(2)  Public Inquiries and Searches;

(3)  Review of Obtained Information and Documents; and

(4)  Opinion.

Mr Dontsov sets out and produces what he considers to be the relevant Russian laws, regulations, decrees and orders and the material documents and records he has obtained from inquiries and searches made in the public domain and then offers his interpretation and understanding of the above to the Court.  I simply cannot discern any matter in the contents or exhibits under these headings and sub-headings that could have been derived from instruction or information of a privileged or confidential nature, whether from the Defendants or otherwise.

58.  The same applies to Mr Dontsov’s Supplemental Expert Report dated 1 February 2013, which disputes and argues against various points made in Mr Klenke’s Expert Report dated 20 December 2012.  Again, Mr Dontsov does so with reference to what he considers to be (1) the relevant Russian laws, regulations, decrees and orders and (2) the material public documents and records of Stern-Stroy and to what he believes to be the proper view of such legal and documentary material.

59.  For these reasons, I am not persuaded that information for which the Defendants can claim privilege or confidence had been imparted by Robertsons to W&C Moscow in January 2012 or that Mr Dontsov has disclosed or misused any privileged or confidential information of the Defendants in acting as the Plaintiff’s expert witness. That being the case, I am also not convinced that Mr Dontsov has taken a stance against the Defendants or compromised his impartiality.  I am therefore not with the Defendants on the first ground of their challenge to Mr Dontsov as expert witness on the Issue for the Plaintiff.

Prince Jefri Bolkiah v KPMG

60.  In Prince Jefri, in 1996, the defendants, a firm of chartered accountants, were retained by the plaintiff (who was then the chairman of an investment agency holding and managing the general reserve fund and the external assets of the Government of Brunei) to provide him with forensic accounting services and litigation support in a litigation relating to his financial affairs.  In the course of such retainer, the defendants performed many tasks usually undertaken by solicitors and were given access to highly confidential information concerning the extent and location of the plaintiff's assets.  The litigation was settled in March 1998. In June 1998, the Government of Brunei started to investigate into the activities of the agency during the period when the plaintiff had been its chairman.  The agency retained the defendants to investigate the whereabouts of certain assets which were suggested to have been misappropriated by the plaintiff for his own benefit.  The defendants took steps to protect the plaintiff's confidentiality by ensuring that the personnel who had been on the team assisting with the plaintiff's litigation were not on the team working on the agency's investigation, and by attempting to create an information barrier within its forensic accounting department so as to prevent the flow of information between the two teams.  The plaintiff commenced an action for breach of confidence against the defendants and sought an interlocutory injunction restraining them from acting for the agency.

61.  The issue arising, as framed by Lord Millett (who gave the leading judgment and with whom their Lordships agreed) at 228A-B, was whether and, if so, in what circumstances a firm of accountants which has provided litigation support services to a former client and in consequence has in its possession information which is confidential to him can undertake work for another client with an adverse interest.

62.  The House of Lords granted the injunction holding, as summarised in the the headnote, the following: (1) that where it was established that solicitors, or accountants providing litigation services such as those provided by the defendants, were in possession of information confidential to a former client which might be relevant to a matter in which they were instructed by a subsequent client the Court should intervene to prevent the information from coming into the hands of anyone with an adverse interest unless it was satisfied that there was no real risk of disclosure; (2) that since it had been established that the defendants were in possession of confidential information the burden was on them to show that there was no risk that the information would come into the possession of those acting for the other party; (3) that although there was no rule of law that "Chinese walls" or other similar arrangements were insufficient to eliminate the risk, unless special measures were taken, information moved within a firm and the Court would restrain the defendants from acting for a new client unless it was satisfied on clear and convincing evidence that effective measures had been taken to ensure that no disclosure would occur; (4) that in order to be effective arrangements had to be an established part of the organisational structure of the firm and the ad hoc arrangements made by the defendants were inadequate in the circumstances to prevent the risk of inadvertent disclosure; and (5) that, accordingly, the defendants had not discharged the burden of showing there was no real risk that information confidential to the plaintiff might unwittingly or inadvertently come into the possession of those working on the agencyinvestigation (at 226F-G, 227G-H, 234C-H, 235D-F, 237A).

63.  With regard to the first holding, it was conceded by the defendants in Prince Jefri that an accountant who provides litigation support services of the kind that they had provided to the plaintiff must be treated for present purposes in the same way as a solicitor (at 234D).

64.  Lord Millett started the discussion on the law by referring to the English Court of Appeal decision in Rakusen v Ellis, Munday & Clarke [1912] 1 Ch 831 as supporting two propositions:

(1)  that there is no absolute rule of law in England that a solicitor may not act in litigation against a former client; and

(2)  that the solicitor may be restrained from acting if such a restriction is necessary to avoid a significant risk of the disclosure or misuse of confidential information belonging to the former client.

See 233H-234D.

65.  His Lordship further affirmed, at 234E-235F, as the basis of the Court’s jurisdiction to intervene on behalf of a former client the protection of confidential information belonging to the former client imparted during the subsistence of the solicitor-client relationship and which survives the termination of such relationship.  Accordingly, it is incumbent upon a party who seeks to restrain his former solicitor from acting in a matter for another client to establish (1) that the solicitor is in possession of information which is confidential to him and to the disclosure of which he has not consented; and (2) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own.

66.  Mr Wong SC argues that Prince Jefri applies because as a result of the communications between Robertsons and W&C Moscow in January 2012, W&C Moscow (of which Mr Dontsov is a partner) stood in a solicitor-client relationship, and now stands in a solicitor-former client relationship, with the Defendants, despite the fact that W&C Moscow were approached as potential expert witness on the issue as to when Stern-Stroy came into existence, in anticipation of direction for expert evidence.

67.  According to Mr Wong SC, W&C Moscow are in the same position as a firm of solicitors (or accountants providing litigation support services to a client in litigation as in Prince Jefri) because it is a firm of lawyers approached to advise and, if required, to give evidence on an issue of law, though foreign law.

68.  With respect, I cannot agree.  Without going into the question whether W&C Moscow were or can be regarded as having been engaged by the Defendants in the circumstances described in the first paragraph quoted in paragraph 16 above, they were in the first place sought out by Robertsons in the character of potential expert witness for the Defendants.  As such, as submitted by Mr Yan SC’s submissions, they assumed a role entirely different from that of solicitors for the Defendant.  See paragraphs 38 to 40 above.  That W&C Moscow should happen to be a firm of lawyers and that the issue on which their assistance was sought should happen to be a question of law are irrelevant and cannot change their duties and responsibilities as (potential) expert witness.  I cannot see any principled distinction between an expert qualified in the law giving evidence on a foreign legal issue and an expert from any other speciality giving evidence on a non-legal matter.

69.  I find support for this analysis from Meat Corporation of Namibia Ltd v Dawn Meats (UK) Ltd [2011] EWHC 474 (Ch) which concerns an application by the claimant to restrain a “meat industry expert”, a Mrs Burt-Thwaites, from acting or continuing to act for the defendant because she was in possession of confidential and privileged information relating to the claimant, as a result of the claimant having tried to retain her first, which fact was not contested by the defendant or the expert herself.

70.  The claimant also sought to apply Prince Jefri.  Mann J distinguished that decision at §31:

“As I have indicated, it is not contested that Mrs Burt-Thwaites was given some privileged and confidential information. However I do not think that the application of the strict test in, and the strict requirements in, Prince Jefri should be imposed simply because of that fact alone. The facts of Prince Jefri were striking. First, the accountants had acted like solicitors. Second, unlike the present case, they were engaged to provide services, and they obtained their information in that context. Third, the information was capable of being very damaging to Prince Jefri. Fourth, the accountants were essentially in the same position as solicitors in relation to that information. In those circumstances what the House of Lords was protecting was a quasi-solicitor/client relationship and all the disclosure that went with it. It is that relationship which is so serious and significant as to attract the disabilities identified in Prince Jefri and to require the heavy burden which the Committee held to apply.”

The first and fourth points are particularly pertinent.  As noted above, in Prince Jefri, the defendants conceded that they should be treated in the same way as a solicitor (at 234D).

71.  Apart from the different role taken on by W&C Moscow as potential expert witness for the Defendants, it must also be appreciated that, in Prince Jefri, the Court intervened by restraining the defendant firm of accountants from acting for the agency to protect confidential information belonging to the plaintiff imparted during the subsistence of a quasi solicitor-client relationship and which survived the termination of such relationship.  Each case turns on its own facts.  Even if I had agreed with Mr Wong SC’s submissions that W&C Moscow should be treated in the same way as if they were solicitors for the Defendants, for the reasons explained in paragraphs 53 to 58 above, I am not satisfied that the Defendants have discharged the burden on them (which I do recognise is not a heavy one per Lord Millett at 235E) that W&C Moscow are in possession of information which is confidential to the Defendants.

72.  I therefore also reject the second ground upon which the Defendants seek to exclude Mr Dontsov as the Plaintiff’s expert witness.

Mr Dontsov’s Supplemental Report dated 1 February 2013

73.  This can be dealt with shortly.  I declined to refuse the Plaintiff leave to adduce and rely on Mr Dontsov’s Supplemental Report for the following reasons:

(1)  I have already described what it contains in paragraph 58 above.  I imagine that had the directions for a joint expert meeting and joint expert report been complied with, Mr Dontsov would have contributed the same opinion in such meeting and report.  Further, even if Mr Dontsov had not prepared the second report, I would expect him to be asked in chief and/or in cross-examination as to what he thinks of various aspects of Mr Klenke’s Expert Report dated 20 December 2012, in response to which he would most probably answer along the lines set out in the Supplemental Report.  The service of Mr Dontsov’s Supplemental Expert Report therefore actually serves to give the Defendants (as well as the Court) a little bit more notice of how Mr Dontsov would deal with Mr Klenke’s Expert Report.  

(2)  Any prejudice that the Defendants may have suffered in consequence of not being informed that Mr Dontsov was preparing a supplemental report and of not instructing Mr Klenke to do the same simultaneously can be remedied by Mr Klenke being given sufficient time to undertake a similar exercise.  On 5 February 2013, I gave leave to the Defendants to file and serve a supplemental report by Mr Klenke in response to Mr Dontsov’s 2 reports on or before 22 February 2013, which time was subsequently further extended in the course of this trial upon the Defendants’ application.

Mr John M Y Yan SC and Ms Sara Tong, instructed by Messrs Baker & McKenzie, for the Plaintiff

Mr Horace Wong SC and Mr Clark Wang, instructed by Messrs Robertsons, for the Defendants

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4089 OF 1994

____________

__________

R U L I N G

__________

1. The trial was directed by the Court of Appeal in early May 2012 to take place on 4 February 2013. Parties then proceeded diligently to prepare their case on the evidence. After the exchange of evidence was completed, the plaintiff administered interrogatories of 41 items comprising 170 questions on the defendants which were served on them on 18 December 2012. After due consideration by both sides, the items were reduced to 31, comprising 151 questions.

2. The trial is on fraud and the determination is on whether an inquiry should be held to determine the amount of damages suffered by the defendants as a result of an injunction obtained by the plaintiff against the 2nd defendant in 1994. 

3. Neither party has been guilty of any delay in preparing their case and the interrogatories have not been administered belatedly.  However, bearing in mind the complexity and length of the trial which will take 16 days, a lot of preparation will have to be undertaken by the legal team for the defendants.  If the interrogatories are to be answered, they will require an immense amount of work to be done by the defence team to take instructions from the witnesses who are all in Germany.

4. I would add that there will also be an interlocutory appeal to the Court of Appeal on the 24th of this month that the parties will have to prepare for.  To require the interrogatories to be answered now will certainly prejudice the defendants so that they will be hampered in preparing their case for the trial.  I would refrain from doing so not on the merits of the interrogatories themselves but because it is too late to require them to be answered.

5. Since neither party is guilty of delay and there is no finding on the merits of the interrogatories, I make no order of costs on the defendants’ application for the withdrawal of the interrogatories as well.

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4089 OF 1994

____________

____________

_________________

D E C I S I O N

_________________

1. This is an application for leave to appeal against my order given on 30 November with reasons given on 6 December refusing the defendants’ application for the 1st defendant to give evidence at the trial from Germany via video link.

2. This application is made under section 14AA(1) and (4) of the High Court Ordinance, Cap 4 and O 59 r 2B of the Rules of the High Court.  Section 14AA(4) provides:

“(4) Leave to appeal for the purpose of subsection (1) shall not be granted unless the court hearing the application for leave is satisfied that –

(a) The appeal has a reasonable prospect of success; or

(b)  There is some other reason in the interests of justice why the appeal should be heard.”

I understand that the application is brought under (a).

3. It has been explained in the case of SMSE v KL [2009] 4 HKLRD 125 at para 17 per Li Pichon, JA that “reasonable” means more than fanciful but without having to be probable.

4. I disagreed in my decision as a matter of fact that the 1st defendant would be unable to travel to Hong Kong on medical ground or that it would be life-threatening for him to do so.  On that finding, he should come to Hong Kong to give evidence before this court.

5. In this application for video link, the diagnosis is a matter for the doctors particularly when undisputed by the other side.  The opinions of the doctors are however for the court’s consideration and not binding on the court.  In this case, the court just did not accept the doctors’ opinions as applicable to first class air-travel or travel by medical escort.  The doctors’ opinions on the stress and risk of air-travel from Germany to Hong Kong is too general and not formed as a result of thorough consideration of what stress or risk that different types of air-travel may entail.  The court has summarised the matters in paras 14 and 28-32 of the decision as the reasons for not accepting the very general opinions of the doctors.

6. Furthermore, this is not a case of a fugitive who cannot enter the court’s jurisdiction for fear of the adverse consequence to his liberty that may follow his entry.

7. Since the court takes the view that the 1st defendant can come here and enjoy full access to the court and the system of justice, all arguments built upon respect for human rights are irrelevant.

8. Counsel for the defendants submitted that it was wrong for me to have compared the stress of cross-examination with the stress of air-travel.  Counsel said that the stress of cross-examination is different and irrelevant and the application for video link was made on to avoid extra life-threatening risk.  But this argument overlooks the basis of the defendants’ medical opinions.  Dr Langmack clearly said that the 1st defendant should not undertake air-travel because of the physical and mental stress associated therewith.  Hence, stress is relevant.

9. Efficiency and effectiveness of video link for giving evidence is of course not to be doubted, however, giving evidence in court before a judge is still the norm and is particularly important for the judge to assess the quality of the evidence where credibility is hotly disputed.

10. I think my refusal of the leave for the 1st defendant to give evidence by video link was made on the simple basis that I disagreed that the 1st defendant could not fly from Germany to Hong Kong in a luxurious form of air-travel to give evidence in this court at the trial.  I therefore exercised my discretion against the application in discharge of my case management duties. 

11. I do not think the defendants have a reasonable chance of success on the proposed appeal.  I therefore dismiss the appeal for leave with costs against them. 

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4089 OF 1994

____________

_________________________

REASONS FOR DECISION

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1.  There are three applications. Two are issued by the defendants for the 1st defendant to give evidence via video link and to strike out a witness statement of the plaintiff. The third one is issued by the plaintiff for adducing expert evidence. I have already given my decision on them on 30 November, 2012. These are my reasons.

2.  The plaintiff applied for a Mareva injunction against the defendant on 29 April 1994.  The injunction was later discharged on different dates in relation to the two defendants.  The defendants have issued a summons on 23 July 2007 seeking an order for an enquiry as to the damages suffered by them by reason of the injunction and an order for the payment of such damages by the plaintiff to them.

3.  The summons has been set down for trial commencing on 4 February 2013 and to last for 16 days.  The three applications are for preparation of the coming trial. 

4.  The 1st application was filed by the defendants on 20 August 2012 for leave for the 1st defendant to give evidence at the trial from Germany by video link.  This application is hotly disputed.

5.  The 2nd application is issued by the defendants on 9 November 2012 to strike out the witness statement of Vladimir Khvalei dated 31 August 2012 served by the plaintiff on the defendants and intended to be used at the trial.  The ground for striking out is that the evidence in this statement is in the nature of an expert report and is in any event scandalous, irrelevant or otherwise oppressive. 

6.  There is no dispute that the evidence in this statement is in the nature of an expert report and hence should be struck out on this ground alone. The real dispute is on the 3rd application issued by the plaintiff on 21 November 2012 for leave to adduce expert evidence at the trial.  The expert evidence sought to be adduced would be similar to that contained in the witness statement of Vladimir Khvalei.  The defendants oppose this application on the ground that the expert evidence sought to be adduced is irrelevant to the issue at the coming trial which is on whether there should be an enquiry on damages. They say that such evidence is only relevant to the issue of quantum which is to be canvassed at the enquiry, if there should be one.  Hence, it is unnecessary to adduce such evidence at the coming trial.

Video link

7.  The 1st defendant made his 7th affidavit on 25 September 2012 in support of the video link application.  He said he was blind and suffered from a number of serious heart related diseases.  Owing to his deteriorating health, he had been living in a home for the aged since February 2012.  There were doctors, nurses and ancillary medical staff at the home on a 24-hour basis and the home was very close to St Joseph Hospital.

8.  He was almost totally immobile and it would be extremely difficult for him to physically travel.  He needed constant assistance in order to be able to move around.  He had made hypothetical enquires with people regarding the possibility of his travelling by air, ship or rail from Germany to Hong Kong and no carrier would accept him unless he could produce a clean bill of health which he could not.

9.  The defendants also produced two affidavits by two doctors on the 1st defendant’s state of health.  One affidavit is made by Dr Bernd Langmack on 25 September 2012.  Dr Langmack is a cardiologist and senior consultant at St Joseph Hospital.

10.  Dr Langmack said in his affidavit that the 1st defendant was born on 9 January 1930 (and is now 82 years old).  He had been treated as an inpatient and outpatient at his hospital since 2001.  The last time that the 1st defendant was at the hospital was between 5 and 20 April 2012 when he was there as an inpatient.  He was diagnosed to be suffering from the following illnesses:

(a)  Severe coronary heart disease;

(b)  Status post anterior and posterior myocardial wall infarction;

(c)  Status post multiple coronary artery stent-implantations with no further options for any additional revascularisation procedure;

(d)  Chronic heart failure, caused by ischemic cardiomyopathy with severe impairment of left ventricular myocardial function (left ventricular ejection fraction < 30%);

(e)  Recurrent cardiac arrhythmia (ventricular arrhythmia and atrial fibrillation);

(f)  Status post pacemaker implantation;

(g)  Clinical manifestation: chronic cardiac failure (NYHA III-IV) and Angina pectoris (CCS III-IV);

(h)  Retinitis pigmentosa with profound eyesight restriction.

11.  Dr Langmack further said that the 1st defendant could no longer undertake air-travel or longer surface travel because any physical and mental stress could cause severe myocardial ischemia with Angina pectoris, acute heart failure and rhythm disturbances and eventually would be life-threatening.  For the same reasons, it would be dangerous to his life if he were to attempt to travel by train or sea.

12.  The other affidavit is made by Dr Reinhold Krämer, a general practitioner.  Dr Krämer said that the 1st defendant had been receiving regular treatment from the general practice of which he was a member and the 1st defendant was suffering from the following medical conditions:

(a) arterial hypertension;

(b)  exicosis;

(c) coronary two-vessel disease;

(d)  status post anterior wall infarction;

(e) status post posterior wall infarction;

(f)  permanent atrial fibrillation;

(g) status post pacemaker implantation;

(h)  bilateral amaurosis.

13.  Dr Krämer further said that he had treated the 1st defendant on 21 August 2012 and was prescribing medicine to the 1st defendant on a continuing basis.  No improvement of the conditions of the 1st defendant was expected because of the severity of his illness.  The 1st defendant was not capable of air-travel because his severe heart related conditions would make a journey by air life threatening.  He could also not come to Hong Kong by train or sea transportation for the same reasons.

14.  However, Dr Krämer did not give any detail on why the 1st defendant had to be treated on 21 August, what treatment was he given and what medicine was prescribed. If the incident on 21 August was of any particular significance, I expect that Dr Krämer would have provided the details of it in his affidavit.

15.  Both sides regard the evidence of the 1st defendant at the trial as important.  For the defendants, he is the only witness on two alleged frauds committed by the plaintiff in relation to the obtaining and discharge of the injunction.  The discharge is only in respect of the 2nd defendant.  To prove the alleged frauds is of crucial importance for the defendants’ quest for the inquiry on damages.

16.  The plaintiff also wants to cross-examine the 1st defendant.  The plaintiff submitted that the summons for inquiry was issued only some 13 years after the discharge of the injunction against the 2nd defendant on 17 May 1994.  The first head of loss alleged by the 1st defendant was the loss of dividends from the 2nd defendant.  He made this claim in early 2008.  This claim is identical to a claim made by him against the plaintiff in Germany in 1998 which was withdrawn in 1999 on the day just before the start of the trial.  Then in September 2011, the defendants made another claim of loss on the basis of loss of an opportunity by the 1st defendant to sell his shares of the 2nd defendant to a Russian Company Stern-Stroy Limited.  Then in January 2012, the defendants made a 3rd claim based on the loss of an alleged housing project. 

17.  The plaintiff also said that the 1st defendant had given inconsistent versions of evidence on the existence of 2nd defendant since the granting of the Mareva injunction in April 1994.  There are also disputes on the authenticity of documents of core relevance to the viability of the claim of damages relating to Stern-Story Ltd. 

18.  I should not go into these matters in any detail or make any comment on them for the purpose of the application before me as these are matters for the trial.  However, it is the plaintiff’s case that because of the above matters, the evidence of the 1st defendant for the trial will be controversial and go to the heart of the dispute for the trial.  His credibility will be one of the major issues.  The plaintiff also referred to So Amy & Ors v Au Leslie [1995] 2 HKC 113 and indicated that it would ask for the 1st defendant to give his evidence in chief orally rather than adopting his witness statement.  The cross-examination of the 1st defendant is expected to be thorough and vigorous.

19.  I refer to So Amy where Godfrey JA said at 118H to 119B:

“…But the most important factor for a judge to consider in deciding whether or not to take it is the extent to which the evidence of a particular witness is likely to be controversial, and his credibility put in issue. In these circumstances, the way in which the witness responds to the oral examination in chief may be of great importance; and, that being so, it is wrong in principle to make orders applying to all witness statements without regard to the extent to which the witness’s evidence is likely to be controversial and go to the heart of the dispute: see Mercer v. Chief Constable of Lancashire [1991] 1 WLR 367, per Lord Donaldson of Lymington M.R. at p.371 H. By consenting to the course taken in the present case, the judge deprived himself of the advantage he would otherwise have had of seeing and hearing how Leslie and Goldie respectively responded to oral examination in chief. This was, in my judgment, most unfortunate. I have not overlooked para. 3 of the Practice Note [1995] 1 All ER 385 under which witness statements, in England and Wales, stand as evidence in chief unless otherwise ordered; but here I would venture to express the hope that, in future, when judges are faced with applications at the trial to allow witness statements to stand as the witness’s evidence in chief, they will refuse such applications whenever the evidence of the witness is likely to be controversial and his credibility put in issue.”

20.  Not only does the plaintiff want the 1st defendant to give evidence, it also wants the 1st defendant to give evidence in the witness box in this court upon his oath rather than from Germany via video link.  The plaintiff referred me to the legal principles applicable to an application to give evidence via video link.  The plaintiff referred to Practice Direction 29, paras 4 and 5 which provide:

“When the Technology Court should be used

4. It is a case management question within the discretion of the court or tribunal concerned whether any proceedings or parts of any proceedings should be conducted in the Technology Court.

5. In making its decision, the court or tribunal will take into account the views of all the parties, the availability of the Technology Court, the subject-matter of the proceedings or the relevant part of the proceedings and all other material circumstances, including in particular, whether the proposed use of the Technology Court is likely :-

(a) to promote the fair and efficient disposal of the proceedings;

(b) to save costs; and/or

(c) materially to delay disposal of the proceedings.”

21.  The plaintiff also referred to the judgment of Rogers VP in Re Chow Kam Fai ex parte Rambas Marketing Co LLC [2004] 2 HKLRD 260 at paras 16 to 19:

“Whether the respondent should be permitted to use VCF?

16. The next question addressed by the judge was as to whether the cross-examination could be conducted whilst the respondent was in Macau using VCF. The judge approached this question on the basis that the giving of evidence by VCF was an exception rather than the rule and that it would be a matter of privilege accorded to the respondent and not a matter of right for him to be allowed to do so.

17. In my view the judge was quite correct in this approach. The starting point must be that proceedings are conducted in court. Mr Kat, who appeared on behalf of the respondent, took issue with the approach of the judge where it was said in paragraph 28 of the judgment that “On the other hand, witnesses are obliged by law, the solemnity of the court atmosphere and the threat of immediate sanction to give evidence on oath or under affirmation and to tell the truth."

18. Whether or not the threat of immediate sanction is something that weighs heavily on witnesses is, perhaps, a matter of conjecture. Nevertheless, I have no doubt that the atmosphere of a court is highly important as regards the taking of evidence. The solemnity of court proceedings and its atmosphere is something which, I have no doubt, plays an important role in the way justice is administered.

19. There is no doubt that VCF is a highly useful tool.  It must be a question of judgment in each case as to whether VCF should be used for the taking of evidence.  No doubt, on those occasions when the witness is giving evidence that is technical or purely factual, without important issues as to credibility, a court may be more disposed to allow evidence to be given by the use VCF.  Questions of cost and convenience are no doubt also important considerations that the court will have to weigh in deciding whether to allow evidence to be given using VCF. But, first and foremost, it seems to me that the judge was correct in his approach that a party wishing to give evidence using VCF should establish a sound reason why that privilege should be accorded.”

22.  The next judgment relied on by the plaintiff is Raj Kumar Mahajan v HCL Technologies (Hong Kong) Ltd [2010] 5 HKLRD 119 also by Rogers VP at paras 7 to 9:

“7. As far as I am concerned the solemnity of the court is most important. In Hong Kong it is important that the members of the court, both the judges and counsel appearing, are properly attired. It is important that the court proceedings are carried on in court in the way that we do. It does give a solemnity to the occasion. One only has to observe parties and witnesses coming to court to observe their demeanour. It does have an impact. Giving evidence via a television link, in my view, dispels part of that. The place for a judge to sit, for witnesses to give evidence and for submissions to be made, is in court.

8. This so-called VCF system, which Hong Kong does have, and, indeed, the Technology Court is frequently used for it, is a very useful tool but, as I said previously, it is a tool which should be used with some care. If a witness is not giving evidence that is likely to be attacked on the basis of credibility, it may be important. If, for example, one has technical evidence, perhaps from a well known and busy physician or surgeon in a foreign country, who has many other patients under his care and many other considerations and is giving highly technical evidence, it may well be important and useful to have his evidence by video link because otherwise one may not have it at all. But these are very different circumstances.

9. I regret to note that in the case of Sun Legend Investment Limited v Ho Wah Yuk [2008] 4 HKLRD the learned judge there used words to the effect that my observations in the Chow case had been “clearly reversed by the House of Lords”. I wish to dispel any misconception. First of all, what I said was not a proposition of law, it was a statement as to one of the considerations which a court must have regard to when deciding whether to use VCF technology and, secondly, as far as I am concerned, what I said was not reversed.”

23.  Finally, the plaintiff referred to the decision of Stone J in Asia-Pac Infrastructure Development Ltd v Ing Yim Leung Alexander & Ors, HCA 16778/1999 dated 8 November 2010 at paras 57 to 62:

“57. It seems to me that there is a very considerable difference in principle between permitting the use of VCF in instances, say, of expert witnesses – the Commercial Court, for example, can recall hearing expert evidence in pre-Technology Court days at the Wanchai premises of Cable & Wireless from an engineer in Falkland Islands – or in terms of taking evidence from peripheral witnesses of fact, when contrasted with permitting a party or a crucial witness who wishes positively to avoid coming to Hong Kong for reasons peculiar to himself simply to be granted permission to proffer his evidence to the trial court, and thus to the judge of primary fact, by means of VCF.

(c) Re-exercise of judicial discretion in the instant case

…

59. In my judgment in a case of this nature, wherein each side accuses the other of lying as to the provenance of the emerging business opportunities in issue, credibility is uppermost – …

…

61. … on any basis Mr Ho evidently is a crucial witness of fact for the plaintiff – indeed I am informed that he is the only witness to be called by the plaintiff, …

62. … and if and in so far as the plaintiff wishes to use Mr Ho’s evidence, Mr Ho will have to come to court to give it: bluntly put, this court wishes to hear his testimony ‘live’, and be in a position to see/scrutinise the witness some ten feet away in the witness box, and not allow him to be ‘shielded’ through the medium of a plasma screen.”

24.  In addition to the reasons contained in these decisions in favour of requiring a witness to give evidence in Hong Kong, the plaintiff also referred to the evidence of a German lawyer, Wolfgang Gruber. Mr Gruber referred to two modes of taking evidence in Germany for foreign legal proceedings.  One mode is under the Hague Convention.  That is not favoured by the parties as it will take a long time to arrange and the time available before the commencement of the trial is too short for that. 

25.  The other mode is described as passive legal assistance.  But there is no sanction for perjury under this mode.  In the light of the plaintiff’s stance that there are serious inconsistencies and flaws in the 1st defendant’s evidence, the plaintiff submitted that such sanction would be necessary. 

26.  For the above reasons, the plaintiff submitted that it would be prejudiced if the 1st defendant should be allowed to give evidence from Germany via video link to Hong Kong.

27.  The plaintiff then referred to the 1st defendant’s health conditions.  The plaintiff did not accept the evidence of the two doctors.  But the plaintiff has not offered any contrary evidence on the medical conditions of the 1st defendant.  I think I would have to proceed on the basis of the medical conditions of the 1st defendant as diagnosed by the doctors.

28.  Dr Langmack’s conclusion based on his diagnosis is that the physical and mental stress of the air travel or longer surface travel can cause severe myocardial ischemia with Angina pectoris, acute heart failure and rhythm disturbances and eventually would be life-threatening.  Dr Krämer is of a similar view regarding air-travel or travel to Hong Kong by train or sea transportation.  I however do not think they would regard the travel from the 1st defendant’s residence to the nearby international airport in a limousine or other types of spacious vehicles as a risky surface travel.

29.  Regarding the above professional assessments of the possibility of risk to health, there is the fact as pointed out by the plaintiff that there was no occasion from 20 April 2012 to 25 September 2012 (when Dr Langmack made his affidavit) that the 1st defendant had to be treated at St Joseph Hospital for any cause. 

30.  The 1st defendant was treated by Dr Krämer on 21 August 2012, but as I have observed above, Dr Krämer did not say anything that was significant about that incident that this court should be told.

31.  Regarding the physical and mental stress of air-travel, I think one should take a realistic assessment of the conditions of modern day air-travel.  Travelling in the economy class may indeed be uncomfortable particularly for a tall and/or fat person in long haul journeys.  But the same cannot be said of the business class.  For travelling in first class, many people regard it as an enjoyment in itself.  If the 1st defendant should be required to come to Hong Kong, he can surely opt for the cool and comfort of first class air-travel.  If he is still worried about the lack of medical care during the flight, he can engage a doctor to fly with him and to be present in court in the course of his evidence. 

32.  The defendants can also consider engaging the service of a commercial medical escort to fly the 1st defendant here and back home.  That may be an expensive option and there is no evidence on the affordability of the defendants.  I however note that the defendants have been engaged in eight court battles with the plaintiff since April 2010 (including the present one) and they were and are always represented by leading and junior counsel.

33.  The 1st defendant has also said that he is in near total immobility.  But that is not the view of his doctors.  Dr Langmack only opined against longer distance surface travel whilst Dr Krämer only said he could not come to Hong Kong by air, train or sea travel.

34.  The 1st defendant also alleged that no transport provider would take him on without a clean bill of health.  That is however an unsupported assertion.  I also doubt very much whether this assertion would apply to medical escort service.

35.  Leading counsel for the defendants repeated the difficulties alleged by the 1st defendant in his affidavit and reiterated the opinions of the two doctors.  Counsel submitted strenuously that it was simply impossible for the 1st defendant to come to Hong Kong to testify.   Counsel further submitted that since the 1st defendant is the most important witness of the defendants’ case, if he is not permitted to testify via video link, serious, if not fatal, prejudice would be caused to defendants.

36.  Regarding sanction for perjury, leading counsel for the defendants also submitted that even if the 1st defendant should come to Hong Kong to give evidence, he would go back to Germany immediately afterwards.  It is unlikely that he would be arrested here for perjury before his departure.  Hence, practically there is no difference whether he should give evidence in Hong Kong or Germany.  Therefore, the prejudice from the lack of sanction for perjury is only the plaintiff’s conjecture.

Decision

37.  I fully agree with the reasons given by Rogers VP and Stone J on the desirability of requiring witnesses to testify in the court room rather than via video link.  This is particularly so when credibility of key witnesses are concerned.  I think these reasons operate vigorously in this case in relation to the evidence of the 1st defendant. 

38.  I also disagree that the sanction for perjury has no practical effect in this case.  The possibility of being arrested before departure from or upon setting foot in this territory again will be a sanction for the 1st defendant to tell the truth on oath.

39.  Regarding the physical and mental stress that can result in adverse health consequences which, according to the doctors, would eventually be life threatening, such stress as may result from first class air-travel or travel arranged by commercial medical escort is not particularly strong comparing with the stress brought about by a thorough and vigorous cross-examination.

40.  Leading counsel for the plaintiff also submitted that there would be many documents that the 1st defendant would be asked to peruse in the course of his evidence and it would be inefficient for the 1st defendant to give evidence via video link as time would be wasted for him to look for the right document.  

41.  I do not think this is a relevant consideration.  The 1st defendant claims that he is blind or at least half blind.  He might be unable to read the documents.  In any event he would require assistance to locate the relevant documents.  Leading counsel for both sides have indicated that if the 1st defendant should be allowed to give evidence via video link, their instructing solicitors would send people to Germany to observe the course of his evidence.  I am sure those who might be sent by the defendants’ solicitors would render whatever assistance the 1st defendant might require in locating documents in the course of his evidence.

42.  Weighing and considering all the facts and arguments presented by the parties, I am of the view that if the 1st defendant should be allowed to give evidence via video link, the plaintiff would be prejudiced as the force and effect of the cross-examination, if presented to the 1st defendant through the video monitor, would be weakened. 

43.  I am also not convinced that there are sufficient reasons for me to exercise the discretion to grant the 1st defendant leave to give evidence via video link.  I therefore dismiss the defendants’ summons dated 20 August 2012 with a costs order nisi that the defendants do pay the plaintiff the costs of this summons in any event with certificate for two counsel.

Striking out

44.  I allow the defendants’ summons dated 9 November 2012 to strike out the witness statement of Vladimir Khvalei dated 31 August 2012.

45.  I also make a costs order nisi that the plaintiff do pay the defendants’ the costs of this summons in any event but without counsel fees.  There is not really a dispute on this summons.  The dispute is in the expert evidence summons.

Expert evidence

46.  I have already mentioned above that one of the claims put forward by the 1st defendant was the loss of the opportunity of selling his shares in the 2nd defendant to the Russian company Stern-Stroy Limited.  This claim was first mentioned in September 2011.  Mr Helge Leiduck, the son of the 1st defendant, in his 2nd affidavit filed on 30 September 2011 referred to an agreement by the representatives of Stern-Stroy to purchase 70% of the shares of the 2nd defendant at US$20 million and to bring investment of up to US$40 million to the 2nd defendant.  He also produced a letter of intent dated 25 February 1994 purportedly issued by Stern-stroy. 

47.  However, he said the alleged deal was ruined by the Mareva injunction.  He produced a further letter dated 1 July 1994 also purportedly from Stern-Stroy terminating the letter of intent. 

48.  He also referred to this alleged deal and the purported letters from Stern-Stroy in his witness statement for the trial.  The two purported letters bear a registration no. 7725214235.

49.  It is however the plaintiff’s case that Stern-Stroy was only established in December 2002 and was not in existence at the time when the two purported letters were allegedly issued.  The plaintiff says that this is a bogus claim and the two purported letters are fabrications.  It goes further to say that the bogus claim and the fabricated letters cast doubt on the credibility of the 1st defendant and his son generally.

50.  In fact after Helge Leiduck had produced the purported letters in his 2nd affidavit on 30 September 2011, the plaintiff responded by filing an affidavit of one Anna Belova, a manager of Baker and Mckenzie’s Moscow office, and dated 6 December 2011 deposing to the result of her company searches and exhibiting various public records she obtained. 

51.  The defendants then responded with an affidavit by one Olga Salman and the 3rd affidavit of Helge Leiduck.  Ms Salman said she had worked for Stern-Stroy from January 1992 to January 1995.  She further said that Russia had a new company registration system in 2002 which adopted old registration numbers of companies.  Helge Leiduck also deposed to the existence of Stern-Stroy in 1992.  He further challenged Belova’s evidence as expert evidence of Russian law and hence inadmissible.  

52.  The plaintiff’s solicitors then proposed to adduce expert evidence on Russian company law and Russian company registration system to assist the court to decide whether Stern-Stroy was in existence in 1994.  But the defendants’ solicitors said in a letter dated 12 April 2012 that this was a matter of fact to be decided by the judge and not suitable to be the subject of expert evidence.  (The defendants’ solicitors now explain that their stance was that quantum of the defendants’ loss was a matter of fact and could not be confused with the expert evidence of Vladimir Khvalei.)  In the light of the stance then taken by the defendants’ solicitors, the plaintiff’s solicitors filed the witness statement of Vladimir Khvalei on the issue of the existence of Stern-Stroy on 7 September 2012 as factual evidence.  However, when the parties attended before Deputy High Court Judge Lok on 25 June 2012 in a case management conference, counsel for the plaintiff had already indicated to the judge that expert evidence might have to be adduced.

53.  After the witness statement of Khvalei was filed on 7 September 2012, the defendants’ solicitors wrote on 22 October 2012 and said that this statement was in the nature of an expert report and that such evidence was relevant to quantum only and not relevant to the coming trial.  They further issued a summons on 9 November 2012 to strike out this witness statement.

54.  Leading counsel for the defendants in opposing this application submitted that such evidence would be irrelevant for the trial as it would be relevant only to the exact amount of loss suffered by the defendants.  Counsel said that the trial would determine whether an enquiry should be held but it would not be the enquiry itself.  In order to justify the enquiry, the defendants had to adduce some prima facie evidence of loss at the trial, but not all the evidence as might have to be adduced for the enquiry.  The court also would not hear protracted arguments at the trial on whether the alleged loss would be recoverable.  Hence, the defendants’ witnesses on quantum would not be called at the trial.  Such evidence would only be necessary if the court should direct an enquiry after the trial. 

55.  Leading counsel also submitted that to allow the expert evidence to be put in would prolong trial, blur the issues and impose extra psychological and financial pressures on the defendants contrary to the underlying objectives of the Rules of the High Court as set out in O 1A r 1.

56.  Leading counsel in her written reply submissions further said that the Stern-Stroy issue would not be canvassed at the trial as it was not listed as an issue in the written submissions of the plaintiff’s leading counsel.  I do not think this is a point taken fairly.  The Stern-Stroy issue was not pleaded as an issue in the defendants’ Amended Points of Claim re Fraud as the two alleged frauds had nothing to do with the existence or otherwise of Stern-Stroy in 1994.  However, the submissions of leading counsel for the plaintiff clearly states in paragraph 25 that there would generally be no enquiry unless the defendants were able to demonstrate with come credible evidence that they had suffered loss as a result of the injunction.  The plaintiff thus wishes to adduce expert evidence to show that the defendant’s evidence of loss of opportunity to sell the 2nd defendants’ shares to Stern-Stroy cannot be credible.

57.  Leading counsel for the defendants further referred to some correspondence and the plaintiff’s demand for discovery and interrogatories on the Stern-Stroy issue which were made not for the trial but for an enquiry.  Leading counsel fairly pointed out that these documents and demands came into being at a time when the plaintiff’s defence to the claim for an enquiry had been struck out and an enquiry on quantum was to be held.  I am of the view that the plaintiff’s desire to raise the Stern-Stroy issue for the then scheduled enquiry would not make this issue irrelevant to the question of whether the claim of loss of opportunity to sell the 2nd defendant’s shares to Stern-Stroy is a bogus one.  If an enquiry would be held without the prior determination at a trial of the need for the same, then the plaintiff could only raise this issue at the enquiry so as to resist the liability to pay.

58.  Leading counsel for the defendants further submitted that if the Stern-Stroy issue should be raised at the trial, then all the discovery and interrogatories previously raised by the plaintiff on this issue (but later not pursued) should now be completed before the commencement of the trial.

59.  These discovery and interrogatories were raised by the plaintiff at the time when an enquiry on quantum had been fixed without a trial for the need of the same because the plaintiff’s points of defence re fraud had been struck out.  These matters were then put on hold after the plaintiff’s points of defence were restored and a trial ordered.  The plaintiff obviously regards these matters relevant only to quantum and need not be pursued at the trial.  Since these matters are not before me, I would not make any observation on them.  They are only matters for the plaintiff.

60.  Finally leading counsel for the defendants submitted that a number of additional affidavits should also be adduced by both sides so as to work out the Stern-Stroy issue.  However, to do so would require new directions and a new assessment of period for the trial.

61.  I understand that there are two extra days in the period fixed for the trial and they are ample to accommodate the expert evidence sought by the plaintiff.  If the plaintiff would like to confine its evidence to the date when Stern-Stroy had come into being so as to prove the claim relating to it a bogus one, it is a matter for the plaintiff.  Now that I have allowed the expert evidence to be adduced, the defendants may, if they consider it necessary, apply to adduce additional factual evidence that is relevant to the issues at the trial.

Decision

62.  Though leading counsel for the defendants has raised many arguments against this application, I do not think the merits of this application have been destroyed.  The simple question is whether the plaintiff should be allowed to establish at the trial that this claim of loss of opportunity relating to Stern-Stroy is a bogus one so that there is no need to hold any enquiry for its quantification.  The plaintiff also wishes to make use of this allegedly bogus claim to further dent the credibility of the 1st defendant and his son and submit to the trial judge that there is no point in conducting an enquiry for any of the defendants’ claims.

63.  Viewed in this way, the expert evidence sought to be adduced by the plaintiff is clearly relevant to whether the claim relating to Stern-Stroy is a bogus one and hence relevant to the question of whether an enquiry would be necessary at least on the quantum of this claim.

64.  I doubt whether this evidence is relevant to both the trial and enquiry, if there should be one.  The simple reason being that the date when Stern-Stroy was established would only be tried and decided once. If there is no trial but just an enquiry on quantum, then this issue would have to be raised in the enquiry.

65.  I think one of the reasons that gave rise to the arguments of whether this issue is relevant solely to quantum is the lack of proper pleadings for the claim for an enquiry.  The pleadings exchanged are only on the existence or otherwise of two alleged frauds that the defendants rely on to say that the injunction and subsequent agreement for discharge in relation to the 2nd defendant were secured by the frauds of the plaintiff.

66.  However, the defendants have to prove more before an enquiry would be ordered.  One of the matters is the loss suffered by the defendant.  If these matters are pleaded to by both sides, then the existence or otherwise of Stern-Stroy in 1994 may be distilled from the pleadings as a distinct issue fit for resolution at the trial.  If it should be resolved in favour of the defendants, then other evidence on the quantum of this claim will be adduced at the enquiry.  Otherwise, no more time and costs need be incurred on it.  Though I did not have such analysis in mind in the course of the hearing, I have at the end of it ordered the parties to exchange pleadings on all the issues for and against an enquiry.

67.  For the above reasons, I am of the view that the plaintiff’s application for expert evidence should be allowed.

68.  I order that:

(1)  the plaintiff and defendants do have leave to adduce expert evidence at the trial of the summons of the defendants dated 23 July 2007 (fixed to be heard from 4 February 2013 to 28 February 2013) (the “Trial”) on Russian company law and on the Russian company registration system in relation to the issue as to the date on which Stern-Stroy Limited with the Individual Taxpayer Identification Number 7725214235 was first established in Moscow, and whether it was an existing company in Moscow as at 25 February 1994 and 1 July 1994, being the dates of the letters allegedly from Stern-Stroy Limited exhibited at “HL-1” and “HL-3” to the 2nd affidavit of Helge Leiduck dated 28 September 2011 and referred to in paragraphs 5 to 6 of the witness statement of Helge Leiduck dated 5 September 2012 (the “Issue”);

(2)  the plaintiff and defendants do have leave to each appoint one expert on Russian company law and/or on the Russian company registration system who shall each provide a written expert report in relation to the Issue, such reports shall be mutually exchanged and filed with the court within 21 days;

(3)  the respective experts of the plaintiff and defendants do, within 7 days from the exchange of their written expert reports as set out in paragraph 2 above, attend a without prejudice joint meeting with a view to agreeing or narrowing down the expert issue(s) to be decided by the court;

(4)  within 14 days from the joint meeting as set out in paragraph 3 above, the experts do produce and file with the court a signed joint report which succinctly identifies:

(a)  the issue(s) on which the experts have reached a common opinion and in respect of each such issue what that common opinion is;

(b)  the issue(s) on which the experts have failed to reach a common opinion and their competing views on each such issue; and

(c)  the reasons for the disagreement of the experts with the opposing views;

(5)  unless otherwise directed by the trial judge, the respective experts of the plaintiff and defendants do attend the Trial to give evidence and to be cross-examined, failing which their report(s) shall not be admitted in evidence.

69.  I further make a costs order nisi that the defendants do pay the plaintiff the costs of this summons in any event with certificate for two counsel.

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4089 OF 1994

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_____________

D E C I S I O N

_____________

1.  The summons issued by the defendants on 20 August 2012 is dismissed. There be a costs order nisi that the defendants do pay the plaintiff the costs of this summons in any event with certificate for two counsel.

2.  There be an order in terms of paragraph 1 of the defendants’ summons issued on 9 November 2012 to strike out the witness statement of Vladimir Khvalei dated 31 August 2012.  There be a costs order nisi that the plaintiff do pay the defendants’ costs of this summons in any event but without counsel fees. 

3.  There be an order in terms of paragraphs 1, 2, 3, 4 and 5 of the plaintiff’s summons issued on 21 November 2012.  There a costs order nisi that the defendants do pay the plaintiff the costs of this summons in any event with certificate for two counsel.

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4089 OF 1994

_________________________

BETWEEN

_________________________

Before: Deputy High Court Judge Au-Yeung in Chambers

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D E C I S I O N

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1.  By this Summons, the Plaintiff seeks to overturn the directions (“the Directions”) on setting down for inquiry as to damages which I have given on 28 July 2011.  It asks for a wholly new timetable to be given.

BACKGROUND

2.  The background of this case leading to the inquiry has been set out in my decision dated 28 July 2011 (“the Decision”).  Put briefly, the Defendants sought to enforce the Plaintiff’s undertaking as to damages arising from discharge of a Mareva Injunction unduly obtained by the Plaintiff.   The Defendants alleged fraud against the Plaintiff.  Points of claim, defence and reply have been filed on the question of liability (but not damages). Interrogatories have been served but not duly answered by the Plaintiff pursuant to an unless order.  The Points of Defence was struck out and an inquiry as to damages was ordered.  In paragraph 69 of the Decision, I gave the Directions for the parties to file and serve affidavits, counsel’s certificates as to estimation of time and laid down the timetable for setting down for hearing in relation to the inquiry.  I also gave liberty to apply.

3.  There had been variation of the Directions in 2 aspects:

(i) to vary the time for filing of counsel’s certificate as to estimation of time to after filing of the Defendants’ affidavits in reply; and

(ii) to extend the time for the Defendants to file and serve their affidavits in support.

4.  On 30 September 2011 the Defendants filed 4 affidavits (“the New Affidavits”) pursuant to the Directions.  They were within time (taking into account the extension of 21 days granted by the Plaintiff).  It is the Plaintiff’s case that senior counsel who has newly joined the team took the view, having considered those affidavits, that this Summons should be taken out.  Effectively, the Plaintiff now seeks to abandon the timetable laid down in the Directions and asks for the filing of pleadings on damages, general discovery, filing of affidavits to be deferred until after the pleadings and discovery have been completed, expert directions and directions for cross-examination of witnesses. 

THE BASES FOR THE PLAINTIFF’S APPLICATION

5.  The Plaintiff says that the New Affidavits disclose a materially different case from what the Defendants did in the affidavits filed on the questions of liability.  In the previous affidavits, the Defendants claimed that the injunction had caused the 2^nd Defendant, which used to be a successful company, to collapse.  In the New Affidavits, other heads of claim for substantial damages to the tune of over US$100 million were disclosed.  In summary it was alleged that:

(i) the 2^nd Defendant suffered loss of profit;

(ii) the 1^st Defendant had lost an opportunity to sell his shares in the 2^nd Defendant which could potentially have been a very profitable deal;

(iii) the 1^st Defendant suffered loss of benefits under a “housing project” of one IRSAM (a company controlled by the 1^st Defendant and not a party to this inquiry); and

(iv) the 2^nd Defendant might have lost an opportunity of listing on the Hong Kong Stock Exchange.

The Defendants also indicated that they intended to adduce expert evidence to show the value of the 2^nd Defendant and the 1^st Defendant’s shares in it.

6.  The Plaintiff asserts that such claims were vague and unparticularized, most of which were no more than mere assertions not backed up by concrete evidence.  Insufficient particulars have been given as to causation of loss and computation of the damages.  There are likely to be disputes of facts. Disclosure of documents by the Defendants was selective and incomplete “as the 1^st Defendant himself admitted”.  The shares of the 2^nd Defendant were sold eventually at HK$3,000,000.  It was not clear if the Defendants would give credit to this in its claim for damages.  Even if the 1^st Defendant was the shareholder of IRSAM, the loss would not be recoverable as it was reflective loss.

7.  The Defendants oppose the application.  They considered that the change in directions will lead to delay.  The filing of pleadings and general discovery are unnecessary.  It is pre-mature to give directions on cross-examination and expert directions.

THE ORIGINAL DIRECTIONS

8.  The Court gives great weight to the parties’ views when fixing a timetable unless those views are wholly inappropriate and display no good faith in the conduct of proceedings.

9.  The Plaintiff was aware from day one that there had been no pleadings on damages.  At the hearing which resulted in the Decision, counsel’s focus was on the substantive issue of the sufficiency of the answers to the interrogatories and whether the unless order had taken effect.  There was no dispute on appropriateness of the directions to apply after my ruling.

10.  I gave the Directions, which I considered to be appropriate.  Apparently the Plaintiff did not consider that problematic as there had been no appeal against them and any variation was insubstantial.  Even Ms Tong conceded today that the Directions were apposite.

11.  It is in my view not appropriate for the Plaintiff now to come back under the “liberty to apply” provision.  That provision was to enable the Directions to be implemented and to give further directions.  It did not exist to enable a party to overturn the previous directions (in this case, almost in a wholesale manner).

DELAY

12.  I am aware that any directions for proper preparation of a case should aim at fairness to both parties.  Expediency should not be achieved at the expense of just resolution of the dispute in accordance with the substantive rights of the parties.  However, where the conduct of a case has headed for one course, to reverse it will require material change of circumstances.

13.  In this case, the circumstances have not materially changed.  The Plaintiff took advantage of the Directions in having sight of the New Affidavits.  It then turned round to claim deficiency in the Directions 3 ½ months after the Directions were given and 3 days before the Plaintiff’s own affidavits were originally due.  Under the proposed timetable, it will be another 343 days before the inquiry can be set down (compared to about early January 2012  under the current timetable).

14.  When looking at whether there will be delay resulting from a change of course, the Court is not limited to looking at the potential delay caused by that particular application but all the circumstances.

15.  The grant and discharge of the injunction was made 17 years ago.  The application for inquiry as to damages was made 4 years ago.   It took a chequered history.  I had commented adversely on the Plaintiff in terms of delay in my Decision (paragraph 62).  The filing of the Points of Defence (on liability) was after 3 extensions of time for a total of 115 days.  The answers to the interrogatories were served by the Plaintiff after an appeal was allowed by consent but still out of time even under compulsion of an unless order.  The Directions were given with the long history in mind. There is now an appeal on the interrogatories to be heard in February 2012.  The 1^st Defendant is aged over 80.  Any change in time-table should not be readily accepted by the Court.

16.  Ms Tong has helpfully prepared a chronology to set out the steps taken after the Decision to show that there has been no delay on the part of the Plaintiff.  However, the picture shows that out of 42 days available for preparing an affidavit in reply, 32 days have been spent on finding a senior counsel in replacement of the former one and confirming instructions.  A conference with the new senior counsel was only held one month and a day after the New Affidavits were served.  There was no attempt to make prior arrangements before service of the New Affidavits to secure the availability of senior counsel to give advice or prepare the affidavit in opposition even if the Defendants have not “considerably increased the scope and amount of damages claimed” (as Ms Tong puts it).  

17.  There was clear delay on the part of the Plaintiff in taking out this application with no substantial change of circumstances demonstrated.

THE REQUIREMENT FOR PLEADINGS

18.  Ms Tong has referred to various authorities on the need for pleadings to set out items of damages being claimed.  With respect, those authorities were aimed at the usual situations involving writ actions.  An independent action for enforcement of the undertaking in question does not lie: Hong Kong Civil Procedure 2012, para 29/1/28.

19.  Moreover, the automatic directions under Order 37, rule 1 apply only if (1) judgment is given for damages to be assessed: and (2) where “no provision is made by the judgment as to how they are to be assessed”.  Even if (1) applied, the Directions have provided for how the inquiry of damages is to be conducted.

20.  The request for pleadings was something the Plaintiff could have asked for at the hearing which led to the Decision but it failed to do so.   Given the stance of the Plaintiff in the past, one could expert it to hotly contest the claim for damages.  The fact that the Defendants’ claim turned out to be more substantial than the Plaintiff expected was not a substantial change in circumstances to justify varying the directions.

21.  The Defendants had deposed to their various heads of loss in their affidavits.  Ms Tong has no difficulty in summarizing the purported heads of claims and Mr Wong SC does not show disagreement over her summary.  The complaints of Ms Tong described in paragraph 6 above are more matters for specific discovery, cross-examination and comments than for a request for pleadings.  By way of example, Ms Tong pointed out that the Defendants said in their previous affidavits that the business of the 2^nd Defendant slumped to zero as a result of the Injunction whereas the Defendants’ Affidavits said that the 2^nd Defendant’s shrank by almost 95%. This, to my mind, does not detract from the position that the Defendants had a viable claim in loss of profits although the extent of their loss might appear to be inconsistent.  I see no justification for ordering pleadings.

THE REQUIREMENT FOR DISCOVERY

22.  Likewise the directions for automatic discovery under Order 37, rule 1 did not apply.  Ms Tong has shown no authority to show that for an inquiry of this sort, general discovery will be ordered.

23.  Having read the affidavits filed by both sides so far, it can be seen that the Plaintiff is effectively saying that their witnesses who had first-hand knowledge of the case can hardly be found.  Effectively it is putting the Defendants to strict proof.  I cannot see how general discovery can assist the Plaintiff to establish a positive case.  The Defendants have filed and served affidavits with substantial exhibits.  It is not uncommon for a party to find the other party’s affidavits to be vague and lacking in particulars.  The Plaintiff can comment on such affidavits, raise issues and ask for disclosure of more documents in its affidavit in opposition.  (It had done so in its affidavit filed to contest liability.)

24.  I do not agree with Ms Tong that the Defendants have admitted that the disclosure of documents was selective and incomplete.  Events happened over 17 years ago.  The employees of the 2^nd Defendant had left en mass as a result of the injunction and the banking facilities were cancelled.  It was “due to the passage of time and the chaos of IRC in 1994 after the injunction” that one cannot expect discovery from the Defendants to be “complete” in the sense of having a complete set of documentation.  Read in context, the Defendants were deposing to the difficulty they faced in making full discovery rather than avoiding disclosure of relevant documents.

25.  Mr Wong SC saw no difficulty with any application for specific discovery and I agree with him that that should be the course the Plaintiffs should take.

REQUIREMENT FOR EXPERT DIRECTIONS

26.  The Defendants’ affidavits do disclose a need for expert directions, at this stage, for valuation of the 2^nd Defendant.  I agree with Mr Wong SC that only after the Plaintiff has filed its affidavit in opposition should expert directions be framed and given.  There is no need to do so now.

REQUIREMENT FOR WITNESSES TO ATTEND FOR CROSS-EXAMINATION

27.  I agree with the Defendants that though in principle the deponents should attend to be cross-examined, it is pre-mature to make an order now. This can be left to the next case management conference or pre-trial review. Given the age of the 1^st Defendant and physical mobility, the need for video linking may be relevant considerations at a later stage.

CONCLUSION

28.  In summary, I find there to be delay on the part of the Plaintiff in making this application and without sufficient change of circumstances since the Directions were given.  This means that the Directions do stand, subject to the variations. 

29.  I am told that the time for the Plaintiff to file and serve its affidavit in opposition falls on 2 December 2011 as a result of extension of time granted by the Defendants.  The Plaintiff has to meet this deadline.  The parties have by correspondence agreed and it was approved by me that counsel’s certificate as to estimation of hearing time can be submitted within 7 days after the Defendants’ affidavit  in reply has been filed.  This will stand.

30.  I order that:

(i) Paragraphs 1-8 and 15-16 of the Summons be dismissed; and

(ii) Paragraphs 9 -14 be deferred to a later occasion when the affidavits have been filed by the parties

31.  I make an order nisi that costs should follow the event and be to the Defendants.  I disallow the costs for preparing the statement of costs and allow only one hour’s time of attendance this morning.  Since this is a case management matter, I disallow the attendance of senior counsel as a matter of principle but allow his fees for advice in conference.  I also allow a higher amount of fees for junior counsel to reflect the work and higher responsibility that he would have assumed were he to appear alone.  I allow costs, nisi, in the amount of $85,000 in favour of the Defendants.

32.  I thank counsel for their assistance.

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4089 OF 1994

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D E C I S I O N

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1.  This application concerns relief against the sanction imposed by an unless order and the right of a party to raise legal professional privilege (“LPP”) in answer to interrogatories.

BACKGROUND

2.  In1994 the Plaintiff obtained a Mareva injunction against the Defendants.  The Plaintiff’s case then was that D1 had allegedly misappropriated US$20 million advanced by the Plaintiff under a contract for the sale and purchase of cars.  Its case against D2 was that a sum of US$6 million out of the US$20 million had been wrongfully used to discharge a loan owed by D2 to a bank when the loan was not yet due.  Part of the $20m went to private bank accounts of D1.  The application for the Mareva injunction was supported by an affidavit of one Mr Paul Carolan (“the PC Affidavit”) who was then a solicitor.  Paragraph 13 of the PC Affidavit referred to information obtained from an investigating Magistrate of Monaco (Lefort).  The Plaintiff’s Paris lawyer was said to have inspected the documents which were in the possession of Lefort.

3.  It turned out that the information was false and that the relevant loan owed by D2 to the bank had not been discharged as alleged.  Seventeen days after the grant of it and by consent, the Mareva injunction against D2 was discharged.  D2 was awarded costs on indemnity basis on condition that it waived its right to enforce the Plaintiff’s undertaking under the injunction (“the Settlement Agreement”).  The action against D2 was also discontinued. 

4.  The Mareva injunction against D1 was also discharged by the Court on other grounds. 

5.  The Mareva injunction was said to have a devastating effect on D2’s business.  It was later found out that the Settlement Agreement was procured by fraud.  Allegedly, Lefort provided false information which led to the obtaining of the Mareva injunction against D2 in return for a new Benz car (“the Lefort fraud”).    In addition, the Plaintiff induced one Mr Yip (a shareholder of D2) to agree not to claim damages when the Mareva injunction was discharged against D2, by promises of future business dealings with the Plaintiff; and subsequently, Mr Yip received an order through a company he controlled from the Plaintiff for the manufacture of rear axles in Shenyang to be used in Mercedes-Benz trucks (“the Yip fraud”). 

6.  By a summons dated 23 July 2007, the Defendants applied to Court to enforce the Plaintiff’s undertaking given under the Mareva injunction.   In respect of this application, the central issue was whether the Settlement Agreement was vitiated by fraud and could not be relied on by the Plaintiff to spare itself from honouring the undertaking.

7.  Point of Claim in respect of fraud, Points of Defence and evidence by way of affirmations were filed.  Amongst the affirmations was one by a senior legal counsel of the Plaintiff by the name of Rene von Samson-Himmelstjerna dated 30 March 2009 (“the RVS Affirmation”). 

8.  Paragraph 17 of the RVS Affirmation stated that,

“I also note that the Mareva against [D2] was based on the findings of an investigating magistrate in Monaco, [Lefort], that US$6 million (out of the US$20 million advanced under the IRSAM Agreement) was used by Banque Nagelmackers 1749 Luxembourg to settle a loan of the same amount granted to [D2] and another party. Such findings were later found to have been misunderstood by the Plaintiff’s solicitors in Paris, who conveyed the same to the Plaintiff’s solicitors in Hong Kong.” (emphasis added)

9.  In respect of the “misunderstanding” by the Plaintiff’s solicitors, the Defendants sought to administer the 6 subject interrogatories (“the Interrogatories”) on the Plaintiff:

“(a) State the exact wording that was used by Lefort in conveying his findings of the usage of US$6 million (out of the US$20 million advanced under the IRSAM agreement) to the Plaintiff’s solicitors in Paris;

(b) Identify the documents that were used or referred to by Lefort in conveying his findings of the usage of US$6 million (out of the US$20 million advanced under the IRSAM agreement) to the Plaintiff’s solicitors in Paris;

(c) State the understanding of the Plaintiff’s solicitors in Paris of such wording used by Lefort;

(d) State why and how such findings were misunderstood by the plaintiff’s solicitors in Paris;

(e) State the exact wording that was used by the Plaintiff’s solicitors in Paris when conveying such findings to the Plaintiff’s solicitors in Hong Kong; and

(f) State how the Plaintiff later found out about such misunderstanding.”

10.  On 11 March 2010, Master Lung ordered that the Interrogatories be withdrawn.  At the same time, he refused the Defendants’ application to amend the Points of Claim re Fraud by pleading the Lefort fraud.   His decision was upheld by Deputy Judge L. Chan on appeal.

11.  Leave to appeal was granted by the Court of Appeal.

12.  Two months afterwards and by consent, the appeal was allowed, the Defendants were granted leave to amend the Points of Claim to plead the Lefort fraud and the Plaintiff was to provide answers to the Interrogatories within 28 days (“the Consent Order”).

13.  By an order dated 7 December 2010, which formed the subject of the present application, Master Ko ordered that unless the Plaintiff do answer the Interrogatories by 4:00 pm on 4 January 2011, the Plaintiff’s Points of Defence re Fraud be struck out and there be an inquiry as to damages sought by the Defendants (“the Unless Order”).

14.  RVS of the Plaintiff swore an affidavit on 22 December 2010 which purported to answer the Interrogatories (“the Answers”).  Four of the Answers raised LPP.  Two of them alleged that the “misunderstanding by the Plaintiff’s solicitors in Paris” referred to in paragraph 17 of the RVS Affirmation did not in fact mean what it said.

15.  The Answers were only filed at about 4:30 pm and served on the Defendants’ solicitors at 5:47 pm on 4 January 2011.

16.  On 25 January 2011, the Plaintiff issued the present summons (“the Plaintiff’s Summons”) to obtain an extension of time for filing and serving the Answers.   In explaining the need for this Summons, T of the Plaintiff’s solicitors took all the blame upon himself.

17.  The Defendants oppose the Plaintiff’s summons.  They issued a summons 2 days later seeking to confirm, for the avoidance of doubt, that the terms of the Unless Order held good and that the Defendant was entitled to have an inquiry as to damages with consequential directions (“the Defendants’ Summons”). They contended that the Plaintiff must be taken to have waived all objections to answering the Interrogatories, and was precluded from raising LPP in the Answers; the Answers were simply not answers at all.

18.  Broadly, the issues are:

A.  Whether the Plaintiff has good explanation for the delay;

B.  Having consented to provide answers to the Interrogatories, whether the Plaintiff is entitled to rely on LPP in its Answers;

C.  Whether the Plaintiff should be granted relief from sanction.

A.   WHETHER THE PLAINITFF HAS GOOD EXPLANATION FOR THE DELAY

19.  Order 2 rule 4, of the Rules of the High Court requires the party in default of an unless order to apply to the Court for and obtain relief from the sanction within 14 days of the failure.

20.  The refusal to grant relief from sanctions is not limited to cases of intentional and contumelious disregard of a court’s peremptory order.  The Court should consider all the individual circumstances including those listed in Order 2, rule 5(1)(a) to (j).  Depending on the circumstances, failure to comply with one or a number of orders through negligence, incompetence or sheer indolence may be sufficient to deny relief: Top One International (China) Property Group Co. Ltd. & another v. Top One Property Group Ltd & others, HCA 1244/ 2009, unreported, 9.12.2010, Fok J.

32.  The relevant legal principles governing the circumstances in which the court will extend time to permit compliance with an unless order were thoroughly analysed and discussed by Ribeiro J (as he then was) in Chan Chun Lung Allen & Anor v Ryland Limited & Ors, unrep., HCA4904/1996, 26.8.99 at §§38 to 47.

33.  The test he applied was that laid down by Bokhary JA (as he then was) in PT Bank Pembangunan Indonesia (Persero) v Tan Eddy Tansil [1997] 1 HKLRD 57 at p.59E-G:

“The test to be applied here is, in my judgment, the one laid down by Sir Nicholas Browne-Wilkinson VC giving the leading judgment in the case of In re Jokai Tea Holdings Ltd [1992] 1 WLR 1196 when he said this at p.1203B:

‘In my judgment, in cases in which the court has to decide what are the consequences of a failure to comply with an ‘unless’ order, the relevant question is whether such failure is intentional and contumelious.  The court should not be astute to find excuses for such failure since obedience to orders of the court is the foundation on which its authority is founded.  But if a party can clearly demonstrate that there was no intention to ignore or flout the order and that the failure to obey was due to extraneous circumstances, such failure to obey is not to be treated as contumelious and therefore does not disentitle the litigant to rights which he would otherwise have enjoyed.’”

34.   Thus, the relevant principles applied by Ribeiro J in Chan v Ryland were set out in §§45 to 47 of his judgment and are summarised below:

(1) The court will ask whether a defendant’s failure to comply with an unless order was “intentional and contumelious” or whether, on the contrary, he has been able “clearly [to] demonstrate that there was no intention to ignore or flout the order and that the failure to obey was due to extraneous circumstances”, keeping in mind that the court should not be astute to find excuses for such non-compliance.

(2) As with any other case in which a party approaches the court for an indulgence, it is incumbent on an applicant to adduce evidence upon which an exercise of discretion in his favour may be founded.

(3) Non-compliance is contumelious where it is the result of the litigant’s conscious and deliberate decision to ignore or disobey the court’s order in the absence of any extraneous excuse.  Such deliberate conduct may be contrasted, for instance, with cases where the litigant has made a serious effort to comply in good faith but has been unsuccessful through bad luck or incompetence or with cases where the litigant has not complied because of circumstances outside his control (including cases where his solicitor has negligently or otherwise missed the deadline though no fault of the litigant).

35.  Ribeiro J declined to lower the threshold, a trend which he noted was detectable in some of the English authorities, in particular Hytec Information Systems Ltd v Coventry City Council [1997] 1 WLR 1666 where, at p.1677, Auld LJ said:

“In my judgment, there is no need to confine the test to that of an intentional disregard of a court’s peremptory order, whether or not it is characterised as flouting, contumelious, contumacious, perverse, obstinate or otherwise. Such an intent may be the most usual circumstance giving rise to the exercise of this jurisdiction. But failure to comply with one or a number of orders through negligence, incompetence or sheer indolence could equally qualify for its exercise. It all depends on the individual circumstances and the existence and degree of fault found by the court after hearing representations to the contrary by the party whose pleading it is sought to strike out.”

He noted that PT Bank Pembangunan case was regarded as representing a binding precedent so far as the Court of First Instance was concerned (§40) and he did not consider that the Hytec approach “as yet to represent the law in this jurisdiction” (§44).

36.  Mr Douglas Lam, counsel for the plaintiffs, submitted that, in the light of the Civil Justice Reform (“CJR”), the time had come to adopt the English approach in Hytec.

…

38. In my view, Mr Lam is right in his submission.  It is noteworthy that, in Chan v Ryland, Ribeiro J simply said that the Hytec approach did not “yet” represent the law in this jurisdiction.  Since his decision in that case, in August 1999, the CJR has since come into effect.  There is now a trend towards the greater use of orders to specify automatic consequences of non-compliance and for placing the onus on a party guilty of non-compliance to seek relief from those consequences.  The rules themselves reflect this trend: see, for example, RHC O.25 r.1C (failure to appear at case management conference or pre-trial review).

39.  To this end RHC O.2 r.4 now specifies that where a party has failed to comply with a rule or court order, any sanction for failure to comply imposed by the rule or order has effect unless the party in default applies to court for relief from the sanction within 14 days of the failure.  Relief is not automatic and RHC O.2 r.5 specifies the circumstances which the court shall consider on an application for such relief.

…

41.  In my view, the passage quoted above from Hytec is entirely consistent with the more pro-active case-management approach encouraged by the CJR and, in my view, the CJR has had the effect that the Hytec approach now reflects the approach that should be applied in this jurisdiction.  That is to say, although intentional and contumelious disregard of a court’s peremptory order may be the most usual circumstance leading to the refusal of an extension of time to comply with a peremptory order, the exercise of the discretion to refuse an extension or to relieve a party from sanctions is not limited to cases of intentional and contumelious default.  As directed by RHC O.2 r.5, the court should consider all the individual circumstances including those listed in r.5(1) at sub-paragraphs (a) to (j).  Depending on the circumstances, failure to comply with one or a number of orders through negligence, incompetence or sheer indolence may be such as to lead the court to conclude there is an existence and degree of fault which warrants a refusal of an extension of time, so that relief from a sanction for non-compliance specified in a peremptory order (including an order striking out a pleading) should not be granted.  Any other conclusion would, in my opinion, be to ignore the positive duty placed on parties to assist the court to further the underlying objectives of CJR (RHC O.1A r.3) and on the court to do so by actively managing cases (RHC O.1A r.4(1)).”

21.  In the present case, the Plaintiff’s Summons was filed well beyond the 14-day limit imposed by rule 4 because, according to Mr Jat SC for the Plaintiff, T was not aware of that rule.   It was also only during the period when the Plaintiff’s Summons was adjourned part-heard that the Plaintiff filed yet another summons for extension of time to file the first.

22.  In considering whether there are good reasons to grant extension of time to file the Plaintiff’s Summons and to explain the delay in compliance with an unless order, the Court is not confined to look only at what happened on the day of the filing and service of the document in question but also the surrounding circumstances.

23.  Even pre-Civil Justice Reform, without rule 4, a party should have acted promptly in seeking relief.  Moreover, 3 days after being served, the Defendants’ solicitors have already reminded the Plaintiff of the breach of the Unless Order, still the Plaintiff did not come to Court.  The lateness in taking out the Plaintiff’s summons and failure to seek extension of time to do so was inexcusable.

24.  On the last day of compliance, T effectively gave instructions only 2 hours before the deadline.  He did not impress upon the person receiving his instructions that there was a 4:00 pm deadline imposed by an unless order. At that time, only one out of 3 clerks was available and he had to attend to urgent filing and service in at least 2 other cases.  The clerk had to run between 2 offices of the Plaintiff’s solicitors situated in Pacific Place and Hutchison House, and finally proceed to the High Court for filing and then service.  In the meantime, it was only at about 3 p.m. that T instructed the paralegal handling filing and service that there was an unless order.  Even so, the paralegal did not recall being informed of the 4 p.m. deadline but only repeated the urgency of the filing to the clerk concerned.  The clerk obviously was not aware of the deadline of 4 p.m. and attended to other services before serving the Defendants’ solicitors. The delay was certainly avoidable if things were not left till the last day.

25.  What is more bewildering was that the Answers were prepared 13 days in advance of the deadline and there was no explanation at all for 13 days’ inaction before they were filed and served.

26.  The circumstances speak of negligence, incompetence or sheer indolence which I find to exist on the part of T.  But should this be laid at the door of the Plaintiff?

27.  I do not think so in the circumstances of this case.  Order 2 rule 5(1)(f) clearly makes a distinction between the conduct of the party and his legal representative.  The affidavit containing the Answers was sworn well ahead of the deadline imposed by the unless order. There was no evidence of deliberate feet dragging.  The Plaintiff should be completely exonerated in such circumstances: Chow Kai Wang v. Toi Samuel [1996] 4 HKC 330.  Even for T, despite ignorance of rule 4, he has not shown conscious and deliberate decision to disobey the unless order.  This was very different from the situation in Hytec Information Systems Ltd v. Coventry City Council [1997] 1 WLR 1666.  There the particulars were found not to have been properly served and the Defendant was found to have flouted the court’s order.  The barrister refused to attend a hearing but sent her pupil to apply for an adjournment. The defence was struck out.  The defendant’s application to set aside the order and extension of time to serve the particulars was refused.

28.  Late as it was, leave ought to be given for the filing of the Plaintiff’s Summons out of time.  I accept that the delay giving rise to breach of the Unless Order and failure to file the Plaintiff’s Summons in time was caused by T and not the Plaintiff.

B.   HAVING CONSENTED TO PROVIDE ANSWERS, WHETHER THE PLAINTIFF IS ENTITLED TO RELY ON LPP IN ITS ANSWERS

The Statutory Position

29.  Order 26, rule 5(1) permits a party to assert LPP in answering interrogatories:

“Without prejudice to rule 3(2), where a person objects to answering any interrogatory on the ground of privilege he may take the objection in his answer.”

30.  In Reuben Import Export Company Limited v. Wong Cheong Fung Company [1957] HKLR 81, by consent, the plaintiff agreed to provide answers to interrogatories.   The plaintiff then deposed on affidavit that he objected to answering the interrogatory on the ground that the answer might tend to incriminate it.  It was held to be a sufficient answer.

31.  The issues are:

(i)  Whether LPP can be engaged;

(ii)  Whether, if LPP is engaged, the Plaintiff has waived it.

Whether LPP Can Be Engaged

32.  LPP does not attach to documents which had been brought into existence before litigation was contemplated and had not previously been in the possession, custody or power of a party of that of his legal adviser but which had been obtained by him or his legal adviser from a third party for the purposes of the litigation.  They cannot become privileged simply because they were subsequently handed over to the Plaintiff’s lawyers: Ventouris v. Mountain [1991] 1 WLR 607.

33.  Mr Jat SC submits that the assertion that there were pre-existing documents prior to the communication between the Plaintiff’s Paris lawyers and Lefort was no more than a speculation.  The Paul Carolan Affidavit stated that the Lefort files were not seen by the Plaintiff’s Paris lawyers until 22 and 26 April 1994 which was more than 2 weeks after his meeting with Lefort.

34.  Even if Mr Jat SC is correct, the burden is still on the Plaintiff who claims LPP to show that legal skill was involved in the bringing into existence of those documents sought.  In LMH v. KLH, [2006] 4 HKLRD 649, the question was whether a schedule of unprivileged documents prepared by the solicitors as an aide memoire to facilitate him in advising his client was subject to LPP.  Yuen JA held, 

“19….A party who claims legal professional privilege has the burden of establishing it. But there is no evidence from Mr Mok the Husband’s Hong Kong lawyer (whose firm is still acting for the Husband) that any legal research or skill was involved in making the list, or that he added to it any legal advice or communications to his client. Mr Pilbrow counsel for the Husband said there is no evidence what was written on the Schedule. But Mr Mok would of course know what he had written on the Schedule. If he had done anything beyond making a clerical list, he need only have gone on affirmation to say so, and no-one could have gainsaid it.

20.  It may well be that on the basis of that Schedule, the Hong Kong lawyers later advised the Husband whether to pay Dr S for the documents.  If there was a letter of advice from the Hong Kong lawyers to the Husband, that letter would of course be privileged but it is not that document that is sought for disclosure.”

35.  In the present case, the files were Lefort’s.  The findings were his. There was nothing to show that the Plaintiff’s Paris or Hong Kong lawyers had applied legal skill to bring them into existence.  In my view, LPP was not proved to be engaged at least in respect of  interrogatory (b).

Whether, If LPP Was Engaged, the Plaintiff Had Waived It

36.  There was clearly no express waiver of LPP even though the initial objection of the Plaintiff was merely on the ground of irrelevance.  Mr Wong SC for the Defendants submits that the Plaintiff should be deemed to have waived it.

The Principles

37.  Waiver of LPP is to be judged objectively.  A party’s subjective intention to waive privilege is entirely irrelevant: Liu Ma Cheung and others v. Liu Yin Fu, HCA 181/2004, unreported, 26.10.2007, at para 81.

38.  Waiver must be unequivocal and any doubt should be resolved in favour of upholding waiver.  There is a difference between relying on the contents of alleged privileged materials and their effect.  There is waiver in the case of the former but not the latter: Goldlion Properties Ltd & Ors v Regent National Enterprises Ltd [2006] 1 HKLRD 793 at 805-807.

“31. …the approach to statutory interpretation employed by the courts in dealing with fundamental human rights should be adopted in the application of the law of waiver of legal professional privilege. If there is any doubt as to whether there was any waiver of the privilege, the question should be resolved in favour of upholding the privilege.

…

35. In Paragon Finance Plc v Freshfields [1991] 1 WLR 1183 Lord Bingham also commented on waiver at p.1188C:

A client expressly waives his legal professional privilege when he elects to disclose communications which the privilege would entitle on the scope of the waiver. Practical difficulties occur in determining such issues, as in Nea Karteria Maritime Co Ltd v Atlantic & Great Lakes Steamship Corp (No 2) [1981] Com LR 138, General Accident Fire and Life Assurance Corp Ltd v Tanter [1984] 1 WLR 100 and R v Secretary of State for Transport, ex p Factortame (1997) 9 Admin LR 591. But the law is clear. While there is no rule that a party who waives privilege in relation to one communication is taken to waive privilege in relation to all, a party may not waive privilege in such a partial and selective manner that unfairness or misunderstanding may result. (Emphasis added.)

36. As for the proper test to be applied for considering whether there is waiver, para 10-17 of Matthews and Malek, Disclosure (2^nd ed., 2000), adopted by the Judge is repeated below:

The key word here is “deploying”. A mere reference to privileged document in an affidavit does not of itself amount to a waiver of privilege, and this is so even if the document referred to is being relied on for some purpose, for reliance in itself is said not to be the test. Instead, the test is whether the contents of the document are being relied on, rather than its effect. The problem is acute in cases where the maker of an affidavit or witness statement has to give details of the source of his information and belief, in order to comply with the rules of admissibility of such affidavit or witness statement. Provided that the maker does not quote the contents, or summarise them, but simply refers to the document’s effect, there is apparently no waiver of privilege. (Emphasis added.)

…

44. The test whether there is waiver in its practical application can be found in Hollander, Documentary Evidence (8^th ed., 2003) para.17-41, which reads:

     There is a distinction to be drawn between a reference to the fact of legal advice and to its contents.  Referring to the fact that legal advice has been taken will not normally give rise to a waiver of privilege.  Similarly, reference to the existence of a privileged document will not be sufficient; there must be reference to or reliance on its contents.  Thus to state that before attending interview with the police I had taken legal advice is not a waiver of privilege.  But to say that I did not tell the police where I was on Tuesday because my solicitor advised me not to, does rely on the contents of the legal advice; here the point of the reliance on the privileged advice is to provide an explanation or justification for the failure to provide an answer to the police.  What is important here is not whether legal advice was taken, but what was the content.”

Analyses

39.  For 3 broad reasons, I find that there has been deemed waiver:

(i)  Deployment of the contents of the alleged privileged materials;

(ii)  Inconsistent evidence of the Plaintiff showing a shift in stance;

(iii)  Submission to the consent order before the Court of Appeal.

Deployment of the Contents of the Alleged Privileged Materials

40.  In paragraph 13 of the PC Affidavit, it was said that Lefort has seized files relating to the bank accounts of IRSAM and D1.  The Plaintiff’s Paris lawyer met with Lefort who believed that he had found “evidence of the following movements of money”.  Paragraph 14 then described the movements.   

41.  Mr Jat SC submits that all that was in those 2 paragraphs was a statement of fact that the Plaintiff’s Paris lawyer had met with Lefort, followed by a statement of fact as to Lefort’s apparent belief as to the movement of the US$20 million. 

42.  With respect, the information in paragraphs 13 and 14 allegedly obtained by the Paris lawyers from Lefort formed the very foundation of the Plaintiff’s application for ex parte injunction against the Defendants.  It particularized how much money went through each Defendant and its use.  There is no doubt that the Plaintiff had deployed the contents and not just the effect of the alleged privileged communication between Lefort and the Paris lawyer.

43.  On 14 May 1994, the Plaintiff’s solicitor by letter asserted that information contrary to Lefort’s findings was located.  It was on that basis that the Mareva injunction against D2 was discharged.  Upon request by the Defendants’ solicitors, a report of the Paris lawyer dated 13 May 1994 was disclosed.  Again, there was deployment and reliance on contents.

44.  The Plaintiff has selectively provided part of the documents and communications that allegedly took place among Lefort, the Paris lawyer, its Hong Kong lawyer and the Plaintiff itself. 

Inconsistence Evidence of the Plaintiff Showing a Shift in Stance

45.  Not only was the basis for seeking the Mareva injunction found to be false but that fifteen years later, on 30 March 2009, RVS by affirmation asserted that the findings were not wrong but they “were later found to have been misunderstood by the plaintiff’s solicitors in Paris, who conveyed the same to the Plaintiff’s solicitors in Hong Kong.”

46.  In the Answers about 2 years later, RVS disowned his own explanation and claimed that there was no misunderstanding by the Plaintiff’s Paris lawyers. He claimed what he meant was that the Paris lawyers later discovered that Lefort’s findings were mistaken.

47.  Mr Wong SC submits that there was a shift in stance.  Mr Jat SC disagrees and says that all that RVS had sought to do was to cure the Defendants of their own mis-reading of his evidence. 

48.  I disagree with Mr Jat SC.  The plain meaning of RVS’ version reveals a complete change in directions: the 2009 version showed the fault to be on the Plaintiff’s lawyers in Paris; the 2011 version, on Lefort.  That begs the very questions that the Interrogatories aim to ask.  What was Lefort’s original finding?  What was the mistake in that finding?  Who had the misunderstanding? What was the misunderstanding and how did it come about?  Their purpose was to weaken the explanation of Paul Carolan and RVS on how the Mareva injunction was obtained and discharged, and strengthen the Defendants’ case on fraud.

49.  The question of LPP aside, the Answers as filed were so contradictory as to amount to no answers at all.

50.  In Wing Fai Construction Co Ltd (in Liquidation) v Benefit Holdings Int’l Ltd & ors, HCA 810/ 2003, unreported, 16.9.2004, the defendants alleged that a letter written by their solicitors was issued without their proper instructions and did not represent the truth of the situation.  Reyes J had to deal with the question of whether the defendants had waived LPP in respect of those instructions.

“8.   Mr. Smith SC (appearing for the defendants) submits that on a fair reading of the witness statements it is not possible to contend that there has been waiver of LPP.  I disagree.

…

10.  Accordingly, the defendants squarely raise the issue whether the letter truly reflected their instructions.  In raising such issue the defendants must be deemed to have waived LPP.  The issue cannot be fairly explored at trial unless the liquidators are allowed access to relevant material to enable them to deal in cross-examination with the defendants’ case of an alleged mismatch between instructions and the contents of the letter.  The defendants cannot both assert that JSM did not act on instructions and refuse discovery of those instructions.

…

12.  Mr. Smith says that mere service of a witness statement does not amount to waiver of privilege.  He cites Hong Kong Civil Procedure 2004, Note 38/2A/12 (p.600) in support of this proposition.  However, this matter involves more than just mere service of a witness statements.  The defendants are expressly challenging the obvious meaning of their own agent's letter.  The defendants are saying that the letter should be ignored because it was written in error.  They may be right that there is a perfectly innocent explanation for how the alleged error came about.  That explanation needs to be tested at trial and fairness demands that the liquidators should be given discovery in relation to the defendants' contentions.”

51.  Fairness demands that in such circumstances, the Plaintiff must be taken to have waived privilege and the Defendants should be allowed to investigate the bases of the Plaintiff’s assertions.

Submission to the Consent Order Before the Court of Appeal

52.  The Plaintiff had won at 2 levels (before the Master and Deputy Judge L Chan) in having the Interrogatories withdrawn and yet they consented to an appeal being allowed and consented to provide the Interrogatories (“the Consent Order”).  It came about after Hon. Rogers VP gave leave to appeal and upon 2 invitations from the Defendants’ solicitors.  Hon. Rogers VP held, in Daimler AG (formerly Mercedes-Benz AG) v Herbert Heinz Horst Leiduck & anor , HCMP 960/2010, 14.9.2010,

“9. It seems to have been the kernel of the decision in the court below, at paragraph 32 of the judgment of the Deputy Judge, that he said, in refusing the application for leave:

“I do not think the Plaintiff was then under any duty to explain to the 2nd defendant how or why the Mareva injunction was wrongly obtained and its solicitors did not do so.”

10. First of all, the solicitors have attempted to do so twice, in two different ways, and secondly, it certainly is the responsibility of a plaintiff who obtains a Mareva injunction and has to have it discharged to explain, both to the court and to the defendants, as to how and why that injunction was obtained. I wish to take this opportunity to disabuse anybody of any misconception that that is not the requirement.

11. …Simply that a mistake was made in obtaining an injunction does not let the plaintiff out of his requirement to honour the undertaking as to damages.

12.  In my view, what has gone wrong in this case is that this is being viewed as discrete frauds and discrete conspiracies.  Really what it is, is it is a global thing which must be looked at as a whole.  These are not discrete conspiracies; they are not discrete frauds.  The whole thing has to be looked at together.  …”

53.  Clearly the Plaintiff owed a duty to the Court to make full and frank disclosure as to why mistakes had been made causing a discharge of the Mareva injunction.  The Answers go nowhere near the discharge of this duty and were nothing short of being evasive.  They are against the spirit of the judgment of Hon. Rogers VP and the Consent Order. 

54.  Based on the 3 reasons I am of the view that the Plaintiff is deemed to have waived LPP.  The consequence is that the Answers are so insufficient as to amount to no answers at all.

55.  Mr Jat SC for the Plaintiff submits that if the Defendants maintain that the Answers are insufficient the proper course is to issue a summons under Order 26, rule 5(2) which provides:

“(2) Where any person on whom ordered interrogatories have been served answers any of them insufficiently, the Court may make an order requiring him to make a further answer, either by affidavit or on oral examination as the Court may direct.”

That, he submits, is a separate matter from the issue of whether the unless order has been breached as a result of raising LPP.

56.  The question of sufficiency of the Interrogatories is best resolved at this interlocutory stage than at the inquiry itself.  Where the issue is defined and before the Court, I cannot see why one should insist on the technicality of taking out yet another summons under Order 26, rule 5(2). 

C. WHETHER THE PLAINITFF SHOULD BE GRANTED RELIEF UNDER ORDER 2 RULE 5 OF THE RULES OF THE HIGH COURT

57.  I am prepared to extend time for the Plaintiff to take out the present summons but I find the Answers to be so insufficient as amount to no answer to the Interrogatories.  The next step is to consider the factors under Order 2, rule 5(1):

“5. (1) On an application for relief from any sanction imposed for a failure to comply with any rule or court order, the Court shall consider all the circumstances including-

(a) the interests of the administration of justice;

(b) whether the application for relief has been made promptly;

(c) whether the failure to comply was intentional;

(d) whether there is a good explanation for the failure to comply;

(e) the extent to which the party in default has complied with other rules and court orders;

(f) whether the failure to comply was caused by the party in default or his legal representative;

(g) in the case where the party in default is not legally represented, whether he was unaware of the rule or court order, or if he was aware of it, whether he was able to comply with it without legal assistance;

(h) whether the trial date or the likely trial date can still be met if relief is granted;

(i) the effect which the failure to comply had on each party; and

(j) the effect which the granting of relief would have on each party.”

All but item (g) are relevant.

58.  With regard to (a), it is in the interests of the administration of justice that orders are to be obeyed, particularly since an unless order is a final opportunity for a party to carry out an act ordered by the Court.  The sanctions should take effect and the innocent party should not lightly be deprived of the fruits of the unless order unless the defaulting party is able to satisfy the Court that discretion should be exercised in its favour. However, it is always important to bear in mind that it is also in the interests of the administration of justice that substantive rights of the parties are resolved instead of being brushed aside on pure technical grounds or inadvertence.

59.  With regard to (b), the application for relief has not been taken out timeously.

60.  With regard to (c), Mr Jat SC submits that raising LPP was entirely in good faith and no deliberate breach was intended.  I take a different view. The Answers display a deliberate attempt to avoid revealing the true picture. There was no acknowledgement of the insufficiency of the Answers as can be seen from the fact that the Summons asked for an order to rely on those Answers. There was no alternative prayer for filing another set of answers.

61.  With regard to (d), there was no good explanation for the delay in filing the Summons.  There was no good explanation for failing to answer the Interrogatories properly.

62.  With regard to (e), the Points of Defence was filed after 3 extensions of time for a total of 115 days.  With regard to the Answers, even disregarding the period from the time they were served until the Consent Order, the Plaintiff was unable to comply with the 28-day limit set by consent.  Even under compulsion of the unless order, the Answers were out of time.

63.  With regard to (f), the fault lies with the Plaintiff’s solicitors in taking out the Summons for relief late and not taking out the time Summons until the first Summons was part-heard.  The Plaintiff is exonerated.  However, insufficiency of the Interrogatories is another matter.  One simply does not know what information has been imparted by the Plaintiff to its solicitors and what advice has been given or taken.  Despite receiving legal advice, the Answers are the Plaintiff’s answers.  The Answers are expected to form part of the evidence.  It is unacceptable for a client to disown a set of answers prepared by its solicitors and ask for another chance to comply with a court order.  It violates the theme of having legal representation.  It is impossible to apportion the blame between the client and the solicitors.

64.  With regard to (h), no date has yet been fixed for inquiry of damages but that should not weigh heavily in favour of reviving the Points of Defence which has been struck out.

65.  With regard to (i) and (j), failure to properly answer the Interrogatories undermines the Consent Order.  The Defendants have served the Interrogatories as long ago as January 2010.  They have waited long enough for the Answers.  Because of the Plaintiff’s objections to them and failure to answer them properly, much costs and time are wasted.  On the other hand, refusing to grant relief would deny the Plaintiff of a core defence.

66.  I have also considered what would happen at a trial if LPP were raised in the course of cross-examination and the judge ruled against it. Usually the witness will be given the opportunity to answer the question again.  However, having considered all the circumstances in this case, the gross insufficiency and evasiveness of the Answers, the fact that despite the Plaintiff having months to consider the overall position after the judgment of Rogers VP tip the balance against giving the Plaintiff another opportunity.  I therefore decline to grant relief from sanction.

CONCLUSION

67.  Since it was the fault of the Plaintiff’s solicitors in failing to take out the Summons for relief against sanction within time, the Plaintiff is exonerated.  I give leave to file the Summons out of time.

68.  Although the delay was explained, the Answers were grossly insufficient.  LPP was not available to interrogatory (b) and there was deemed waiver of LPP in respect of the Interrogatories.  The Plaintiff should not be permitted to make selective disclosure.  The Answers were also evasive and against the spirit of the judgment of Rogers JA and the Consent Order.  I therefore dismiss the Plaintiff’s Summons.

69.  I grant an order in terms of the Defendants’ Summons.  I direct that the inquiry for damages be set down within 28 days for hearing.  Parties shall each lodge a counsel’s certificate as to estimation of hearing time within 7 days.

70.  As for costs, I make an order nisi, that the Defendants should have the costs of both summonses to be assessed summarily, with certificate for 2 counsel. 

71.  There shall be summary assessment of costs on the papers on 19 August 2011 at 9:30 am.  No attendance is required. The Defendants shall file and serve its statement of costs by 11 August 2011.  The Plaintiff shall file and serve its grounds in opposition by 18 August 2011.

72.  I thank counsel for their very thorough preparation and able assistance.

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4089 OF 1994

____________

________________

_____________

D E C I S I O N

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1.  This is an application for leave to appeal against my decision given on 8 April 2010 upholding a decision of Master Lung, which ordered the withdrawal of six interrogatories administered by the defendants on the plaintiff and refused an oral application by the defendants to amend their points of claim. 

2.   Section 14A(a)(4) of the High Court Ordinance, Cap. 4, provides that I should not grant leave unless I am satisfied that the appeal has a reasonable prospect of success, or there is some other reason in the interest of justice that the appeal should be heard.  I am only concerned with whether the defendants have a reasonable prospect of success in the appeal.  The facts have been set out in my decision of 8 April.  This decision should be read together with that decision. 

3.  The 2nd defendant now wants to plead that the settlement agreement was made as a result of the plaintiff’s fraudulent misrepresentation in that the plaintiff had failed to disclose to the 2nd defendant the Lefort fraud and had thereby fraudulently misrepresented to the 2nd defendant that the injunction against the 2nd defendant was obtained by a bona fide mistake.

4.  I said in paragraphs 32 and 33 of my last decision:

“32.   The facts in the present case are different.  The plaintiff’s solicitors, in their letter dated 14 May 1994 to the defendants’ solicitors, only said that the report by the plaintiff’s Paris lawyers on the banking records in the possession of the magistrate indicated that the loan of US$6 million had not been repaid out of the US$20 million, and that was contrary to the earlier information provided by the magistrate.  The letter did not say how or why the wrong information was given earlier on by the magistrate.  There is also no evidence that the then solicitors of the defendants had asked how or why the magistrate had erred.  I do not think the plaintiff was then under any duty to explain to the 2nd defendant how or why the Mareva injunction was wrongly obtained and its solicitors did not do so.  There is also nothing to suggest that it was a material circumstance for Yip to consider whether the 2nd defendant should enter into the settlement agreement.

33.    Since there was no duty to explain and the plaintiff’s solicitors had made no representation that the injunction was obtained by a bona fide mistake or otherwise, there is no basis for the 2nd defendant to say that a non-disclosure of the alleged Lefort fraud by the plaintiff amounted to the plaintiff’s fraudulent misrepresentation of a bona fide mistake.  In the premises, the defendants will not be able to establish the alleged fraudulent misrepresentation as sought to be pleaded in the proposed paragraph 13A.”

5.  In this application the 2nd defendant asked me to consider an earlier letter from the plaintiff’s solicitors to the defendants’ then solicitors and dated 11 May 1994 together with the letter dated 14 May 1994 also from the plaintiff’s solicitors to the defendants’ then solicitors.  Paragraph 2 of the first letter reads:

“2.     Our client’s Paris lawyer is now permitted (as charges have just formally been laid against the 1st defendant in Monaco) to inspect documents in the possession of the investigating magistrate which support the evidence in Mr Carolan’s affidavit of 29 April (namely to the effect that the loan in question was repaid).”

6.  The first to third paragraphs of the second letter read:

“We have now received instructions from our client following a report by its Paris lawyer on the banking records in the possession of the Investigating Magistrate. 

This report indicates (contrary to earlier information which had been provided by the Magistrate) that the loan in question has not been repaid out of the funds advanced to the 1st Defendant by our client. 

Accordingly, we will discharge the Mareva injunction against the 2nd Defendant.  …  We will confirm the position to the Court at the hearing on 17 May and we have asked Counsel not to attend in order to avoid unnecessary costs.”

7.  Mr Wong, leading counsel for the defendants, submitted that an objective reading of these two letters as quoted above gives a clear indication that the mistake that led to the application for injunction was an innocent mistake.  Counsel further submitted that if the plaintiff was aware of the mistake from the beginning (as the mistake was the result of the plaintiff’s bribery to the magistrate Mr Lefort), then it was wrong for the plaintiff’s solicitors to have said in the second letter that the report from the Paris lawyers indicated that the earlier information provided by the magistrate was wrong.  Counsel said that this gave the impression that the plaintiff was not aware of the falsity of the information until the report was given by the Paris lawyers, but the fact is that the plaintiff was aware of it right from the start because of the Lefort fraud.

8.  In other words, the 2nd defendant is saying that the plaintiff was pretending not to know the falsity and thereby induced the 2nd defendant to believe in its innocence, and hence the 2nd defendant, in the mistaken belief that the plaintiff had merely made an innocent mistake, entered into the settlement agreement with the plaintiff.

9.  I, however, do not think an objective reading of the two letters can give rise to an understanding that the plaintiff’s solicitors were saying that the mistake that led to the application for injunction was an innocent one.  The letters, whether read alone or together, do not amount to an explanation of how the mistake was made.  The second letter only said that the report by the plaintiff’s Paris lawyers indicated that the earlier information provided by the magistrate was wrong.  It did not seek to explain whether the information was erroneous because it was the result of negligence, or recklessness, or the deceit of someone. 

10.  I have already held in my last decision that the plaintiff’s solicitors had no duty to explain how or why the injunction was wrongly obtained, and Mr Wong accepts this conclusion.  I also do not think the plaintiff’s solicitors had tried to provide an explanation in the second letter.  I think the 2nd defendant is reading too much into this letter when it says that this letter, whether read alone or together with the earlier letter, somehow says that the mistake was an innocent one.

11.  I therefore do not think the proposed appeal of the 2nd defendant has a reasonable prospect of success.  I therefore dismiss the application. 

(Discussion re costs)

12.  So I make a costs order nisi that the defendants do pay the costs of this application to the plaintiff.  If there is no application for variation of the costs order nisi after 14 days, then an appointment should be made and I do direct an appointment to be made then for gross sum assessment of the costs of the appeal as well as this application.  That will reduce the overall costs.

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4089 OF 1994

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----------------------

D E C I S I O N

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1.  This is an appeal against a decision of Master Lung made on 11 March 2010.  Master Lung ordered the withdrawal of six interrogatories administered by the defendants on the plaintiff on 29 January 2010 and refused an oral application by the defendants to amend their Points of Claim made in the course of the hearing on 11 March 2010.  

The background

2.  The plaintiff is a car manufacturer.  The 1st defendant is a businessman.  The 2nd defendant is a company incorporated in Hong Kong and was, at the material times, 99% owned by the 1st defendant and controlled by him. 

3.  The plaintiff entered into an agreement with one Intercontinental Resources Société Anonyme Monégasque (“IRSAM”) on 9 July 1993.  The agreement was for IRSAM to facilitate a sale by the plaintiff of 10,000 passenger cars manufactured by the plaintiff for US$870 million.  IRSAM was represented by the 1st defendant in the negotiation of the contract.  It was to receive a commission of US$20 million if the proposed sale should be concluded.  This sum was paid by the plaintiff to IRSAM in advance as initial financing for the proposed sale.  However, IRSAM had to return this US$20 million with interest at 9.5% to the plaintiff if the proposed transaction was not effected by 31 October 1993 and the consideration of US$870 million not received by the plaintiff by 1 December 1993.  As security for the return of the US$20 million plus interest, IRSAM gave the plaintiff a bank guarantee of US$5 million and a promissory note for US$21,055,055.55.  The promissory note was guaranteed by the 1st defendant. 

4.  The proposed sale of cars did not materialise and the promissory note was not honoured by IRSAM or the 1st defendant.  The plaintiff then brought various proceedings against the 1st defendant for the recovery of the money due.  The plaintiff also brought this action with a view to secure the assets of the 1st defendant in Hong Kong. 

5.  It was alleged that an investigating magistrate of Monaco, Monsieur Jacques Lefort (“Lefort”) had made a finding that US$6 million of the US$20 million paid by the plaintiff to IRSAM had been used to settle a loan due from the 2nd defendant and another entity to a bank.  Based on this alleged payment, the 2nd defendant was also sued in this action. 

6.  The plaintiff also obtained a Mareva injunction against the 1st and 2nd defendants on 29 April 1994.  The injunction contained the usual undertaking by the plaintiff to pay damages to the defendants if this court should be of the opinion that the defendants have suffered by reason of the injunction which the plaintiff ought to pay. 

7.  However, the bank’s lawyer, by a letter dated 6 May 1994, confirmed that this loan of US$6 million had not been repaid as a whole by the 2nd defendant or the other entity.  The allegation relied on by the plaintiff in obtaining the Mareva injunction against the 2nd defendant was therefore untrue.  By a letter of 14 May 1994, the plaintiff’s solicitors told the defendants’ then solicitors:

“We have now received instructions from our client following a report by its Paris lawyer on the banking records in the possession of the Investigating Magistrate. 

This report indicates (contrary to earlier information which had been provided by the Magistrate) that the loan in question has not been repaid out of the funds advanced to the 1st Defendant by our client. 

Accordingly, we will discharge the Mareva injunction against the 2nd Defendant.  …  We will confirm the position to the Court at the hearing on 17 May and we have asked Counsel not to attend in order to avoid unnecessary costs. 

We will not seek to resist the order for costs in favour of your client provided you can confirm there will be no claim for damages pursuant to our client’s undertaking.  Given that ordinary business transactions have continued we would not have thought your client has suffered any loss and if you can confirm as requested, then an order could be made by consent on 17 May without the need of argument before the Court.”

8.  The defendants’ solicitors replied by a letter of 16 May 1994:

“We refer to your letter of 14 May and today’s telephone conversations between Mr Carolan and Mr Clarke. 

We confirm our agreement that our client will not be claiming damages pursuant to your client’s undertaking and that your client will pay our client’s costs and disbursements on an indemnity basis. 

Accordingly, you will draft a Consent Order dismissing your client’s injunction and there will be no need for either party to instruct Counsel.”

9.  An order by consent of the plaintiff and the 2nd defendant was then made on 17 May 1994 setting aside the Mareva injunction as against the 2nd defendant with cost to the 2nd defendant on an indemnity basis.

10.  On 23 July 2007, the 1st and 2nd defendants took out a summons pursuant to the undertaking of damages in the Mareva injunction for an enquiry of the damages suffered by them by reason of the Mareva injunction and for payment of such damages. 

11.  However, in the case of the 2nd defendant, it had made the settlement agreement with the plaintiff through their solicitors on 16 May 1994, as referred to above, that it would not claim damages from the plaintiff pursuant to the plaintiff’s undertaking in the Mareva injunction.  The 2nd defendant therefore seeks to set aside this agreement.

12.  The defendants filed their Points of Claim on 11 April 2008.  They pleaded that it was one Phillip Yip (“Yip”) who purportedly agreed on behalf of the 2nd defendant not to claim damages from the plaintiff pursuant to the undertaking.  At that time the 1st defendant, who was another director of the 2nd defendant, was imprisoned in Monaco.  The 1st defendant also said in an affidavit dated 7 January 2008 that it did not know about this settlement agreement until after the event. 

13.  The Points of Claim also pleaded that the Mareva injunction against the 2nd defendant was obtained by the plaintiff fraudulently, knowing the basis to be untrue, and with intent to damage the business of the 2nd defendant, and hence the commercial interest of the 1st defendant who owned 99% of the shares of the 2nd defendant.  It pleaded that the plaintiff had bribed Mr Lefort, the Monaco magistrate, with a passenger car, and Mr Lefort in return provided the false information that US$6 million of the US$20 million had been used to pay off a loan due from the 2nd defendant and another entity to a bank.  This false information was then used by the plaintiff to obtain the Mareva injunction against the 2nd defendant.  This alleged fraud is hereafter called “the Lefort fraud” for convenience.

14.  However, the Lefort fraud is not the basis for vitiating the settlement agreement as it did not cause the making of the settlement agreement.  The Points of Claim pleaded another alleged fraud.  It pleaded under the heading “Particulars of fraud vitiating the agreement not to claim damages” that the settlement agreement was made by Yip on behalf of the 2nd defendant as a result of a promise given by the plaintiff to Yip of future business dealings with the plaintiff.  For convenience, this alleged fraud is hereinafter called “the Yip fraud”.

15.  The plaintiff filed an affirmation of one Rene von Sampson-Himmelstjerna (“RVS”) on 14 April 2009 to oppose the defendants’ application for enquiry.  RVS said in paragraph 17:

“I also note that the Mareva against IRC was based on the findings of an investigating magistrate in Monaco, Monsieur Jacques Lefort, that US$6 million (out of the US$20 million advanced under the IRSAM agreement) was used by Banque Nagelmackers 1749 Luxembourg to settle a loan of the same amount granted to IRC and another party.  Such findings were later found to have been misunderstood by the Plaintiff’s solicitors in Paris, who conveyed the same to the Plaintiff’s solicitors in Hong Kong.  …”

The Interrogatories

16.  On 29 January 2010, which was some nine months after the filing of the affirmation of RVS by the plaintiff, the defendants served six interrogatories in relation to paragraph 17 of RVS’s affirmation requiring the plaintiff to answer them.  The interrogatories read:

“(a) State the exact wording that was used by Lefort in conveying his findings of the usage of US$6 million (out of the US$20 million advanced under the IRSAM agreement) to the Plaintiff’s solicitors in Paris;

(b) Identify the documents that were used or referred to by Lefort in conveying his findings of the usage of US$6 million (out of the US$20 million advanced under the IRSAM agreement) to the Plaintiff’s solicitors in Paris;

(c) State the understanding of the Plaintiff’s solicitors in Paris of such wording used by Lefort;

(d) State why and how such findings were misunderstood by the plaintiff’s solicitors in Paris;

(e) State the exact wording that was used by the Plaintiff’s solicitors in Paris when conveying such findings to the Plaintiff’s solicitors in Hong Kong; and

(f) State how the Plaintiff later found out about such misunderstanding.”

17.  The plaintiff refused to answer the interrogatories and issued a summons on 12 February 2010 for an order that the interrogatories be withdrawn.  The summons was heard by Master Lung on 11 March 2010.  In the course of the hearing, and possibly for the purpose of dealing with the plaintiff’s argument of irrelevance, the defendants made an oral application to amend the Points of Claim by adding a further paragraph under the heading “Particulars of fraud vitiating the agreement not to claim damages.” 

The proposed amendment

18.  This further paragraph, as now engrossed in a draft Amended Points of Claim annexed to the Notice of Appeal dated 23 March 2010, reads:

“13A.  By non-disclosure of the facts of the fraud in obtaining the ex-parte Mareva Injunction as pleaded in paragraphs 8-13 above while admitting that the basis of the Mareva Injunction as against the 2nd Defendant was wrong, the Plaintiff has fraudulently misrepresented to the 2nd Defendant that the Mareva Injunction as against the 2nd Defendant was obtained on the basis of a bona fide mistake on the part of the Plaintiff.  In reliance on the fraudulent misrepresentation, the 2nd Defendant entered into the said agreement.  In the premise, the said agreement was vitiated by fraud.”

19.  Master Lung ordered the interrogatories to be withdrawn and dismissed the oral application to amend. 

The legal principles

20.  The defendants submitted that interrogatories which are relevant are admissible.  The test of relevance is the same as the Peruvian Guano principle.  They also accept that only such interrogatories that are necessary either for disposing fairly of a cause or matter or for saving costs will be allowed, and oppressive interrogatories should not be allowed.  (See Hong Kong Civil Procedure 2010, Vol. 1 at 26/4/7 and 26/4/11 - 26/4/12.)

21.  On amendment, the defendants’ reminded me that it should be allowed at any stage of the proceedings for determining the real question and controversy between the parties or for correcting any defect or error in any proceedings.  However late the amendment may be sought, it should be allowed if it would not cause any prejudice to the other side that could not be compensated with cost.  The court will also order the amendment if it is of the opinion that it is necessary for disposing of a cause or matter or for saving costs (Order 20, rule 8 of the Rules of the High Court.) 

Analyses of the arguments

22.  The Points of Claim in its present form pleads only the Yip fraud as a ground for vitiating the settlement agreement.  It does not plead that the Lefort fraud has anything to do with the making of the settlement agreement though it was the basis for the Mareva injunction against the 2nd defendant. 

23.  However, the interrogatories are all directed to elicit the details of the alleged misunderstanding of the alleged findings of Mr Lefort.  They are obviously for the purpose of weakening the explanation by RVS, in paragraph 17 of his affirmation, on how the plaintiff had erred in obtaining the injunction against the 2nd defendant, and to strengthen the defendants’ case that there was the Lefort fraud which led to the injunction against the 2nd defendant.

24.  These interrogatories may be relevant to show who was telling the truth on the cause for the injunction against the 2nd defendant.  But with the present Points of Claim, they are irrelevant as to how or why the settlement agreement was made.  Hence the defendants want to amend the Points of Claim by adding a new paragraph 13A.  This paragraph says that the settlement agreement was made as a result of the plaintiff’s fraudulent misrepresentation in that the plaintiff had failed to disclose to the 2nd defendant the Lefort fraud and had thereby fraudulently misrepresented to the 2nd defendant that the injunction against the 2nd defendant was obtained by a bona fide mistake. 

25.  By this paragraph the defendants seek to make the non-disclosure of the Lefort fraud as a cause for making the settlement agreement.  They want to rely on the non-disclosure of the Lefort fraud and the Yip fraud cumulatively and alternatively for setting aside the settlement agreement. 

26.  If the new paragraph 13A can be incorporated into the Points of Claim by way of amendment, then the six interrogatories will become relevant to the issue of setting aside the settlement agreement. 

27.  Mr Shieh, leading counsel for the plaintiff, argued against the amendment.  He said the defendants could never succeed in establishing what is sought to be pleaded in paragraph 13A.  He submitted that, for the purpose of argument, even if there was the Lefort fraud, there is no evidence that Yip had agreed on behalf of the 2nd defendant to enter into the settlement agreement because he thought that the plaintiff had obtained the injunction by a bona fide mistake. 

28.  Yip has not filed any affidavit in this application and will not be called as a witness. 

29.  Mr Wong, leading counsel for the defendants, however argued that once the fraudulent misrepresentation is proved, it is presumed as a matter of law that it did induce the representee to enter into the transaction in question.  I am referred to Pan Atlantic Insurance Co. Ltd. and Anor v Pine Top Insurance Co. Ltd. [1995] 1 AC 501 at 542A and 551D, and Barton & Ors v County NatWest Limited [1999] LL R (Part 8) 408 at paragraphs 54 and 58.

30.  In Pan Atlantic Insurance Co. Ltd., the insured had the obligation to disclose to the defendant insurers a material circumstance.  They made no disclosure and the insurers were allowed to avoid the contract. 

31.  In Barton, there was evidence that a bank manager had made a misrepresentation to some prospective guarantors knowing the same to be false and intending the same to be relied on.  There was a presumption in law that the guarantors were indeed induced by the misrepresentation.  The bank failed to rebut the presumption.  The guarantors therefore succeeded in their claims of deceit based upon the fraudulent misrepresentation of the bank manager.

32.  The facts in the present case are different.  The plaintiff’s solicitors, in their letter dated 14 May 1994 to the defendants’ solicitors, only said that the report by the plaintiff’s Paris lawyers on the banking records in the possession of the magistrate indicated that the loan of US$6 million had not been repaid out of the US$20 million, and that was contrary to the earlier information provided by the magistrate.  The letter did not say how or why the wrong information was given earlier on by the magistrate.  There is also no evidence that the then solicitors of the defendants had asked how or why the magistrate had erred.  I do not think the plaintiff was then under any duty to explain to the 2nd defendant how or why the Mareva injunction was wrongly obtained and its solicitors did not do so.  There is also nothing to suggest that it was a material circumstance for Yip to consider whether the 2nd defendant should enter into the settlement agreement.

33.  Since there was no duty to explain and the plaintiff’s solicitors had made no representation that the injunction was obtained by a bona fide mistake or otherwise, there is no basis for the 2nd defendant to say that a non-disclosure of the alleged Lefort fraud by the plaintiff amounted to the plaintiff’s fraudulent misrepresentation of a bona fide mistake.  In the premises, the defendants will not be able to establish the alleged fraudulent misrepresentation as sought to be pleaded in the proposed paragraph 13A. 

Decision

34.  I therefore agree with Master Lung’s decision to reject the application to amend.  Without the amendment, the six interrogatories are also irrelevant to the issue of setting aside the settlement agreement.  I therefore also uphold Master Lung’s order that these interrogatories should be withdrawn.  The appeal is therefore dismissed.

Discretion

35.  I would go further to consider whether I would have exercised my discretion to allow the interrogatories had I allowed the amendment.  The plaintiff submitted that I should not allow the interrogatories as they were administered late and were therefore oppressive. 

36.  I would, however, agree with the defendants that despite the interrogatories were served some nine months after the filing of the affirmation of RVS, there were still a few months before the hearing for considering the issue of setting aside the settlement agreement.  The compass of the interrogatories is also a narrow one.  They do not require extensive enquiries of a large number of people or the consideration of a large number of documents.  Some of the answers should also be contained in some documents too.  Hence, RVS was able to depose to what he did in paragraph 17 of his affirmation. 

37.  Had I allowed the amendment I would have exercised my discretion in favour of the interrogatories as they may go to weaken the veracity of paragraph 17 of the affirmation of RVS and strengthen the defendants’ case that there was the Lefort fraud.  However, I have already decided against the amendment, and the defendants shall pursue their claim for setting aside the settlement agreement by relying on the Yip fraud only.

Costs

38.  I also make a cost order nisi that the defendants shall pay the plaintiff the costs of this appeal.  If there shall be no application to vary the cost order nisi within the next 14 days, the solicitors on both sides shall arrange with the listing officer for a 9.30 am hearing for me to conduct a gross sum assessment of the amount of costs payable.

Please refer to HCMP960/2010 for the relevant appeal(s) to the Court of Appeal.

1994 No. A4089

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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H E A D N O T E

(I) The words "a person duly served" in Ord. 11 r. 1(1)(c) of the R.S.C. mean "a person who has been duly served". Accordingly, a defendant has to have been duly served with the writ before an application under Ord. 11 r. 1(1)(c) for leave to serve another defendant out of the jurisdiction is made.

(ii) The words "any judgment or arbitral award" in Ord. 11 r. 1(1)(m) mean "any judgment or arbitral award which has been obtained." Accordingly, the judgment or arbitral award has to have been obtained before an application under Ord. 11 r. 1(1)(m) for leave to serve a defendant out of the jurisdiction is made. In addition, the judgment must have finally and conclusively determined the rights of the parties to it.

(iii) Leave to serve a writ out of the jurisdiction will be set aside if the claim in the writ is discovered to be unsustainable soon after leave was granted.

(iv) If the conditions necessary for leave to serve a writ out of the jurisdiction had not existed when leave was granted, the grant of leave was not merely a failure to comply with the requirements of the R.S.C. Accordingly, Ord. 2 r. 1(2) could not prevent the service of the writ being set aside, nor could the unjustified grant of leave be waived under Ord. 2 r. 2(1).

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J U D G M E N T

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INTRODUCTION

1. The Plaintiff, Mercedes-Benz AG ("Mercedes"), is the well- known manufacturer of motor vehicles. On 30th April 1994, it commenced proceedings in Hong Kong against the Defendants. However, on 22nd August 1994, it discontinued the proceedings against the 2nd Defendant, Intercontinental Resources Company Ltd. ("IRCL"). The remaining Defendant, Mr. Leiduck, now disputes the jurisdiction of the court in Hong Kong to entertain the claim against him. In order to understand how the dispute as to jurisdiction arises, it is necessary for me to outline the nature of Mercedes' case against the Defendants and the history of these proceedings. Save where otherwise appears, all dates in this judgment refer to 1994.

MERCEDES' CASE AGAINST THE DEFENDANTS

2.Mr. Leiduck. Mercedes' case against Mr. Leiduck rests on two agreements, relating to motor cars and lorries respectively, with a company incorporated in Monaco and known as Intercontinental Resources S.A.M. ("IRSAM"). IRSAM was solely owned by Mr. Leiduck. It obtained US$20m. from Mercedes on the basis of an agreement with Mercedes that the sum would be used as an advance to finance the promotion of the sale of 10,000 motor cars by Mercedes to a customer in Russia for a price of US$870m. The agreement provided that if the sale did not go ahead by 31st December 1993, the sum of US$20m. would be returned to Mercedes by 31st January 1994 with interest. As security for the advance of the US$20m., IRSAM provided Mercedes with a promissory note for US$20m. plus interest. The promissory note was personally guaranteed by Mr. Leiduck by way of an "aval", which takes effect in English Law as if it were an indorsement. In the event, the sale did not materialise, and Mercedes allege that the US$20m. was misused by Mr. Leiduck, that it was not returned to Mercedes, and that the promissory note was dishonoured. Mercedes claim against Mr. Leiduck as the guarantor of the promissory note, though they give credit to Mr. Leiduck for US$5m. paid to Mercedes under a bank guarantee opened in Mercedes' favour at IRSAM's request.

3. Under the second agreement, IRSAM obtained US$1.5m. from Mercedes in connection with an agreement for the sale of 400 lorries by Mercedes to the Commonwealth of Independent States. IRSAM provided Mercedes with a promissory note for US$1.5m. plus interest. Mr. Leiduck guaranteed that promissory note by way of an "aval" as well. Mercedes allege that this promissory note was also dishonoured, and Mercedes again claim against Mr. Leiduck as the guarantor of the promissory note.

4. To complete the picture, Mr. Leiduck, who is a German national but with a Hong Kong identity card, is currently in jail in Monaco where he is being held in connection with these events. Prior to issuing proceedings in Hong Kong, Mercedes had commenced proceedings in Monaco for relief similar to that sought in Hong Kong. In those proceedings, Mercedes had obtained orders for attachment in Monaco of assets belonging to Mr. Leiduck and a Liechtenstein company which was wholly owned by him, Vernal Ets. ("Vernal").

5.IRCL. IRCL is a company incorporated in Hong Kong, and Mr. Leiduck is the owner of 99,998 of its 100,000 issued shares. The claim which Mercedes have discontinued against IRCL rested on yet another agreement. That was an agreement under which a bank in Luxembourg had lent US$6m. to IRCL and Vernal. Mercedes were at one time alleging that part of the US$20m. obtained by IRSAM in connection with the motor car agreement had been used by IRCL and Vernal to repay their loan to the bank. Mercedes claimed that the US$6m. paid to the bank on IRCL's behalf rendered IRCL a constructive trustee of the money.

THE HISTORY OF THE PROCEEDINGS

6. On 29th April (the day before the writ was issued), Mercedes applied ex parte for interlocutory relief against both Defendants. Mercedes' solicitors were entirely candid as to the reasons for seeking relief in Hong Kong. Mercedes did not want Mr. Leiduck to dispose of his shares in IRCL so as to defeat any judgment which may be obtained against him in Monaco. Accordingly, their French lawyer had applied to the court in Monaco for a saisie conservatoire over the shares. However, the court in Monaco had declined to make such an order. That had been because the law of Monaco only permitted shares to be seized in the jurisdiction of the place where the company is registered. Since IRCL is incorporated in Hong Kong, it was in Hong Kong that Mercedes had to seek interlocutory relief relating to Mr. Leiduck's shares in IRCL.

7. However, the orders which Mercedes eventually sought in Hong Kong were not limited to orders freezing those shares and getting leave for service of the writ out of the jurisdiction. They included worldwide Mareva injunctions against both Defendants, and an order for the disclosure by both Defendants of their assets worldwide. Deputy Judge Wilson granted the relief sought, and the order he made, as well as the writ, were served on Mr. Leiduck in Monaco on 5th May. At a subsequent hearing on 9th May, the worldwide Mareva injunctions were continued, with variations, until further order, and Mr. Leiduck's time for disclosing his assets was extended. However, to the extent that Deputy Judge Wilson's order of 29th April applied to IRCL, it was set aside by consent on 17th May, and costs were awarded to IRCL on an indemnity basis.

8. Mr. Leiduck did not give notice of intention to defend. Accordingly, on 24th June, Mercedes entered judgment in default against Mr. Leiduck for about US$17.6m., being the sums due under the two promissory notes, less the US$5m. paid to Mercedes under the bank guarantee. In due course, a charging order was made over Mr. Leiduck's shares in IRCL.

9. Some weeks later, Mr. Leiduck decided to dispute the jurisdiction of the court to entertain Mercedes' claim against him. To do that, Ord. 12 r. 8(1) of the Rules of the Supreme Court required Mr. Leiduck to give notice of intention to defend the proceedings. Since judgment had already been obtained against him, Ord. 12 r. 6(1) required him to obtain the leave of the court before giving notice of intention to defend. Accordingly, a summons was filed under Ord. 12 r. 6(1) on 2nd August, the very day on which the charging order was made absolute.

10. On 8th September, Leong J. granted Mr. Leiduck leave to give notice of intention to defend. In due course, Mr. Leiduck gave notice of intention to defend, and by a summons filed on 17th September, Mr. Leiduck disputed the jurisdiction of the court to entertain Mercedes' claim against him. That is the summons now before me, and the orders which Mr. Leiduck seeks are:

(a) a declaration that the writ was not duly served on him, or (if it was) an order setting aside the service of the writ on him,

(b) an order that the order of 29th April giving leave for serving the writ on him out of the jurisdiction be set aside,

(c) a declaration that in the circumstances the court has no jurisdiction over him in respect of the subject matter of Mercedes' claim against him, and

(d) orders discharging the Mareva injunction and the order for disclosure of 29th April, the default judgment of 24th June and the charging order absolute of 2nd August.

Mr. Michael Thomas Q.C. for Mercedes did not seek to justify the Mareva injunction, to the extent that it related to assets of Mr. Leiduck other than his shares in IRCL, or the order for disclosure.

THE RELEVANCE OF THE DEFAULT JUDGMENT

11. Mr. Thomas argues that the primary focus of this application should be on the default judgment. Leave to serve the writ out of the jurisdiction had been served. In due course, the writ was duly served on Mr. Leiduck. He did not file notice of intention to defend. Leaving aside a minor problem with the affidavit of service of the writ, which Ord. 13 r. 7(1)(b) required to be filed before judgment in default could be entered, the judgment was a regular one. Ord. 13 r. 9 confers on the court a wide discretion to set aside a default judgment. Accordingly, even if the conditions necessary for leave to serve the writ out of the jurisdiction had not, in fact, existed when leave was given, the fact that a regular judgment had been entered meant that any error which there may have been in the grant of leave was only a minor factor to be considered in the overall exercise of the court's discretion. That was because the issue of service had merged with the judgment - provided, of course, that any irregularity in the affidavit of service of the writ could be treated by Ord. 2 r. 1(1) as not nullifying the judgment.

12. I accept that submission to this extent. There must come a time when a defendant can no longer justify the setting aside of a judgment on the basis of some error which there may have been in the grant of leave to serve the writ out of the jurisdiction. The desirability of the finality of litigation obviously prevents a judgment being challenged many years after the judgment has been entered simply on the footing of some defect in the service of the originating process. However, the question whether the default judgment should prevent Mr. Leiduck disputing the court's jurisdiction has, on the face of it, already been decided by Leong J. Ord. 12 r. 6(1) required Leong J. to determine whether the default judgment should prevent Mr. Leiduck from defending the action. Since Mr. Leiduck has at all times been concerned to defend the action only on the basis of the court's lack of jurisdiction, the issue which Leong J. had to decide was whether the default judgment should prevent Mr. Leiduck from disputing the court's jurisdiction. I have been told that Leong J. gave no reasons for granting Mr. Leiduck leave to give notice of intention to defend. However, the fact that he gave Mr. Leiduck leave almost certainly meant that he took the view that the default judgment should not prevent Mr. Leiduck from disputing the court's jurisdiction under Ord. 12 r. 8(1).

13. However, because I do not have the advantage of a reasoned judgment from Leong J., I suppose that it is just possible for Leong J. to have granted leave simply on the basis that Mr. Leiduck had arguable grounds for disputing the court's jurisdiction. I have, therefore, considered whether the default judgment and any subsequent delay should now prevent Mr. Leiduck from disputing the court's jurisdiction. I have decided that it should not. I do not overlook the absence of any affidavit explaining why he did not give notice of intention to defend, why he allowed the default judgment to be entered and why he did not instruct his current solicitors to act for him until 28th July. But the delay between the time when notice of intention to defend should have been given (namely 31st May, being 26 days after service of the writ on 5th May) and the date when leave to give notice of intention to defend was sought (namely 2nd August) was only 9 weeks, and during the whole of that time Mr. Leiduck was in custody in Monaco.

14. I am prepared to assume for present purposes that the default judgment was a regular one, in that any irregularity in the affidavit of service could be treated by Ord. 2 r. 1(1) as not nullifying the judgment. I take the point that there is a well-nigh inflexible rule that a regular default judgment will not be set aside unless there is an affidavit of merits showing that the defendant has a defence which is not merely arguable but has a real prospect of success: Evans v. Bartlam [1937] A.C. 473 as explained in The Saudi Eagle [1986] 2 Lloyd's Rep. 221 at p. 223. Mr. Leiduck has not filed an affidavit of merits. However, if a defendant wishes to defend an action, not on the merits, but on the basis of the court's lack of jurisdiction, it would be absurd to require the usual affidavit of merits. Instead, the court would merely have to be satisfied that the challenge to the court's jurisdiction had a real prospect of success. That question will inevitably be decided in the rest of this judgment.

THE NATURE OF THE CHALLENGE TO THE COURT'S JURISDICTION

15. The challenge to the court's jurisdiction is based on the contention that Ord. 11 did not, in the circumstances of the case, permit Deputy Judge Wilson to give Mercedes leave to serve the writ on Mr. Leiduck out of the jurisdiction. Two points are taken:

(1) Mercedes' claim against Mr. Leiduck did not fall within any of the four classes of cases set out in Ord. 11 r. 1(1) upon which Mercedes relied before Deputy Judge Wilson, namely the classes set out in rr. 1(1)(b), 1(1)(c), 1(1)(m) and 1(1)(p).

(2) Mercedes' claim was not a proper one for service out of the jurisdiction within the meaning of Ord. 11 r. 4(2), because Mercedes had not shown that Hong Kong was the appropriate forum for the proceedings.

Mr. Thomas agreed that in order to justify the grant of leave, Mercedes' claim had to have come within one of the four classes of cases set out in Ord. 11 r. 1, and Mercedes had to have shown that Hong Kong was the appropriate forum for the proceedings.

(i) Ord. 11 r. 1(1)(b)

16. Service of a writ out of the jurisdiction is permissible with the leave of the court if, in the action begun by the writ, "an injunction is sought ordering the defendant to do or refrain from doing anything within the jurisdiction (whether or not damages are also claimed in respect of a failure to do or the doing of that thing)". There was no claim in the writ for an injunction against Mr. Leiduck. The only injunctions which Mercedes have sought against Mr. Leiduck are the worldwide Mareva injunction and the order for disclosure of his assets. At first blush, these are not injunctions of the kind to which r. 1(1)(b) relates. That is because in The Siskina [1979] A.C. 210, the House of Lords held that, to come within the rule which was the U.K. equivalent of r. 1(1)(b) at the time, the injunction sought in the action had to be part of the substantive relief to which the plaintiff's cause of action entitled it, and not merely an interlocutory injunction ancillary to that relief. To paraphrase Dicey and Morris, "The Conflict of Laws", 12th ed., p. 195 so as to put the principle into its Hong Kong context :

"The effect of this decision was that a plaintiff, who had a claim against a defendant who was not subject to the jurisdiction of the [courts of Hong Kong] (because the defendant was not present In [Hong Kong] and the underlying cause of action had no connection with [Hong Kong] and did not come within any of the heads of Order 11), could not restrain the defendant from removing his [Hong Kong] assets outside the jurisdiction. This was so even where it was only in [Hong Kong] that there were assets which might be available to satisfy a judgment granted in the country to whose jurisdiction the defendant was amenable, and where the consequence would be that the plaintiff would be left without any effective remedy."

17. However, in Channel Tunnel Group Ltd. v. Balfour Beatty Construction Ltd. [1993] A.C. 334, it was argued that The Siskina did not lie easily with the U.K. equivalent of section 21L of the Supreme Court Ordinance (Cap. 4) which provides:

"The High Court may by order (whether interlocutory or final) grant an injunction . . . . in all cases in which it appears to the High Court to be just or convenient to do so."

In the words of Lord Browne-Wilkinson at p. 341B-D, the submission was

"that the decision . . . in [The Siskina] . . . would preclude the grant of any injunction under [the equivalent of section 21L] . . . , even if such injunction were otherwise appropriate. If correct, that submission would have the effect of severely curtailing the powers of the English courts to act in aid . . . of foreign courts. Given the international character of much contemporary litigation and the need to promote mutual assistance between the courts of the various jurisdictions which such litigation straddles, it would be a serious matter if the English courts were unable to grant interlocutory relief in cases where the substantial trial and the ultimate decision of the case might ultimately take place in a court outside England."

Indeed, after reviewing the speech of Lord Diplock in The Siskina, Lord Browne-Wilkinson came to the view that The Siskina did not prevent the court from granting interlocutory relief based on a cause of action recognised by English law where the interlocutory relief was ancillary to a final order sought in a foreign court. That was the argument advanced by counsel then appearing for Mercedes to Deputy Judge Wilson.

18. However, what Deputy Judge Wilson was not told was that if such interlocutory relief was to be granted, The Siskina required the defendant to have been duly served with the proceedings, either personally if the defendant was within the jurisdiction, or pursuant to leave granted under Ord. 11 if he was out of the jurisdiction. The one class of case set out in Ord. 11 r. 1(1) which The Siskina prevented a plaintiff from relying upon for this purpose was the equivalent of r. 1(1)(b). That Lord Browne-Wilkinson was exempting the equivalent of r. 1(1)(b) from the classes of cases set out in Ord. 11 r. 1(1) which The Siskina prevented a plaintiff from relying upon for this purpose is plain from his acceptance that The Siskina imposed at least one limit on the general power conferred by the equivalent of section 21L, namely "that the court must have personal jurisdiction over the defendants in the sense that they can be duly served either personally or under Ord. 11 (other than [the equivalent of r. 1(1)(b)])" (my emphasis): p. 342A. Both Lord Keith of Kinkel and Lord Goff of Chieveley agreed with the views expressed by Lord Browne-Wilkinson.

19. To be fair, Mr. Thomas did not seek to argue otherwise. Neither he nor junior counsel, Mr. Anderson Chow, appeared before Deputy Judge Wilson, and no criticism can be attached to them for failing to draw this vital point to Deputy Judge Wilson's attention. Mr. Thomas is merely content to remind me that doubt has been expressed about the correctness of TheSiskina. However, since there is no material distinction between the relevant statutory provisions in the U.K. (section 37(1) of the Supreme Court Act 1981 and what was then Ord. 11 r. 1(1)(i)) and those in Hong Kong (section 21L of the Supreme Court Ordinance and Ord. 11 r. 1(1)(b)), the courts in Hong Kong are bound by The Siskina because in these circumstances the decisions of the House of Lords are binding on the courts of Hong Kong: De Lasala v. De Lasala [1979] H.K.L.R. 214. Having said that, though, Mr. Thomas reserved the right to argue elsewhere that The Siskina was wrongly decided.

20. For these reasons, I conclude that service of the writ on Mr. Leiduck out of the jurisdiction was not permissible under Ord. 11 r. 1(1)(b).

(ii) Ord. 11 r. 1(1)(c)

21. Service of the writ out of the jurisdiction is permissible with the leave of the court if, in the action begun by the writ, "the claim is brought against a person duly served within or out of the jurisdiction and a person out of the jurisdiction is a necessary or proper party thereto." Mercedes' case is that this claim fell within r. 1(1)(c) because IRCL was duly served within the jurisdiction, and Mr. Leiduck was a necessary or proper party to the claim against IRCL.

22. Mercedes face two formidable obstacles to success on this argument. The first is this. Mercedes did not want to serve the writ on IRCL before obtaining (a) leave to serve the writ on Mr. Leiduck out of the jurisdiction and (b) the Mareva injunction against him. After all, there was some evidence that Mr. Leiduck had already agreed to transfer his shares in IRCL to a fellow director of IRCL, who was its Chief Executive, though the document putting that agreement into effect had not been executed. If IRCL had to be served with the writ in advance of the application for leave to serve Mr. Leiduck out of the jurisdiction, and if the proposed transferee got wind of that application, the shares might have been transferred to the proposed transferee before the Mareva injunction against Mr. Leiduck had been obtained. Since Deputy Judge Wilson was given an express undertaking that service of the writ on Mr. Leiduck would not be effected until IRCL had been served, Mr. Thomas argues that Deputy Judge Wilson must be taken to have made a conditional order for leave to serve the writ on Mr. Leiduck out of the jurisdiction, subject to prior service of the writ on IRCL.

23. I accept that submission so far as it goes. The difficulty which the submission does not begin to address, however, is whether Deputy Judge Wilson had the power to make the conditional order which he did. I have no doubt that he had no such power. IRCL had to have been "duly served" within the jurisdiction before the application for leave to serve Mr. Leiduck out of the jurisdiction was made. As Dicey and Morris, op. cit., point out at p. 325, that follows from the wording of Ord. 11 r. 4(1)(d), which assumes that the writ "has been served" on the defendant within the jurisdiction by the time the application under r. 1(1)(c) is made. It does not appear from Mercedes' solicitors' attendance note of the hearing on 29th April that Deputy Judge Wilson's attention was drawn to r. 4(1)(d). Since the writ had not been served on IRCL before the application for leave to serve Mr. Leiduck out of the jurisdiction was made, service of the writ on Mr. Leiduck out of the jurisdiction was not permissible under Ord. 11 r. 1(1)(c).

24. However, the matter does not end there. Para. 11/4/10 of The Supreme Court Practice 1995, Vol. 1, p. 100, includes the following passage:

". . . in accordance with general principles of practice, the order [for leave to serve the writ out of the jurisdiction], having been obtained by the plaintiff ex parte, can be set aside on application by the Defendant after service .... The application is decided on the affidavit evidence of the parties, and the issue is whether, on the whole of the evidence, the plaintiff shows a good arguable case within one of the sub- paragraphs of r. 1(1) .... If the allegations on which the order was made turn out to be unfounded it will be set aside."

In this case, the allegations on which the order was made did turn out to be unfounded. IRCL had, within 10 days of the order, filed evidence establishing that the US$6m. lent to IRCL and Vernal had not been repaid to the bank at all. That, no doubt, was why Mercedes discontinued the claim against IRCL.

25. Mr. Thomas' bold contention in response to that is that Mercedes' claim against IRCL was honestly and reasonably believed, at the time of the application to Deputy Judge Wilson, to be a valid and plausible one. The subsequent discovery that the claim could not be proceeded with could not retrospectively invalidate the leave to serve the writ out of the jurisdiction to the extent that leave was granted pursuant to r. 1(1)(c). He relied on what Hoffman J. (as he then was) said in ISC TechnologiesLtd. v. Guerin [1992] 2 Lloyd's Rep. 430 at p. 434:

"The question [on an application under Ord. 12 r. 8(1)(c) to discharge an order giving leave to serve a writ out of the jurisdiction] is . . . whether that order was rightly made at the time it was made. Of course the Court can receive evidence which was not before the [Court when the order was made] and subsequent events may throw light upon what should have been relevant considerations at the time. But I do not think that leave which was rightly given should be discharged simply because circumstances have changed. That would mean that different answers could be given depending upon how long it took before the application came on to be heard."

26. In my judgment, these observations do not assist Mercedes at all. This is not a case in which Mr. Leiduck is seeking to have the leave set aside because circumstances have changed since leave was granted. What caused Mercedes to discontinue their claim against IRCL - namely, the fact the US$6m. lent to IRCL and Vernal had not been repaid to the bank - was just as much the case at the date of discontinuance as it had been on 29th April. Adopting the language of Hoffman J., subsequent events (namely, the discovery that the loan had not been repaid) threw a wholly different light on one of the issues which Deputy Judge Wilson had had to consider - namely, whether there was, to use the words of Ord. 11 r. 4(1)(d), "a real issue"

between Mercedes and IRCL which Mercedes could "reasonably ask the Court to try". For this reason also, service of the writ on Mr. Leiduck out of the jurisdiction had not been permissible under Ord. 11 r. 1(1)(c).

(iii) Ord. 11 r. 1(1)(m)

27. Service of the writ out of the jurisdiction is permissible with the leave of the court if, in the action begun by the writ, "the claim is brought to enforce any judgment or arbitral award". There has, as yet, been no judgment or arbitral award against Mr. Leiduck in Monaco, which is the jurisdiction in which Mercedes intend to obtain final judgment against him. However, Mr. Thomas contends that that should not debar Mercedes from relying on r. 1(1)(m), because the action in Hong Kong was brought with a view to enforcing the judgment in Monaco once it had been obtained.

28. Mr. Thomas's argument went like this. Rule 1(1)(m) should be construed to give effect to the beneficial change in the law intended to plug the loophole referred to in para. 11/1/25 of The Supreme Court Practice 1995, Vol. 1, p. 92, namely, to permit service of process upon a defendant outside Hong Kong who has assets within Hong Kong required to satisfy an overseas judgment but who is not otherwise amenable to the jurisdiction of the courts of Hong Kong. If r. 1(1)(m) is not construed in the way contended for by Mr. Thomas, Mercedes suffer a serious injustice because neither the court in Monaco nor the courts in Hong Kong will be able to restrain the dissipation of Mr. Leiduck's assets in Hong Kong. Mr. Thomas says that r. 1(1)(m) should therefore be construed in a way to avoid that injustice, and that can be done by construing the words "judgment or arbitral award" as applying to a judgment or arbitral award which the plaintiff hopes to obtain in the proceedings which it has commenced overseas. The fact that the claim may be a shadowy one, or that this construction of r. 1(1)(m) affords an opportunity for an unscrupulous plaintiff to raise a specious claim in a foreign court simply to found jurisdiction to serve a defendant in Hong Kong, presents no problem, says Mr. Thomas: in such cases, leave to serve out of the jurisdiction will be refused, under Ord. 11 r. 4(2), on the ground that the case is not a proper one for service out of the jurisdiction.

29. The beguiling nature of this argument almost led me into the heresy of accepting it. The argument wholly ignores the vast body of jurisprudence which prevents a foreign judgment being recognised or enforced in Hong Kong, unless it is a judgment finally and conclusively determining the rights of the parties to it. The construction of r. 1(1)(m) which Mr. Thomas urges on me would have the effect of providing for the premature recognition and enforcement in Hong Kong of overseas judgments. It does not appear from Mercedes' solicitors' attendance note of the hearing on 29th April that Deputy Judge Wilson's attention was drawn to this fact.

30. Mr. Thomas had a second string in his bow. A number of orders have been made in Monaco, Belgium and Switzerland. Mr. Thomas accepted that, save for one of those orders, none of them can be enforced in Hong Kong because they relate solely to assets of Mr. Leiduck and companies in which he has an interest outside Hong Kong. The one order on which Mr. Thomas relied, however, was an order for payment made by the court in Switzerland. Mr. Thomas himself conceded, in his helpful skeleton argument, that this order was made on an interlocutory application, and I therefore doubt (notwithstanding the obiter dictum of Lord Donaldson MR in Mansour v Mansour[1989] 1 F L R 418 at p.421 A) whether this was an order to which r. 1(1)(m) applies. There has been no evidence before me as to whether in Swiss law this order for payment is final and binding on Mr. Leiduck. But in any event the order for payment was not made until 26th May. Since it was not capable of enforcement in Hong Kong on 29th April because it did not then exist, it could not have justified the invocation of r. 1(1)(m) on that date.

31. For these reasons, service of the writ on Mr. Leiduck out of the jurisdiction was not permissible under r. 1(1)(m).

(iv) Ord. 11 r. 1(1)(p)

32. Service of the writ out of the jurisdiction is permissible with the leave of the court if, in the action begun by writ, "the claim is brought for money had and received or for an account or other relief against the defendant as constructive trustee, and the defendant's alleged liability arises out of acts committed, whether by him or otherwise, within the jurisdiction." The writ which was served on Mr. Leiduck included a claim for money had and received. That claim has since been abandoned, but since it was abandoned only because Mercedes entered judgment in default against Mr. Leiduck for the sums due under the promissory notes, the subsequent abandonment of the claim does not prevent Mercedes now seeking to justify obtaining leave under r. 1(1)(p) by reference to this claim.

33. The acts of Mr. Leiduck in Hong Kong which are alleged to have given rise to this liability are his instigation or approval in Hong Kong of, or his connivance in Hong Kong in, the use of the US$20m. to repay the loan of US$6m. There was no direct evidence before Deputy Judge Wilson that that was what he had done. Mercedes invited Deputy Judge Wilson to infer that merely from the fact that Mr. Leiduck was a director and the controller of IRCL, and from the fact that he held a Hong Kong identity card, which suggested that he was a regular visitor to Hong Kong. In my view, none of these facts, even if taken cumulatively, justify the inference that the instigation, approval or connivance occurred in Hong Kong. In any event, of course, we now know that the US$20m. was not used to repay the loan. Mr. Leiduck could not therefore have done what he was alleged to have done. It follows that, for the reasons I have given when dealing with r. 1(1)(c), service of the writ on Mr. Leiduck out of the jurisdiction had not been-permissible under r. 1(1)(p).

(v) Ord. 11 r. 4(2)

34. Ord. 11 r. 4(2) provides that leave to serve the writ out of the jurisdiction will not be granted "unless it shall be made sufficiently clear to the Court that the case is a proper one for service out of the jurisdiction under [Ord. 11]." The effect of The Spiliada [1987] A.C. 460 is that a plaintiff has to show that the court in Hong Kong is the forum with which the action has the most real and substantial connection. I accept that Mr. Leiduck has some connection with Hong Kong, but that does not begin to mean that Hong Kong is the forum with which the action has the most real and substantial connection. The summary I have given of Mercedes' case against Mr. Leiduck shows that the action has no connection with Hong Kong at all.

35. However, Mr. Thomas developed an ingenious argument, which he told me was Mr. Chow's brain-child, if I were to find that leave to serve the writ out of the jurisdiction could have been justified under r. 1(1)(m). The argument went like this. In considering where the action had the most real and substantial connection, the court should have regard to the grounds upon which leave is sought to serve the writ out of the jurisdiction, and to the purpose for which the proceedings are brought in Hong Kong. The purpose for which the proceedings are being brought against Mr. Leiduck in Hong Kong is to ensure that Mr. Leiduck's assets in Hong Kong, i.e. his shares in IRCL, will be available to satisfy the judgment overseas when it is obtained. Accordingly, to the extent that leave to serve the writ out of the jurisdiction was sought under r. 1(1)(m), Hong Kong was the most appropriate forum in which to enforce the judgment which Mercedes hoped to obtain shortly in Monaco.

36. This argument was not part of Mr. Thomas' initial submissions. It was not in his skeleton submissions at all. He developed it only after he had completed his submissions, and when I asked him if he wanted to address me on the issue of the appropriate forum. The argument was only properly formulated in the supplemental skeleton submissions handed to me by Mr. Chow the following morning. Mr. William Stone for Mr. Leiduck did not, I think, have sufficient time to analyse the argument himself, and the stance which he adopted was that he did not wish to make any submissions on the issue.

37. That is not a satisfactory basis upon which I should decide an important and far-reaching argument such as this. I therefore decline to do so, and I leave the question to be decided on another occasion. After all, my decision on the issue cannot affect the outcome of this application, in view of my finding that service of the writ on Mr. Leiduck out of the jurisdiction was not permissible under r. 1(1)(m).

NON-COMPLIANCE WITH THE RULES

38. A failure to comply with the requirements of the Rules of the Supreme Court does not nullify the proceedings or any step in the proceedings. Non-compliance is merely an irregularity (Ord. 2 r. 1(1)), and the court is vested with a wide discretion to determine what the effect of any irregularity should be (Ord. 2 r. 1(2)). Accordingly, Mr. Thomas submits that even if service of the writ on Mr. Leiduck out of the jurisdiction was not permissible under any of the grounds upon which Mercedes relied before Deputy Judge Wilson, the grant of leave to serve the writ on him out of the jurisdiction was merely an irregularity, and that irregularity should not result in the setting aside of the leave granted by Deputy Judge Wilson.

39. I do not think that the grant of leave to serve the writ out of the jurisdiction was merely an irregularity. In Leal v. Dunlop Bio-ProcessesInternational Ltd. [1984] 1 WLR 874, the plaintiff had, amongst other things, served the writ out of the jurisdiction without obtaining the leave of the court pursuant to Ord. 11 r. 1. The Court of Appeal unanimously held that the failure to obtain the leave of the court under Ord. 11 r. I was merely a failure to comply with the requirements of the Rules. In my view, however, there is the world of a difference between a failure to apply for leave (which can quite properly be described as a failure to comply with the requirements of the Rules) and a plaintiff's failure to bring itself within the qualifying conditions required by the Rules for invoking the court's power to permit the service of originating process out of the jurisdiction. The flaw in the argument is that a plaintiff cannot claim to be in a better position than it would have been in if all the relevant facts and legal argument had been before the court when leave was obtained.

40. However, I have also considered whether, on the assumption that the grant of leave out of the jurisdiction was merely an irregularity, that irregularity should result in the setting aide of the leave. On this issue, Mr. Stone is surely correct when he asserts that the irregularity in the grant of leave should result in the setting aside of the leave. To paraphrase what Slade L.J. said in Leal at p. 885 C-D to put it into the context of this case:

"When seeking the indulgence of the court under Ord. 2 r. 1 . . . a plaintiff cannot, in my opinion, expect the court to exercise its discretion [to permit what it could not have done under Ord. 11 r. 1]. If he cannot properly enter through the front door of [Ord. 11 r. 1], he should not be allowed to enter through the back door of Ord. 2 r. 1."

In my view, there is no answer to that argument.

WAIVER

41. Ord. 2 r. 2(1) provides that an application to set aside an order for irregularity will not be allowed, unless the application is made (a) within a reasonable time, and (b) before the party making the application has taken any fresh step after becoming aware of the irregularity. Mr. Thomas submits that even if service of the writ on Mr. Leiduck out of the jurisdiction was not permissible under any of the grounds relied upon before Deputy Judge Wilson, Mr. Leiduck's application to set aside the leave should be dismissed on two grounds:

(I) It was not made until 2nd August, which was almost three months after 5th May when Mr. Leiduck became aware of the grant of leave, and was not therefore made within a reasonable time.

(ii) It was made after Mr. Leiduck had taken a fresh step in the proceedings after 5th May, namely, the application by his solicitor, Mr. Graham Miles of Haldanes, on 9th May for an extension of time to comply with that part of Deputy Judge Wilson's order which required him to disclose his assets.

42. The proximity in the Rules of Ord. 2 r. 2 to Ord. 2 r. 1 leads me to conclude that the reference to "irregularity" in Ord. 2 r. 2(1) relates to "a failure to comply with the requirements of these rules" in Ord. 2 r. 1(1). Since I do not regard a plaintiff's failure to bring itself within the qualifying conditions of Ord. 11 r. 1 as a mere failure to comply with the requirements of the Rules, it follows that I do not regard Ord. 2 r. 2 as having even been engaged.

43. However, since this argument was not canvassed before me, I have considered whether, but for that argument, Mr. Leiduck's application to set aside the leave should be dismissed on either of the two grounds advanced by Mr. Thomas. I do not think that it should. Bearing in mind that Mr. Leiduck was in custody in Monaco, I do not think that it can be said that his application to set aside the leave was not made within a reasonable time. Moreover, I reject the suggestion that Mr. Miles on 9th May took a fresh step in the proceedings on Mr. Leiduck's behalf after he or Mr. Leiduck had become aware of the irregularity. I say that for two reasons:

(1) Although it is Mr. Leiduck who is seeking to set aside the leave for irregularity, it is Mercedes who are asserting that Mr. Leiduck or Mr. Miles had become aware of the irregularity by 9th May. Assuming that Mr. Leiduck had by 9th May read, absorbed and understood the documents which had been served on him on 5th May, I do not think that I can assume that he had been advised that, on the facts of which he was then aware, it may have been possible for a challenge to be mounted to the jurisdiction of the court. Indeed, the best evidence before me is that Mr. Miles has never even spoken to Mr. Leiduck. It may be that between 5th May and 9th May, Mr. Leiduck had instructed Mr. Rupert Skrine of Denton Hall to act for him and IRCL, but I declined to assume that, in the short time before 9th May, Mr. Skrine had advised Mr. Leiduck that, on the facts set out in the documents served on Mr. Leiduck, it may have been possible for a challenge to be mounted to the jurisdiction of the court. As for the knowledge of Mr. Miles on 9th May, the evidence before me is that he was aware of the issue of whether the court had jurisdiction over Mr. Leiduck, but that is a long way from asserting that he had formed the view that, on the facts set out in the documents served on Mr. Leiduck, it may have been possible for a challenge to be mounted to the jurisdiction of the court. I am therefore not satisfied that Mr. Leiduck or Mr. Miles had become aware of the irregularity by 9th May.

(2) I do not think that the application which Mr. Miles made on 9th May amounted to the taking of a fresh step in the action. In Rein v. Stein (1892) 66 L.T. 469, Cave J. said at p. 471:

". . . in order to establish a waiver, you must show that the party alleged to have waived [the irregularity] has taken some step which is only necessary or only useful if the [irregularity] has actually been waived, or if the objection has never been entertained at all."

44. I reject the suggestion that the application made by Mr. Miles shows that he and Mr. Leiduck were recognising the validity of the grant of leave. Since the order which included the grant of leave also included an order requiring Mr. Leiduck to disclose his assets within 7 days, Mr. Miles wanted to ensure that Mr. Leiduck had sufficient time to comply with that part of the order to avoid Mr. Leiduck being in contempt of court. Taking steps to enable Mr. Leiduck to comply with an order which required him to disclose his assets, and which informed him that a neglect to obey that order may result in him being liable to imprisonment for contempt of court, cannot fairly be treated as an acceptance that the court has jurisdiction over him. To take, by way of analogy, what was said in one of the cases on the meaning of the words "taking any . . . steps in the proceedings" in section 4 of the Arbitration Act 1950,

"the statute contemplates some positive act by way of offence on the part of the defendant rather than merely parrying a blow by the plaintiff, particularly where the attack consists in asking for an interlocutory injunction": Graham J. in Roussel-Uclaf v.G.D. Searle & Co. Ltd. [1978] R.P.C. 747 at p. 756.

CONCLUSION

45. Since I have found that Mr. Leiduck's challenge to the jurisdiction of the court has succeeded, I have not addressed the arguments which have been canvassed as to whether, on the footing that the challenge to the jurisdiction of the court had failed, the Mareva injunction, the default judgment and the charging order should be set aside. The successful challenge to the jurisdiction of the court means that they must all be set aside, and I propose to make orders in terms of paras. 2-6 inclusive of Mr. Leiduck's summons filed on 17th September. I shall hear the parties on the costs of the summons, on Mr. Leiduck's appeal relating to the order for costs made by Master O'Donnell on 17th August when he granted a stay of execution of the default judgment pending the determination of the dispute as to the jurisdiction of the court, and on any application which either of the parties wishes to make as a consequence of this judgment. I give leave for this judgment, though delivered in chambers, to be reported, so that my views on the issues of law which the case raises can be brought to the attention of the legal profession.

46. Before completing this judgment, though, there is one final matter I want to mention. The judge who heard Mercedes' application on 29th April was a deputy judge. He normally sits in the District Court. He probably had not had much experience of applications under Ord. 11, and I do not suppose that he had had much occasion to address difficult questions relating to the conflict of laws. Face as he was by junior counsel experienced in commercial law, instructed by a firm of solicitors with an international client base and reputation, acting on behalf of a company known the world over, and invited to read an affidavit which, with exhibits, ran to 81 pages and a closely-argued skeleton argument over 6 pages long, no one could blame the judge if he felt pressure on himself to give Mercedes the relief they sought. The profession must realise, I think, that in situations of that kind the judge may be tempted to take things on trust. The practical realities of the situation impose a special obligation on solicitors and counsel to do what they can to justify the trust which the judge on exparte applications of this kind will inevitably place in them. In those circumstances, it was unfortunate that there were some things which, with the advantage of hindsight, it might have been better for the judge to have been told. However, it is right to record that Mr. Stone disavowed any suggestion of bad faith on the part of Mercedes' advisers. In my view, Mr. Stone was right to do that.

Representation:

Mr. Michael Thomas Q.C. and Mr. Anderson Chow, instructed by M/s. Baker & McKenzie, for the Plaintiff.

Mr. William Stone, instructed by M/s. Robert W.H. Wang & Co., for the 1st Defendant.