HONG KONG AIR CARGO TERMINALS LTD v. COMMISSIONER OF RATING AND VALUATION

LDRA 12/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

RATING APPEAL NO. 12 OF 2001

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REASONS FOR DECISION

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1. By a summons dated 6 April 2004, the Respondent sought an order for excluding certain specified paragraphs from the witness statements of two witnesses of the Appellant on the ground that they are inadmissible. Although the summons was, on its face, returnable before me and a member of the Lands Tribunal, it was agreed between the parties that I could deal with the application on my own. The application was heard on the first two days of the appeal. The two witnesses were Mr Johnnie Wong and Mr Patrick Kan. Both of them are employed by the Appellant.

2. There is no dispute about the relevance of the evidence of these witnesses. In fact, Mr Barnes QC contended that the evidence of Mr Wong was fundamental to the issue of competition which is a central issue in the appeal. The other experts called by the Appellant relied on the evidence of Mr Wong to establish a likelihood of competition being taken into account by the hypothetical tenant.

3. Mr Barnes, leading counsel for the Respondent, contended that the paragraphs which he sought to exclude were opinion and expert evidence. Due to the relationship of these witnesses with the Appellant, it was submitted that the Appellant had to demonstrate that they were fully advised of the duty of an expert witness to give independent and unbiased evidence before the court could admit their evidence. Counsel contended that in general an expert witness should be independent. Although there is no absolute rule that employee could not give expert evidence for his employer, the court should not permit that course to be taken unless it could be satisfied that the employee concerned fully understood the duty of an expert.

4. Mr Barnes principally relied on Field v Leeds City Council [2000] 1 EGLR 54 and R (Factortame Ltd) v Secretary of State for Transport [2003] QB 381. In particular, he derived from the following dictum a proposition that the court has to assess the independence of a witness before admitting his opinion evidence.

"The question of whether someone should be able to give expert evidence should depend on whether: (i) it can be demonstrated that that person has relevant expertise in an area in issue in the case; and (ii) it can be demonstrated that he or she is aware of their primary duty to the court if they give expert evidence. " (per Waller LJ in Field v Leeds City Council at p. 56)

"In this particular case, I consider the material before the court was, and is, quite insufficient for the court to be enabled to give permission for evidence from Mr Broadbent to be admitted. " (per May LJ in Field v Leeds City Council at p. 56)

"Where an expert has an interest of one kind or another in the outcome of the case, this fact should be made known to the court as soon as possible. The question of whether the proposed expert should be permitted to give evidence should then be determined in the course of case management. In considering that question the judge will have to weigh the alternative choices open if the expert's evidence is excluded, having regard to the overriding objective of the Civil Procedure Rules." (per Lord Phillips of Worth Matravers MR in R (Factortame Ltd) v Secretary of State for Transport at Para. 70)

5. It seems to follow from what was said by Lord Phillips that even in the context of admissibility, it is a balancing exercise. There is no absolute rule that an interested person could not give expert opinion evidence. Immediately before the dicta quoted above, Lord Phillips said,

"It is always desirable that an expert should have no actual or apparent interest in the outcome of the proceedings in which he gives evidence, but such disinterest is not automatically a precondition to the admissibility of his evidence."

6. Factortame was a case about contingency fees arrangement with an expert. At Para. 73, Lord Phillips observed,

"To give evidence on a contingency fee basis gives an expert, who would otherwise be independent, a significant financial interest in the outcome of the case. As a general proposition, such an interest is highly undesirable. In many cases the expert will be giving an authoritative opinion on issues that are critical to the outcome of the case. In such a situation the threat to his objectivity posed by a contingency fee agreement may carry greater dangers to the administration of justice than would the interest of an advocate or solicitor acting under a similar agreement. Accordingly, we consider that it will be in a very rare case indeed that the court will be prepared to consent to an expert being instructed under a contingency fee agreement."

7. Hence, even in a situation of contingency fees, the court still has the power to admit the evidence of such an expert although the occasion would be rare. This shows that the rule against financial interest on the part of an expert in the outcome is not an absolute rule.

8. In Tang Ping-choi v The Secretary for Transport CACV 81 of 2003, 6 April 2004, Para. 16, Rogers VP adopted the approach of Lord Phillips.

9. Mr Barnes accepted that the rule is not absolute. He submitted that the court should adopt these criteria in considering whether a witness should be permitted to give expert opinion evidence when it is shown that he is an employee of one of the party to the litigation,

(a) the degree of interest the expert has in the proceedings;

(b) could other expert be engaged to give evidence on the same subject;

(c) the importance of the issue to which the evidence is directed;

(d) the promptness in which the matter is brought to the attention of the court.

10. Mr Roots QC submitted on behalf of the Appellant that the question of independence of a witness who proposed to give opinion evidence should be examined in the context of weight instead of admissibility. He accepted it is imperative that when such a person is an employee of a party to the litigation, that witness should be made fully aware of the duty of an expert towards the court. He acknowledged the lack of reference to that in the witness statements of Mr Wong and Mr Kan.

11. Initially, he indicated that the Appellant could undertake to file a supplemental witness statement to remedy such deficiency. However, I do not think it is a satisfactory course to adopt since Mr Barnes had indicated that if the supplemental witness statement were to be relied upon to support the contention as to admissibility, he would like to cross-examine the witnesses on certain aspects relevant to the issue of admissibility.

12. Two supplemental statements dated 20 April 2004 were prepared by Mr Wong and Mr Kan dealing with the objections of Mr Barnes as to the admissibility of their evidence. Both gentlemen went into the witness box and were cross-examined by Mr Barnes. It transpired from their evidence that part of their remuneration was by way of bonus. They also revealed that they had been advised by the solicitors for the Appellant and later on by counsel as to the importance of being independent and an overriding duty was owed to the court by an expert witness. At a late stage, both of them had been given a copy of Part 35 of the English Civil Procedure Rules and Practice Direction relating to experts and assessors.

13. Mr Barnes quite properly put to these witnesses that their bonuses must depend on the financial results of the Appellant and the personal performance of the witnesses. This is a matter of common sense. Counsel went on to argue it follows that these witnesses must have a financial interest in the outcome of the appeal. Mr Kan said the outcome of this appeal would only have a minimal impact on the financial results of the Appellant. I am prepared to accept such evidence. As regards the impact of the bonus on the manner in which these witnesses would give evidence in this appeal, bearing in mind the corporate size of the Appellant and its governance, I do not consider there is any significant risk that the witnesses would be concerned about any correlation between their bonus and the evidence they shall give.

14. However, the fact remains that these witnesses are senior staff of the Appellant. Mr Kan is the finance director (although he emphasized that he was not a member of the board) and Mr Wong is the General Manager (Special Projects) of the Appellant. For most of his working life, Mr Wong had been employed by the Appellant. He joined HACTL in 1974. Although Mr Kan only joined the Appellant in 1999, he had been working for Jardine Matheson since 1978. Jardine Matheson owned 25% of the shareholding in the Appellant. Against such background, the natural loyalty and bias of these witnesses towards the Appellant could not be lightly discounted.

15. Another matter of importance in relation to the question of admissibility is the adequacy of the advice given to these witnesses as to their duty as expert witnesses. The evidence showed that Part 35 of the English Civil Procedure Rules and Practice Direction relating to experts and assessors were only given to these gentlemen after their main statements had been finalized and Mr Barnes was correct in suggesting that in such circumstances, the contents of these Rules and Practice Direction could have little impact on the preparation of the evidence. Whilst it would be too rigid, in my judgment, to suggest that each expert witness must be given a full set of the Rules and Practice Direction before he or she prepared an expert report, it must be imperative that expert witness should be fully aware of the extent his duty before doing so.

16. Although we do not have Part 35 in Hong Kong, the rationale behind it as spelt out in The Ikarian Reefer [1993] 2 Ll Rep 68 is applicable here. That case has often been cited and applied in Hong Kong. The relevant principles were set out in Para. L1/58/7 of Volume 2 of Hong Kong Civil Procedure 2004. In addition to the overriding duty to provide independent and unbiased assistance to the court, an expert should also ensure that he does not omit to consider material facts which could detract from his concluded opinion and should make it clear when a particular question or issue falls outside his expertise.

17. Mr Kan said he had been advised by the solicitor for the Appellant as to the importance of integrity of expert evidence. When he was cross-examined, he was asked about the nature of the advice given to him. He said it was about the overriding duty to court. At a later stage, he was reminded by counsel as to the need to tell the truth and he should not be biased. That was on 26 January 2004. It was only on 19 April 2004 that he was given a set of Part 35 of the Civil Procedure Rules and the Practice Direction. Although he might have given another set earlier, he said he had not read it before 19 April 2004.

18. Mr Wong also testified that he had been advised on 9 September 2003 of the importance of the integrity of expert evidence and overriding duty was owed to the court. He was again reminded on 26 January 2004 by counsel. He was provided with a set of Part 35 of the Civil Procedure Rules after he signed his witness statement. His understanding of the duty was that the evidence had to be independent and he had to be comfortable with it as he would be subject to cross-examination. He also understood that whatever he said must be the truth.

19. Having heard their evidence, I am of the view that the duty of an expert had not been fully and adequately explained to these gentlemen. As mentioned, since they only had sight of Part 35 of the Civil Procedure Rules after they had finalized their statements, the fact that they were given copies of the same could not be taken into account. It is not enough that an expert appreciated that he had an overriding duty to the court. Nor is it sufficient that such a witness understand that he had to be comfortable with his evidence and it has to be truthful. He must also understand that he has a duty to ensure his evidence does not omit any relevant matters. As Rogers VP said in Tang Ping-choi, at Paragraph 17,

"In the second place many of the problems which have arisen with regard to expert evidence have been caused by the fact that the witnesses have not been frank with the court. In some cases they have given evidence which is half truthful, keeping back knowledge which they knew as experts and which was relevant to the matter in respect of which they were giving evidence."

20. Such a duty is all the more important when the witness who gave expert evidence is the only expert witness on the subject. This is highlighted by Lord Phillips in Factortame at Paras. 72 and 73,

"But the expert will often be in a position to influence the course of the litigation in a manner in which the funder, or even the lawyer conducting the litigation, will not. "

"In many cases the expert will be giving an authoritative opinion on issues that are critical to the outcome of the case. In such a situation the threat to his objectivity posed by a contingency fee agreement may carry greater dangers to the administration of justice than would the interest of an advocate or solicitor acting under a similar agreement."

21. Mr Wong's proposed opinion evidence played an important part in this appeal. The Appellant's valuation expert Mr Botton was unable to assess the likelihood of competition and he had to rely on Mr Wong's opinion to derive his conclusions as to the rateable values of the appeal tenement. With respect to Mr Roots, I do not think the fact that Mr Botton would give valuation evidence on behalf of the Appellant solved the difficulty about the challenge to Mr Wong's evidence.

22. Mr Wong is the key witness on the likelihood of competition being considered by the hypothetical tenant. Not only did his witness statement refer to such likelihood generally, he actually went into details in projecting what would be the likely mode of competition. He also postulated the likely pricing level of the hypothetical competitors and presented calculations as to the loss of trade that would be suffered by the hypothetical tenant as a result of the competition. Mr Botton referred to those figures for his valuation.

23. There had not been any indication that expert evidence will be led in terms of likelihood of competition prior to the exchange of evidence. As a result, the Respondent did not have any expert in that regard. Hence, the only evidence before the Tribunal would be that of Mr Wong.

24. Competition is a major, if not fundamental, difference between the parties. Against such circumstances, it is unsatisfactory if the Tribunal has to determine the appeal on the strength and weakness of the evidence of a witness who did not appreciate he had to place all relevant considerations before the Tribunal in his report.

25. Another defect in the witness statement of Mr Wong is that, as revealed in cross-examination by Mr Barnes, the calculations and figures were actually done and compiled by Mr Eric Tsang. Mr Roots properly and readily accepted that in the light of that, Mr Tsang should also give a statement and the Respondent should be given the opportunity to cross-examine him. The lack of reference to that in the statement of Mr Wong showed that he did not have in mind the duty to clearly identify in his report the parts thereof which he was actually relying on the works of others instead of his own product.

26. I say these without any intention of casting any imputation on Mr Wong's honesty. It is not his fault that he failed to appreciate the full extent of his duty. He is not an expert witness by profession and he has not given any expert evidence before this occasion. But I am not satisfied that Mr Wong was aware of the full extent of his duty towards the Tribunal in giving his expert opinion on the matter.

27. As regards Mr Kan, the most controversial part of his evidence is those paragraphs in Section 6 of his witness statement where he drew certain conclusions from Mr Wong's evidence. The other paragraphs objected to by Mr Barnes, in my judgment, could be properly admitted as Mr Kan's perception of other admissible evidence under Section 58(2) of the Evidence Ordinance.

28. From the English authorities discussed above, I derived the following propositions,

(a) admissibility and weight are two different questions to be considered at different stages;

(b) in the context of expert evidence, it is a relevant consideration in determining permission to admit such evidence (as well as weight) whether he is fully aware of his duty as an expert (see the authorities cited in Paragraph 4 above);

(c) the fact that a witness is an employee of a litigant would not automatically bar him from giving expert evidence for that litigant;

(d) however, once the issue of admissibility is brought up, whether in respect of an employee or otherwise, the court could examine the extent to which such a witness is aware of his duty as an expert witness;

(e) for reasons already given in Paragraphs 19 and 20 above, an important aspect of the duty of an expert witness is to inform the court or tribunal all relevant matters whether such matters are favourable to his conclusion or otherwise;

(f) if the court is of the view that an expert had not properly understood his duty towards the court when he prepared his report, it is a question of case management whether the report should be excluded or some other solution should be adopted to remedy the situation (see the dictum of Lord Phillips in Para. 70 of Factortame).

(g) Obviously, the appropriate solution to be adopted depends on the circumstances of the case. The factors outlined by Mr Barnes are no doubt relevant. But they are by no means exhaustive. Bearing in mind the different scenarios under which the issue could arise, it would be undesirable and indeed impossible to identify all relevant factors and possible solutions. I would however venture to suggest in a case where the expert is giving evidence on an important issue which is highly controversial, and he is the only expert who would give evidence on that aspect, the court will attach great significance to the expert's understanding of his duty as stated in (e) above.

29. Apart from the matters that I have alluded to, another important consideration in the present case is that the Appellant informed the Tribunal that if the evidence of Mr Wong were excluded, they would like to call another expert to give evidence about the likelihood of competition from a third party. Hence, it is accepted that Mr Wong is not the only person who could give evidence in relation to such matter.

30. Although it is likely that if the evidence of Mr Wong were excluded, the appeal would have to be adjourned, it is not suggested that parties would suffer any prejudice apart from costs as a result thereof.

31. In my judgment, in the interest of just and fair determination of this appeal, I should exclude the opinion evidence of Mr Wong on the likelihood of competition. I have therefore ordered accordingly on 20 April 2004.

32. By way of postscript, since the pronouncement of my decision, I came across the decision of the Victorian Court of Appeal in FGT Custodians Pty Ltd v Fagenblat [2003] VSCA 33. It was held in that case the question of bias should be considered as a matter that went to weight instead of admissibility. Counsel have not made submissions on that authority and I have drawn counsel's attention to it on 23 April 2004.

33. I should also mention that I have referred to the issue of admissibility in the above reasoning as a discrete concept from the question of weight and that was how I read the dicta of Lord Phillips. However, there is perhaps a need to be more refined when one refers to the exclusion of evidence by way of case management as Lord Phillips did. Lord Phillips was dealing the matter in the context of the Civil Procedure Rules. CPR 35. 4 (1) provides that no party may call an expert or put in evidence an expert's report without the court's permission. It is obvious that Lord Phillips was referring to the refusal to give permission under CPR 35. 4(1) in Paragraph 70 of Factortame. That involves consideration of a wider range of factors than those one would conventionally take into account in deciding the admissibility of evidence. Hence, the court is not confined to asking whether the witness has the requisite expertise and whether the evidence is relevant.

34. CPR 35. 4(1) is not applicable in Hong Kong. Although Order 38 Rule 36 restricted expert evidence to be adduced without leave of the court or expert directions, Rule 20(6) of the Lands Tribunal Rules provides that such restriction shall not apply in the Tribunal.

35. Since the points mentioned in Paragraphs 32 to 34 have not been argued by counsel, I should not express any view as to whether they would invalidate my above reasons for my pronounced decision. Given that leave is granted to the Appellant to call another expert on likelihood of competition, it is tempting to let sleeping dog lies. However, I consider it is appropriate for me to mention these points for two reasons. First, whilst this Tribunal would not review the decision of 20 April 2004 on its own motion in view of the developments since that date, the parties also have the right to do so under Section 11A of the Lands Tribunal Ordinance. Second, as mentioned by me at the hearing on 23 April 2004, the admissibility of expert evidence is a question of general importance. It is therefore desirable for me to set out points which I have not considered in my deliberation leading to the decision of 20 April 2004.

Representation:

Mr Guy Roots, QC and Miss Chyvette Ip, instructed by Messrs Denton Wilde Spate, for the Appellant

Mr Michael Barnes, QC and Mr F Y Kan, instructed by Department of Justice, for the Respondent