DEACONS (a firm) v. WHITE & CASE LTD LIABILITY PARTNERSHIP AND OTHERS

HCMP 2591/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 2591 OF 2003

(ON AN INTENDED APPEAL FROM HCA 2433/2002)

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J U D G M E N T

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Hon Rogers VP:

1. This is an application for leave to appeal to the Court of Final Appeal in respect of two applications. The judgment of this court was given on 11 July with reasons handed down on 15 July. The background to this case can be found in the judgment of 15 July and in the determination of Ma JA, as he then was, of 20 June 2003.

2. The question before the court was whether leave to appeal out of time should be given in respect of two interlocutory decisions of the deputy judge who was originally to hear the case. There was also an appeal in respect of another earlier interlocutory order made by the same judge.

3. The sole grounds of the application for leave to appeal out of time were that the decision should be set aside on the grounds of reasonable apprehension of bias. No mention was made of any matter which went to challenge the correctness of the original decisions. These applications are made under the provisions of section 22(1)(b) of the Court of Final Appeal Ordinance. It is therefore necessary for there to be a matter of great general or public importance. The question of bias has been approached on the basis of what are now well-established principles.

4. Despite Mr Burns's efforts this morning, I cannot see that there is any matter of great general or public importance. The points which have been sought to be raised are specific points on the facts of the case. As to that, I would say the matters sought to be raised are not sound, but, in any event, do not constitute matters of great general or public importance.

Hon Le Pichon JA:

5. I agree.

Hon Sakhrani J:

6. I also agree.

Representation:

Mr Alistair McGregor QC and Mr Anderson Chow, instructed by Messrs Clifford Chance, for the Plaintiff/Respondent

Mr Ashley Burns, instructed by Messrs Herbert Smith for the 3rd and 4th Defendants/Applicants

HCMP 2591/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 2591 OF 2003

(ON AN INTENDED APPEAL FROM HCA 2433/2002)

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_______________________

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J U D G M E N T

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Hon Rogers VP:

1. This is an application for variation of a costs order which this court made when the appeal in this matter was heard. The basis of this application is that the appeal to this court was an abuse of the process of court and that, in particular, subsequent events have shown that to be true.

2. In summary, I would state that for my part I agree that subsequent events have shown that any goodwill - which I will come to in a moment - which the judge below has indicated should be used in taking all steps to pursue the expeditious resolution of this matter has been absent.

3. The 3rd and 4th defendants have indicated that they wish to apply for leave to appeal to the Court of Final Appeal. Despite the fact that a draft notice of motion has been prepared, that has not been filed. It has been submitted to this court today that the 3rd and 4th defendants have 28 days in which they can file that notice of motion and that, in my view, flies in the face of the premise upon which Gill DJ gave his directions on 19 June (see page 28, lines 10 - 14 of the transcript). A brief history of the matter can be summarised as follows.

4. On 15 July this court offered a date for hearing of any application for leave to appeal to the Court of Final Appeal on Friday 18 July at 10 am. On the following day, on 16 July, Messrs Herbert Smith, the solicitors for the 3rd and 4th defendant replied inter alia:

"The present position is that the Notices of Motion are being finalised by junior counsel before we seek to have them settled by leading counsel. Due to leading counsel's other pre-existing commitments, we do not expect to be in a position to finalise the Notice of Motions much prior to Friday in any event."

5. The Friday which this court, and no doubt the reader of the letter was intended to assume, would have been Friday 18 July and not some other Friday. On the same day, on 16 July, the Acting Registrar of the Court of Final Appeal notified the parties that a session had been provisionally reserved for hearing the potential leave application and the captioned matter on 25 July at 9.15 am.

6. On 16 July, this court offered the parties the possibility that the matter of the application for leave to appeal to the Court of Final Appeal could be listed in this court on Monday 21 July at 10 am, that is today. On 17 July, Herbert Smith wrote to the solicitors for the plaintiffs and said:

"For your information, we enclose a copy of our letter to his Lordship's clerk today. As you will see, the timetable that you have suggested in relation to our client's application to the Court of Appeal for leave to appeal to the Court of Final Appeal is not feasible. As you are aware, the Notices of Motion required have not yet been filed and, indeed, due to our leading counsel's prior commitments, we have not yet obtained his input on the drafts prepared by junior counsel. Also as set out in our letter to his Lordship, our client's leading counsel is not available for a hearing on Monday and, with the greatest respect to his Lordship, we do not feel able to advise our clients that it would be appropriate for them to proceed with their application, other than with leading counsel, and indeed the same leading counsel who appeared on their behalf at the substantive hearing before the Court of Appeal."

On the same day Messrs Herbert Smith wrote to the Registrar of the Court of Final Appeal saying:

"At the present time, due to an existing court commitment, leading counsel for our client is not available earlier than Thursday, 24 July and we have not yet ascertained from the Civil Appeals Listing Office the availability of the Court of Appeal on that day or thereafter. In short, our position remains as set out in our letter of yesterday's date, namely that even assuming the application to the Court of Appeal is not allowed, we do not expect our clients to make an application to the Court of Final Appeal on 25 July 2003."

7. On 19 July, which was last Saturday, two days ago, Messrs Herbert Smith wrote to the solicitors for the plaintiff saying:

"As you are already aware, Mr Chan SC was not available on Friday 19 July 2003, nor is he available on Monday 21 July 2003. We will copy you in on our letter to his Lordship's clerk."

And then on 20 July, which was yesterday, a Sunday, Messrs Herbert Smith wrote a letter to the clerk of this court saying:

"However, as our letter also explained, when we first engaged Mr Chan to appear on our clients' appeal to the Court of Appeal, he indicated that he had other pre-existing commitments from early July 2003 onwards which would limit his ability to deal with further matters. In the event, he was able to make himself available for the hearings in the Court of Appeal on 8 and 9 July, but we now understand he feels that, at least in the coming two weeks, he must, as he had indicated previously, devote his full attention to the commitments he has already made where he has approaching deadlines."

The letter then goes on to indicate that the solicitors have been approaching other leading counsel and then the letter further on says:

"Fortunately [counsel] has indicated he has time available in the coming two weeks to advise and appear on behalf of our clients and papers were forwarded to him on Saturday to begin reading into the matter. He has also been able to spend time this morning being briefed in relation to the matter by [junior counsel] and us. However, inevitably it is going to require him some time simply to read into the matter, the papers for which are substantial. Further, he (like all other leading counsel considered and approached, did not say that they were unable to accept the instructions simply because the identities of the parties) also has pre-existing Court commitments that he must give precedence to, with the result that having discussed this matter with him, the earliest he considers that he would be properly briefed and prepared for a hearing would be Thursday 31 July 2003."

8. In my view, the history of the correspondence shows no willingness on the part of the 3rd and 4th defendant to issue their notice of motion, nor to proceed with any application. I should make it clear at this stage that it is this court's view that this matter can be dealt with by junior counsel who should, in any event, be ready and able to deal with the matter in the absence of leading counsel.

9. A speedy trial has been ordered in this matter. The speedy trial has been, unfortunately, adjourned and the parties cannot expect the court to adjourn matters continuously simply because they indicate a potential intention to take a step which has never materialised.

10. In my view, the dates now have been offered. This court, although it will be hearing a six-day appeal, is confident that that case will not take six days and is prepared to hear any application for leave to appeal to the Court of Final Appeal at 10 o'clock on any day in the coming week and, provisionally, Wednesday would seem to be an appropriate date.

11. The leading counsel who the correspondence indicated that the 3rd and 4th defendants previously wished to instruct and the court, as a matter of indulgence, was prepared to accommodate, is apparently engaged in final submissions in a case today and, according to the judge in that case, is hoped to be concluded today in any event. But, even so, as this court has indicated, the presence of leading counsel on any such application should be unnecessary.

12. The Court of Final Appeal, should it be necessary, has offered to accommodate the parties on Friday of this week. It seems to me quite clear that if the 3rd and 4th defendants are not prepared to avail themselves of these arrangements which the court is prepared to make, they should proceed with the trial as quickly as possible. A speedy trial has been ordered and, in all the circumstances of this case, that would be appropriate.

13. With regard to the costs, this court has given urgent consideration as to whether the costs order should be varied, as requested, by the plaintiffs. The difficulty which this court perceives in that is that it would be taking into consideration matters which have emerged since the hearing. So for that reason, this court is not disposed to vary its costs order on the appeal.

Hon Le Pichon JA:

14. I agree.

Hon Rogers VP:

15. When I indicated that this court was prepared to offer any day this week, of course, that is not Friday, because that was the date that the Court of Final Appeal has offered.

Representation:

Mr Alistair McGregor QC and Mr Anderson Chow, instructed by Messrs Clifford Chance, for the Plaintiff

Mr Ashley Burns, instructed by Messrs Herbert Smith for the 3rd and 4th Defendants

HCMP 2591/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 2591 OF 2003

(ON AN INTENDED APPEAL FROM HCA NO. 2433 OF 2002)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1. This is an appeal from a determination by Ma JA (as he then was), given on 20 June 2003, whereby the judge refused to extend time for appealing two interlocutory orders of Deputy Judge Poon dated 13 March and 1 April 2003 respectively. The decision of this court was given on 11 July with reasons to be handed down in writing later, which we now do.

Background

2. The claim in this action arises from the fact that the 3rd defendant, who had previously been an equity partner of the plaintiff, and the 4th defendant, who had previously been a salaried partner of the plaintiff, and a number of other solicitors previously employed by the plaintiff had left the plaintiff's firm and joined the 1st and 2nd defendants as partners or employed solicitors. The action was commenced on 24 June 2002. An order for speedy trial was made on 29 October 2002. At that time, it was also ordered that there should be a spilt trial between liability and damages. In January of this year, Deputy Judge Poon was designated the trial judge. In that capacity he later heard a number of interlocutory applications. Amongst those applications were the applications which resulted in the decisions in respect of which leave is sought to appeal out of time.

3. There is a further appeal, CACV 173 of 2003, which by consent of the parties was listed to be heard at the same time as the hearing of these applications. For reasons which will emerge that appeal inevitably fell to be dismissed for the same reasons as the applications for extension of time.

4. On 18 and 19 February 2003 the deputy judge had three summonses before him. There was an application on the part of the plaintiff to limit discovery so as to exclude any documents relating to matters raised or referred to in paragraphs 9 to 16 and 26(9) of the defence of the 3rd and 4th defendants. Those paragraphs may be summarised as pleading that various partners in the plaintiff's partnership had conducted themselves in a way which was incompatible with their obligations as partners to the extent that they had furthered their own interests rather than the interests of the partnership. It was also said that those partners had discriminated in important partnership and professional matters against the interests of the 3rd and 4th defendants and the solicitors who had left the plaintiff's employment, both to the detriment of those persons and the detriment of the partnership business. To this extent the nub of the allegations amounted to the allegation that circumstances had been created such that the 3rd and 4th defendants and the other solicitors who left the plaintiff's firm would, naturally, not have wished to remain working as part of the plaintiff's firm.

5. In his judgment of 13 March 2003, the deputy judge came to the conclusion that the matters pleaded in those paragraphs of the defence were not relevant to any of the issues in the action pleaded. It was on that basis that the judge made the order that discovery by the parties should be limited so as to exclude any documents relating to matters raised in those paragraphs of the defence. Consequent upon that judgment and order a summons was issued on behalf of the plaintiff seeking to strike out those paragraphs in the defence of the 3rd and 4th defendants. That application was heard on 1 April 2003 and the deputy judge gave a short oral judgment ordering those paragraphs to be struck out. That decision was not only consistent with but followed upon the reasoning for the order of 13 March limiting the documents on discovery.

6. At the hearing on 13 March the deputy judge also heard a corresponding application on behalf of the 3rd and 4th defendants for discovery of documents which were listed in the schedules to the summons. That application was refused because the judge came to the conclusion that for the most part the discovery sought was irrelevant and in some respects there had been no class of documents which had been defined in the request. The order in respect of that part of the judge's decision was not drawn up until 19 June.

7. The trial of the action was scheduled to commence on 2 June 2003. At the commencement of the hearing the deputy judge informed the parties that he had been a classmate of Mr David Zee, who he understood to be a salaried partner of the plaintiff. Apart from knowing Mr Zee well at university he had stayed in close contact with him after graduation and had been good friends and, indeed, had shared a flat for about 3 years ending in 1990 but, at least for the last 10 years, he had scarcely had any contact with him. The matter was adjourned until 5 June 2003. At the resumed hearing the deputy judge was requested on behalf of the defendants to recuse himself. By that date the judge had been alerted to the fact that Mr Zee was not merely a salaried partner but was an equity partner. As the deputy judge pointed out in his ruling, that status made Mr Zee "a real plaintiff". He would have a direct and personal interest in the outcome of the litigation. It can be borne in mind that the naming of a partnership by its firm name as a party to an action is the equivalent of listing all the partners of the firm.

8. Despite the fact that the deputy judge's connection with Mr Zee in the last 10 years had been minimal the judge decided to recuse himself. In doing so he said:

"I am confident that were I to continue to try this case, I would be able to discharge my judicial functions and duties fairly and impartially. But justice must not only be done. It must be seen to be done as well. It is indeed a matter of paramount importance that underpins the administration of justice in our system. Were I to continue to hear the case, will a fair-minded and informed observer conceive of any real possibility of bias and hence casting a serious doubt if justice is really done in the case? This involves an objective of appraisal of the relevant facts. When making the appraisal, an important consideration that I have to bear in mind is the desirability that the public should remain confident in the administration of justice."

He went on to say that Mr Zee was neither a close friend nor a casual acquaintance. He considered that it was a borderline case. In the circumstances the judge clearly took an extremely cautious approach.

9. The judgment of the deputy judge was given on 9 June 2003. It was not until 17 June 2003 that the 3rd and 4th defendants filed papers seeking an extension of time to appeal from the orders of 13 March and 1 April 2003. Two days later, on 19 June 2003, the order in respect of the 3rd and 4th defendants' application also the subject of the decision of 13 March was drawn up. A notice of appeal was apparently served on 2 July 2003. It is noteworthy that that notice of appeal, as indeed the two draft notices of appeal in respect of which extension of time is sought, seek only that the orders made should be set aside and the matters be remitted for rehearing by the judge assigned to hear the case. The grounds of appeal are simply that the judge should have recused himself from hearing the relevant interlocutory applications. The merits of the applications are not the subject of any of the grounds of appeal.

10. When the matter came before Ma JA on 20 June, the judge observed that there had been significant delay in seeking extensions of time for appealing. In the course of argument he pointed out that delay was a matter to be judged in relation to the facts of each case. A delay of a few months might, in some cases, not be significant. In the present case there had been an order for a speedy trial and that was due to come on on 2 June. In view of the recusal of the original trial judge a new judge had been appointed to hear the case. In those circumstances, as Ma JA correctly pointed out, the delay even of a week was highly relevant. In the circumstances of the case Ma JA considered that the delay aspect was by itself sufficient to dispose of the applications. In the second place, however, Ma JA went on to consider the fact that the merits of the two orders had not been addressed. For those reasons Ma JA dismissed the application.

11. On this appeal reliance is now placed upon an affidavit of David Nigel Francis seeking to explain the delay. The primary point put forward was that the matter had been mentioned before Madam Justice Chu, the listing judge on 10 June and that thereafter it had taken time to consider the matter and draft the documents. In respect of the merits of the appeal it is said that the 3rd and 4th defendants had been advised by leading counsel at the time that there were grounds to appeal the relevant orders but that a decision had been taken to proceed with the trial without appealing.

12. The primary point taken on this appeal was that the fact the deputy judge had recused himself from hearing the trial of the action on the grounds that there was reasonable apprehension of bias meant that there was likewise a reasonable apprehension of bias in respect of the decisions on the interlocutory matters in March and April. The argument of Mr Chan SC on behalf of the 3rd and 4th defendants was that the decisions fell to be set aside virtually automatically once the judge had, on 9 June, recused himself from hearing the trial. His argument was that once the judge was disqualified on the basis of bias not only was he excluded from taking any further part in the proceedings but any decision which he had made also fell to be set aside.

13. In reliance on Mr Francis's affidavit, Mr Chan argued that Ma JA's views as to the delay in applying for leave to appeal out of time put far too high an onus on the 3rd and 4th defendants and their advisers. In relation to Ma JA's view that there was no underlying merit in any appeal Mr Chan sought to argue that the matters pleaded in paragraphs 9 to 16 and 26(9) of the defence were relevant to some of the allegations in the amended statement of claim and in particular paragraph 38I(a) and 38K.

14. In reliance upon his primary ground that the interlocutory decisions fell to be set aside, Mr Chan relied in particular upon the case is of R. v. Curragh Inc. [1997] 1 R.C.S. 537 and specifically on the passages at pages 542 to 545 in the judgments of La Forest and Cory JJ. At paragraph 8 on page 544 it was said:

"Certainly, every order of a trial court is enforceable and must be obeyed until it is declared void by an appellate court. In this sense the order may be viewed as voidable. However, when a court of appeal determines that the trial judge was biased or demonstrated a reasonable apprehension of bias, that finding retroactively renders all the decisions and orders made during the trial void and without effect."

The same sentiment was repeated in effect in the subsequent paragraph.

15. Mr Chan also relied upon similar sentiments expressed in the advice given by the Privy Council in the case of Millar v Dickson [2002] 1 WLR 1615. At paragraph 65 of his advice Lord Hope of Craighead said:

"The principle of the common law on which these cases depend is the need to preserve public confidence in the administration of justice .... It is no answer for the judge to say that he is in fact impartial, that he abided by his judicial oath and there was a fair trial. The administration of justice must be preserved from any suspicion that a judge lacks independence or that he is not impartial. If there are grounds which would be sufficient to create in the mind of a reasonable man a doubt about the judge's impartiality, the inevitable result is that the judge is disqualified from taking any further part in the case. No further investigation is necessary, and any decisions he may have made cannot stand."

Similar sentiments were expressed by Hefer JA in the Appellate Division in South Africa in the case of Moch v Medtravel (Pty) Ltd t/a American Express Travel Service 1996 (3) SA 1 at page 10.

16. Whilst it has been canvassed that these cases involved decisions in criminal proceedings, it seems to me that the important point is that all the circumstances which have a bearing on the suggestion that the judge was biased have to be considered. It seems to me that the deputy judge in paragraph 7 to 9 of his ruling of 9 June 2003 set out the judicial approach to the matter correctly. As he pointed out in his citation from the judgment of the Court of Appeal in In re Medicaments and Related Classes of Goods (No. 2) (CA) [2001] 1 WLR 700 Lord Phillips had observed at paragraph 69 that a judge who is asked to recuse himself is in a difficulty in applying the test of a real danger and hence the test which the judge should apply is whether an objective onlooker might have a reasonable apprehension of bias.

17. In the three cases which have been referred to above which make reference to the decisions in the course of a case failing once it has been decided that bias, or a reasonable apprehension of bias, exists, there was no question of any relevant change in the circumstances between the time when it is determined that the trial judge was biased and the previous decisions or orders which had been made during the trial which the courts considered could not stand. In the present case there is, it seems to me, a very material difference. Up until the time when the deputy judge first broached the subject of his friendship with Mr Zee he considered that Mr Zee was a salaried partner, in other words, an employee, of the plaintiff. That, it seems to me, is a very relevant consideration. Where a judge is determining an interlocutory matter, not on the basis of exercising a discretion but on the basis of whether evidence or documents are relevant to the issues in the proceedings, the fact that he may be a friend of an employee of the plaintiff is quite a different matter from a situation where a judge is a friend of one of the partners of the plaintiff and is determining issues at a trial on oral evidence. The fact that the deputy judge thought Mr Zee was a salaried partner is highly relevant. As was said in the judgment of the court, Lord Bingham, Lord Woolf M.R. and Sir Richard Scott V.-C. in the case of Locabail (UK) Ltd v Bayfield Properties Ltd and Another [2002] QB 451 at paragraph 18:

"When applying the test of real danger or possibility (as opposed to the test of automatic disqualification under the Dimes case, 3 H.L.Cas. 759 and Ex parte Pinochet (No. 2) [2000] 1 A.C. 119) it will very often be appropriate to inquire whether the judge knew of the matter relied on as appearing to undermine his impartiality, because if it is shown that he did not know of it the danger of its having influenced his judgment is eliminated and the appearance of possible bias is dispelled. As the Court of Appeal of New Zealand observed in Auckland Casino Ltd. v. Casino Control Authority [1995] 1 N.Z.L.R. 142, 148, if the judge were ignorant of the allegedly disqualifying interest: 'there would be no real danger of bias, as no one could suppose that the judge could be unconsciously affected by that of which he knew nothing ..."

18. Mr Chan sought to avoid this suggestion on two grounds. First he said that a proper reading of the amended statement of claim showed that Mr Zee was an equity partner and hence the deputy judge would have known of that when he made the decisions in March and April. As to that, I would say that, although a careful reading of the amended statement of claim would disclose that, any person who was under the impression that Mr Zee was a salaried partner might well have missed the point. Moreover, Mr Zee's name appears in a list of names and it would not have been necessary when considering the allegations in the amended statement of claim to identify precisely those names. Mr Chan's reliance on paragraph 69 of the judgment in the Locabail case does not take the matter any further. In my view it is clear from what has happened that there is no ground for suggesting that until the deputy judge was informed as to his misapprehension in June 2003 he considered that Mr Zee was a salaried partner.

19. In those circumstances I do not consider that an attack upon the interlocutory decisions made by the deputy judge in March and April can be challenged on the basis that there was a reasonable apprehension of bias. In my view any appeal based on those grounds would fail. Since those are the grounds upon which the applications for extension of time are based those applications would fail. Likewise Appeal No. CACV 178 of 2003 which does not require leave because it was not out of time must likewise fail since the grounds in the notice of appeal related to bias.

20. Lest there should be any doubt about the matter I would say this about the underlying merits of the relevant applications which gave rise to the decisions. As already indicated the burden of the allegations in paragraphs 9 to 16 and 26(9) of the defence amounted to an allegation that the 3rd and 4th defendants and the other solicitors who left the plaintiff's firm would have done so with some justification having regard to the way in which the partnership was conducted and, in particular, some of the partners conducted themselves. That, it seems to me, can be no justification for those persons joining the 1st and 2nd defendants who were not only a competitor of the plaintiff but by reason of the negotiations between the two firms had acquired special and confidential knowledge of the plaintiff's business. Whilst Ma JA did not have the benefit of Mr Chan's submissions in this regard, it appears to me that the decisions of the deputy judge on the question of relevance are entirely supportable.

21. As regards the question of delay, in my view, no issue can be taken of the way in which Ma JA approached the matter on the basis of the facts known to him. Although the affidavit of Mr Francis does indicate that the 3rd and 4th defendants and their advisers were engaged on the matter in June, if they had wished to progress the trial on a speedy basis, as was apparently the professed intention of all parties, steps should have been taken immediately after 2 June to seek extension of time for appealing those decisions. Were it not for this court accommodating the parties on a very speedy basis, the trial of the action would inevitably have been delayed much further. Whilst appreciating that this would impose strict requirements on the 3rd and 4th defendants and their advisers, that, it seems to me would not be unjust, given the fact that a deliberate decision had been taken not to appeal those orders and to proceed to trial on the basis of the decisions which had been made.

Hon Le Pichon JA:

22. I agree.

Representation:

Mr Alistair McGregor QC & Mr Anderson Chow, instructed by Messrs Clifford Chance, for the Plaintiff/Respondent

Mr Edward K S Chan SC and Mr Ashley Burns, instructed by Messrs Herbert Smith, for the 3rd & 4th Defendants/Appellants