Re Paul Girolami

HCMP 3567/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3567 OF 2016

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REASONS FOR JUDGMENT

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1.At the conclusion of the hearing, I ordered the ad hoc admission of Mr Paul Girolami QC pursuant to section 27(4) of the Legal Practitioners Ordinance (Cap 159) to represent Mr Thomas Chan at the hearing of his application for leave to appeal before the Appeal Committee of the Court of Final Appeal in FAMV 49/2016, fixed for 14 February 2017, and, if leave is obtained, at the hearing of the substantive appeal, as well as to advise him generally in relation to the same, subject to the compliance of all required formalities.  I now give my reasons. 

2.The underlying proceedings (CACV 10/2014) involve a multiple derivative action in a group company situation, and Mr Chan has been found after trial to be the errant fiduciary involved in the sale of the subject shares, thus causing loss to Waddington Limited, the plaintiff in the multiple derivative action.  His appeal to the Court of Appeal was dismissed by judgment dated 20 May 2016.  Mr Chan then sought leave from the Court of Appeal to appeal to the Court of Final Appeal on two questions said to be of great general or public importance: 

(1)   Where F is the fiduciary of B, and there is a benefit or opportunity which comes to F not in his capacity as fiduciary of B (so that the “no profit duty” is not engaged), but the opportunity could not have been utilised by B because the relevant third party would not deal with B, does the “no conflict duty” require F to refrain from taking up the opportunity for himself or for a company in which he is interested?  Or does the no conflict duty require F to persuade the third party to deal with B?

(2)   Where a beneficiary claims compensation for breach of fiduciary duty in the form of lost profits that he says he would have made on a lost transaction, for the beneficiary to succeed, would it be sufficient simply for him to show that he has lost an opportunity (and then the burden would be on the fiduciary to show that the opportunity would not materialise in favour of the beneficiary)?  Or would it be the burden on the beneficiary to show that the lost opportunity would have materialised to his benefit?

3.The application was refused, and thus the application for leave to appeal before the Appeal Committee.  Mr Chan now wants to bring in the applicant to lead his team of local counsel in the application (comprising Mr Bernard Man SC and Mr KeithLam – they were led by Mr Jat Sew Tong SC at the substantive appeal).  

4.At the hearing, the application for admission was essentially put on the basis that the issues raised are important ones and – more importantly – the hearing in question concerns an application for leave to appeal before the Appeal Committee of the Court of Final Appeal itself and therefore the “2^nd CFA factor” is engaged.

5.The Bar opposed the application on the ground that the two issues raised simply do not arise from the judgment of the Court of Appeal, and are in fact fact-specific.  They do not merit the admission of a London silk to argue them before the Appeal Committee.  The Secretary for Justice took a similar view. 

6.The principles governing the admission of overseas counsel are well established: Re Flesch QC [1999] 1 HKLRD 506; Re McGregor QC [2003] 3 HKLRD 585.  They have recently been summarised in Re Perry QC [2016] 2 HKLRD 647, para 24.  The 2^nd CFA factor has been explained in Re Dicker QC [2013] 2 HKLRD 245, paras 19 to 22.  For a recent example of how that factor was taken into account in the context of an application for leave to appeal, see Re Dicker QC, HCMP 1923/2013, 17 September 2013, a decision of this court.  I will not repeat the principles here.  In essence, the fact that one is concerned with a hearing before the Court of Final Appeal, including an application for leave to appeal, is a weighty consideration to take into account in the balancing exercise, provided that the hearing is a “substantial one” and overseas counsel can make a “substantial contribution” to the hearing (see below).  Each case of course turns on its own facts.  Ultimately, the court must decide whether it is in the public interest, on balance, to grant the admission.  The court adopts a sensible and flexible approach.

7.It is important to bear in mind that this court is not seized of the leave application.  It does not sit to determine whether any issues of great general or public importance have arisen from the judgment of the Court of Appeal which ought to be dealt with by the Court of Final Appeal.  This is a matter for the Appeal Committee at the forthcoming hearing.  It is important to bear this in mind because the arguments of Mr Richard Khaw SC (Mr Martin Kok with him) for the Bar and Ms Ann Lui for the Secretary for Justice essentially focused on what I would call the “merits” of the application for leave.  That is to say, their arguments revolved around whether the two questions framed by Mr Chan’s team really arise from the judgment of the Court of Appeal and whether they are essentially fact-sensitive questions rather than questions of great general or public importance. 

8.With respect, the real focus of the present admission application is whether, given that one is concerned with a hearing before the Appeal Committee of our highest court, the Appeal Committee ought, as a matter of public interest, to be assisted by overseas counsel in discharging its filtering function.  In this regard, two matters are of particular significance.  As the authorities have said, the hearing itself, it being not a substantive appeal but an application for leave to appeal only, must be a “substantial” one.  Secondly, and to some extent it is related to the first, overseas counsel must be able to make a “significant contribution” to the hearing by reason of his specialty or expertise. 

9.In relation to the first matter, one must also look at the nature of the application and the issues and arguments that would be involved at the hearing in question.  The fact that the leave application is potentially the end of the road for Mr Chan in this long litigation must mean it is a substantial matter for him, and this is certainly a matter that should be taken into account.  But one must also consider the issues and arguments that may be involved.  Here, one has to be careful – I am repeating myself here – and must not confuse the substantive merits of the leave application before the Appeal Committee with the question of whether the leave hearing is a substantial one, although the two are necessarily related.  In the context of the present case, whether Mr Chan will ultimately get leave to appeal from the Appeal Committee is one thing, but whether his leave application is a substantial one in terms of the issues and arguments involved for our present purpose is another. Put in the context of counsel’s submissions, whether the two questions that he relies on are really questions of great general or public importance arising from the judgment of the Court of Appeal is one thing, but whether the arguments and counter arguments that may be involved in resolving that question before the Appeal Committee are of such nature and quality such that the hearing is going to be a substantial one is another. 

10.At the oral hearing, the court heard interesting arguments in relation to all these matters, including the merits of the substantive application for leave, not for the purpose of allowing this court to decide that question (which, as pointed out, is not seized of the matter); but rather, for the purpose of allowing this court to gauge whether the forthcoming hearing before the Appeal Committee is going to be a substantial one.

11.Having had the benefit of hearing in gist those arguments, particularly from Mr Man moving the admission, the court has been left with no doubt that the forthcoming hearing will likely be a substantial one.  

12.Take the first question as an illustration.  The Court of Appeal refused leave primarily on the basis that the issue as framed simply does not arise from the proceedings.  Specifically, the issue is formulated on the factual basis that “the opportunity could not have been utilized by B because the relevant third party would not deal with B”. As the court pointed out in paragraph 7 of its judgment dated 14 October 2016 (refusing leave), no such finding was made in the court below and on appeal the court found that “there is no credible evidence that Yugang [ie the third party] would not have purchased part of the Prestige shares from Profit Point [ie B]”.  In moving the admission, Mr Man argued that the Court of Appeal was wrong.  He contended that Waddington, as plaintiff, bore the burden of proof as to what Yugang would or would not have done.  He relied on Everist v McEvedy [1996] 3 NZLR 348 at 355, lines 8 to 13, a decision dealt with by the Court of Appeal in paragraph 8 of its judgment, but the court relied on what the New Zealand court said in lines 15 to 29 instead.

13.Mr Man submitted that in the absence of any finding that Yugang would have purchased the shares from Profit Point, one must proceed on the basis that this essential fact is not proved.

14.It is not for this court to decide whether the New Zealand case has correctly stated the relevant principles on burden of proof, or whether they are applicable to the present type of situation, or whether they have been applied correctly.  At the oral hearing, Mr Man succinctly explained to the court how he would seek to overcome this factual hurdle to the first question, and I therefore have a fairly good idea as to what arguments (and counter arguments) might likely feature at the leave application before the Appeal Committee.  The next question before the Appeal Committee would be: assuming Mr Man was (arguably) correct in his contention that the Court of Appeal had got the burden of proof wrong, whether an issue of great general or public importance had arisen from the judgment of the Court of Appeal.  Again, I have heard from Mr Man as to how he would seek to overcome the argument that the issue as framed was really a fact-specific one and no established principles of law were challenged.  I have also been taken to what the Court of Appeal has said about the applicability of the equitable principle from Keech v Sandford (1726) Sel Cas Ch 61 to the “no conflict duty”: paras 69 to 72 of the main judgment of the Court of Appeal dated 20 May 2016.  Some may not regard the arguments (and counter arguments) involved as simple or straightforward. 

15.Turning to the second matter concerning the “2^nd CFA factor”, that is, overseas counsel must be able to make a significant contribution to the hearing, there is a dispute as to whether that has to be judged by itself, or against what local counsel would have been able to contribute if no overseas counsel were instructed.  This debate arose out of how the second matter was put in the authorities.  In Re Jones QC, HCMP 2629/2006, 19 January 2007, Ma CJHC (as the Chief Justice then was) said in paragraph 11(3) that overseas counsel has to be able to provide the necessary assistance to the Appeal Committee “beyond that which will be provided by local counsel”.  That was picked up by this court in the unreported Re Dicker QC case, supra, para 11.  However, the requirement was put slightly differently by Ma JA (as he then was) in the earlier case of Re Pannick QC [2004] 1 HKLRD 950, para 16(4), where his Lordship said the matter has to be “one that is substantial and in which overseas counsel is able to contribute significantly by reason of his expertise”.  That was followed by Hartmann JA in Re Cooper QC, HCMP 184/2011, 15 March 2011, para 22, where the learned judge did not mention the requirement that the significant contribution to be made has to be something going “beyond that which will be provided by local counsel”. 

16.In my view, the difference between the two formulations is more apparent than real.  The rationale for the 2^nd CFA factor is to allow our top court to have available to assist its deliberations “at least the same pool of counsel that was available to the Judicial Committee of the Privy Council prior to 1 July 1997”: Re Pannick QC, para 16(3). In fact, there is a strong argument that perhaps the pool should be even larger, “provided of course only overseas counsel of the highest calibre appears in that court”: ibid.  That being the case, when one requires overseas counsel to make “a significant contribution” to the hearing by reason of his expertise, one is necessarily looking at the calibre of the overseas counsel and is expecting a very high standard of assistance as may be required by the case.

17.On the other hand, when one says the contribution to be made has to be something going beyond that which would be provided by local counsel, one is having in mind a very general comparison, not necessarily with any particular local counsel in mind.  The purpose of the comparison is not for the sake of comparison itself, but rather to ensure that the overseas counsel sought to be admitted is somebody of a very high if not “the highest calibre”.  One is also having in mind, when so saying, whether the hearing is a “substantial” one, that is, the first matter discussed above.

18.Re Jones QC was concerned with a run-of-the-mill application for leave to appeal, and the court no doubt took the view that the issues raised were straightforward, that is, “matters that Hong Kong counsel were more than competent to deal with” (para 9).  Indeed, the court observed there was no reason why the same local leading counsel “could not properly and competently act for [the client in question] in the application for leave before the Appeal Committee as he did before in the Court of Appeal” (ibid).  It was in that context, and in explaining why the court did not believe “that the application for leave [was] a substantial one” that the court commented it was “unlikely in the circumstances of the present case that [London silk would] be able to provide the necessary assistance to the Appeal Committee beyond that which [would] be provided by local counsel”: para 11(3).

19.In my view, the two relevant matters, so far as the 2^nd CFA factor is concerned, remain: first, whether the hearing is a substantial one, secondly (which is related to the first), whether overseas counsel would be able to make a significant contribution to the hearing by reason of his expertise.  

20.Turning to the facts of the present case, there is no dispute over the specialty and experience of the applicant.  Given that the hearing is going to be a substantial one – bearing in mind its importance to Mr Chan and the issues and arguments that will be involved, and having had the benefit of hearing some of these arguments at the hearing as they were presented by Mr Man, I have come to the conclusion that the applicant, if admitted, would be able to make a significant contribution to the hearing.

21.This being the case, and having borne in mind all other relevant considerations urged upon the court – particularly the undertaking given by Mr Chan that if the applicant is admitted to lead the application for leave to appeal before the Appeal Committee, both Mr Man and Mr Lam will also be instructed, I have come to the conclusion that on balance, the public interest would be better served by allowing the admission.  I ordered accordingly at the conclusion of the hearing.

Mr Bernard Man SC, instructed by K & L Gates, for the applicant

Mr Richard Khaw SC and Mr Martin Kok, instructed by Anthony Chiang & Partners, for the Hong Kong Bar Association

Ms Ann Lui, instructed by the Department of Justice, for the Secretary for Justice