Competition Commission v. W. Hing Construction Co Ltd and Others

CTEA 2/2017

[2018] HKCT 5

IN THE COMPETITION TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COMPETITION TRIBUNAL ENFORCEMENT ACTION NO 2 OF 2017

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BETWEEN

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Before: Hon G Lam J, President of the Competition Tribunal in Chambers

Date of Hearing: 26 September 2018

Date of Decision: 26 September 2018

Date of Reasons for Decision: 28 September 2018

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REASONS FOR DECISION

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1.These are the Tribunal’s reasons for the rulings at the hearing on 26 September 2018 originally fixed for the applicant’s application to strike out various parts of the report of the expert engaged by the 2^nd, 3^rd, 4^th, 5^th, 6^th, 7^th, 8^th, and 10^th respondents (“Report”). One of the grounds relied on by the applicant is that the Report contains factual materials not supported by evidence and in particular by the relevant respondents’ witness statements.

2.On 20 September 2018, the 2^nd, 3^rd, 5^th, 6^th, 7^th, 8^th and 10^th respondents took out a summons for leave to file and serve witness statements or supplemental witness statements of eight individuals, which seek to verify the factual matters in the Report that the applicant says are not supported by any evidence.  The 4^th respondent has taken a neutral stance on the applicant’s summons, and has indicated that it will not be seeking to call the expert or adduce the Report as expert evidence.

3.The first issue arising from counsel’s arguments is whether the Tribunal should entertain the strike-out application at all at this stage.  On behalf of the applicant, Mr Chan SC submitted that where the expert evidence is plainly inadmissible, a court or tribunal ought to exercise its discretion to rule on it before the trial.  That would save time and costs and promote certainty in litigation: Ko Chi Keung v Lee Ping Yan [2001] 1 HKLRD 829, 832-833; Wong Hoi Fung v American International Assurance Co (Bermuda) Ltd & Anor [2002] 3 HKLRD 507 at §11.

4.On behalf of the 2^nd and 3^rd respondents, Mr Chim, placing reliance on Rogers v Hoyle [2015] QB 265 at §§53-55 and cases following it such as Moylett v Geldof [2018] EWHC 893 (Ch) at §4 and Gill v HMRC [2017] UKFTT 597 at §8(4), submitted that it is an unnecessary and disproportionate exercise to try to edit or excise parts of the Report, and that the proper approach is to leave it to the Tribunal at trial to see the whole Report, leave out of account any part that is inadmissible, and make use of the Report as it thinks fit.  I have no doubt that in an appropriate case this approach may well be a sensible one to adopt.  But, in my view, as with case management questions generally, one cannot be dogmatic about it.  Whether a court or tribunal should entertain an inadmissibility objection to an expert report prior to the trial must depend on the particular circumstances of the case.

5.In the present case, I have no doubt that it is appropriate to grapple with the objections raised as early as possible because, as explained below, very substantial parts of the Report are not supported by evidence that the respondents have hitherto indicated they will be adducing at trial.  The question raised will have an obvious and fundamental impact on how the applicant’s experts should prepare their opinions, on the scope of the factual disputes, and on the conduct of the trial itself.  To leave the cloud of uncertainty looming until the evidence unfolds at trial would hamper preparation, be disruptive to the trial itself and potentially cause unfairness to the other parties.

6.The next question is whether the applicant has made out its grounds for striking out the parts of the Report that it seeks to impugn.  Three objections have been raised by the applicant to the impugned paragraphs, some of which are objected to on more than one ground.  Turning to the first ground, the applicant has in my view clearly demonstrated that there are numerous paragraphs where the expert has referred to her understanding of certain facts but (i) the source of the information is not specified, (ii) the source of the information is said to be the “Relevant Respondents” (ie the 2^nd, 3^rd, 4^th, 5^th, 6^th, 7^th, 8^th, and 10^th Respondents) without specifying which persons provided it, (iii) the information is said to be obtained from “a representative” of a particular respondent without identifying the person, (iv) the facts asserted are not contained in the witness statements hitherto exchanged, or (v) a combination of the above apply. 

7.Furthermore, the matters in question are not peripheral or trivial facts but go to the heart of the respondents’ argument that the first conduct rule is excluded under Schedule 1 to the Ordinance by reason of the economic efficiencies produced by the alleged arrangements.  The matters relayed by the Report included facts about the respondents’ methodology of renovation work as well as time, costing and pricing issues.  Mr Yip who appeared on behalf of the 6^th, 7^th, 8^th and 10^th respondents stated that without those facts the Report would be “devoid of substance and unlikely to be of much help”.  Mr Pun SC also submitted on behalf of the 5^th respondent that without the passages in question there would effectively be no expert opinion that could be relied upon. 

8.The respondents’ counsel have referred to authorities suggesting that it may be proper and sometimes necessary for experts to refer to and give their opinion on assumed facts (HKSAR v Kissel [2014] 1 HKLRD 460 at §132; JP Morgan v Springwell [2006] EWHC 2755 (Comm) at §21).  I have no quarrel with that proposition in itself.  But as stated by Heydon J in Dasreef Pty Ltd v Hawchar [2011] HCA 21:[1]

“64. … Expert evidence is inadmissible unless the facts on which the opinion is based stated by the expert – by way of proof if the expert can admissibly improve them, otherwise as assumptions to be proved in other ways. …”

“66. … An expert opinion is not admissible unless evidence has been, or will be, admitted, whether from the expert or from some other source, which is capable of supporting findings of fact which are sufficiently similar to the factual assumptions on which the opinion was stated to be based to render the opinion of value. …”

9.This is not a case where the respondents have filed witness statements to indicate that they intend to adduce certain factual evidence and their expert then gives an opinion on the assumption of such factual evidence being accepted.  Instead, the extensive factual matters referred to in the Report were mentioned there for the very first time – by way of statement of the expert as to what she had understood from or been informed by the respondents or their representatives.  Until and unless they are independently established as facts, they remain assumptions made by the expert.  Without a proper basis for introducing the relevant factual evidence, there is no prospect of establishing the relevant facts.  The objectionable feature here is that the respondents would be trying to adduce factual evidence through the back door, without having exchanged witness statements to cover such evidence as required.

10.Whilst maintaining there is nothing objectionable in the Report, as stated above the 2^nd, 3^rd, 5^th, 6^th, 7^th, 8^th and 10^th respondents have belatedly applied for leave to file and serve witness statements of two additional witnesses and supplemental witness statements of six existing witnesses. In broad terms the statements seek to confirm that the witnesses have indeed informed the expert of the matters set out in the paragraphs impugned, and that such matters are true and accurate to the best of the knowledge of the witnesses. If permitted, these statements would go a long way to addressing the defects identified by the applicant under the first ground.  The question is whether these respondents should be allowed to do so at this late stage.

11.The applicant opposed the respondents’ application to put in further evidence, pointing out that the respondents had had ample time in which to exchange witness statements which the parties did in April and May 2018 and that the respondents had been given much indulgence in relation to expert evidence, as can be seen from my decision on 10 July 2018 ([2018] HKCT 2).  I have much sympathy for the applicant’s arguments but in the end, in the circumstances of this case I have come to the view that the statements should be permitted to go in.  I take into account in particular that this is the first case before the Tribunal in which expert evidence is to be adduced, and that pecuniary penalties are being sought here so that the proceedings, as accepted by the applicant, involve the determination of a criminal charge for Bill of Rights purposes.  Perhaps as a result of the novelty of the Competition Ordinance in Hong Kong the relevant respondents’ former legal representatives did not appear to have a grasp of what was required by way of expert evidence and as its factual basis.  Without the requisite foundation in fact, much of the expert’s opinion would be based on unproven assumptions and of little value, and what has been called “a fundamental pillar” of the defence – albeit an alternative case – would automatically implode without any examination of its merits.  In a future case the Tribunal may well say that it is all too late and that those who find themselves barred from putting in such eleventh-hour evidence have only themselves to blame.  But having balanced all relevant matters in this case including the public interest dimension I have come to the view that the statements should be permitted. 

12.As to the second ground, namely, that the expert has ventured out of her field of expertise, it is not entirely clear how the attack interacts with the proposed new evidence.  The applicant’s summons was therefore adjourned sine die in that respect.

13.The third ground is directed at parts of the Report which, the applicant says, go beyond the scope of the directions on expert evidence given by this Tribunal.  In particular, §§177-183 of the Report appear under the heading “The market characteristics in the provision of decorative work to tenants in On Tat Estate (Phase 1) are not conducive to collusion”.  They purport to set out matters concerning incentives to participate in a price-fixing agreement, the likelihood of a price-fixing agreement and market characteristics that are or are not conducive to forming and sustaining a price-fixing agreement or collusive agreement in general, concluding (in §183) that the actual market conditions were “not at all conducive to firms engaging in any collusive agreements”.

14.These paragraphs in my view clearly go to something quite extraneous to the topics set out in the directions for expert evidence.  The appendix to the order of 4 June 2018, based on the relevant respondents’ application, sets out the scope of expert evidence which in broad terms concerns (i) the contribution of the alleged market sharing agreement and price-fixing agreement to improving the provision of decoration and renovation services by the relevant respondents and the economic efficiencies thereby attained, (ii) the resulting benefit of the alleged agreements to the tenants in the form of lower prices, and (iii) whether the restrictions imposed by the alleged agreements were indispensable to the attainment of the efficiencies.  In short, the expert evidence was proposed by the relevant respondents, and eventually directed by the Tribunal, to cover what may be called the economic efficiencies exclusion in paragraph 1 of Schedule 1 to the Ordinance.  The paragraphs in question, instead of dealing with the possible benefits of the alleged agreements, seek to say that those agreements were inherently unlikely.  It seems to me they so plainly fall outside the scope of expert evidence as directed that they should be struck out now.

15.For these reasons, the Tribunal (i) indicated that it would in principle allow the further witness statements to go in, subject to their being made in the correct form (and not simply by cross-referencing to specified paragraphs of the Report); (ii) ordered paragraphs 177-183 of the Report to be struck out; and (iii) adjourned the remainder of the applicant’s summons sine die.

Mr Abraham Chan SC and Mr Byron Chiu, instructed by King & Wood Mallesons, for the Commission (the Applicant)

Mr Carter Chim and Mr Thomas WK Wong, instructed by JCC Cheung & Co, for the 2^nd-3^rd Respondents

Mr Peter Dong, instructed by Henry Wan & Yeung, for the 4^th Respondent

Mr Hectar Pun SC, Mr Anson Wong Yu Yat and Ms Allison Wong, instructed by JCC Cheung & Co, for the 5^th Respondent

Mr Richard Yip, instructed by JCC Cheung & Co, for the 6^th-8^th and 10^th Respondents

The 1^st and 9^th Respondents did not appear