Taching Petroleum Co, Ltd v. Meyer Aluminium Ltd

CAMP 158/2020
and CAMP 159/2020
(Heard together)

[2020] HKCA 1005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 158OF 2020

(ON AN INTENDED APPEAL FROM CTA 1/2018)

________________________

________________________

AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 159OF 2020

(ON AN INTENDED APPEAL FROM CTA 2/2018)

________________________

________________________

(Heard together)

_______________________________________

REASONS FOR JUDGMENT AND
DECISION ON COSTS

________________________________________

Hon Lam VP (giving the Reasons for Judgment and Decision on Costs of the Court):

1.These are applications for leave to appeal against the interlocutory decisions of Au-Yeung J, sitting as the Deputy President of the Competition Tribunal (“the Deputy President”) on 29 May 2020. By those decisions, the Deputy President refused to grant leave to the Defendant to adduce expert evidence in the following respects (“the Disallowed Evidence”):

(a)     Defining the market;

(b)     Whether uniformity in the pricing mechanisms and adjustments of Taching and Shell between January 2011 and June 2017 could better be explained on the hypothesis of collusion or on the hypothesis of independent conduct; and

(c)     In the event that there was collusion, whether Meyer has suffered loss and damage as a result of such conduct, and if so, quantum of damages.

2.On the other hand, the Deputy President granted leave to the Defendant to adduce expert evidence to show:

(a)     Structure of the industrial diesel market;

(b)     Whether the underlying cost factors of the oil majors were similar;

(c)     Whether there was high degree of transparency in List Prices of the oil majors; and

(d)     Whether there was a high degree of uniformity in the changes to the List Prices of the oil majors.

Over the period of 2011 to June 2017.  We shall refer to these as Permitted Evidence.

3.In respect of CTA 2/2018, the Deputy President also dismissed the Defendant’s applications for unredacted copies of some documents disclosed in Shell’s List of Documents and for further and better particulars of Shell’s Re-Amended Points of Response.  

4.The Deputy President refused leave to appeal on 27 August 2020.

5.The Defendant renewed the applications for leave to appeal in this Court in CAMP 158/2020 (originating from CTA 1/2018 with Taching as Plaintiff) and CAMP 159/2020 (originating from CTA 2/2018 with Shell as Plaintiff).

6.We shall first address the Expert Evidence applications (the substance of which is the same in both actions).

7.The reasons for the Deputy President’s refusal to grant leave to adduce the Evidence on Rejected Issues were set out at great length in the Decision handed down on 29 May 2020.

8.After hearing and reading the submissions of counsel, we are of the view that the intended appeals in respect of Disallowed Evidence (a) and (b) have no reasonable prospect of success.  As discussed at the hearing, it is clear that the Deputy President was on top of the issues in the actions (as she would be presiding over the trial which shall take place in 2021) and she was exercising a case management power over the admissibility of expert evidence in light of the pleaded cases of the parties.

9.She refused to grant permission for the calling of expert evidence on Disallowed Evidence (a) and (b) due to her assessment that they were not relevant to the issues which the court has to decide at the trial.  She carefully analysed the case as pleaded by the Defendant (see [17] to [28]) and held that the Defendant had only properly pleaded a case based on “object” defence and it was impermissible for the Defendant to attempt to run a case of “effect” defence without setting out the relevant conduct alleged to have the effect of restricting competition: see [26].  For that reason, the Deputy President held that the passing reference at 16 of the Point of Defence to a “effect” defence should be disregarded.

10.She then examined the “object” defence and the relevant principles of competition law at Section C of the judgment.  In particular, at [82] and [83] she discussed the implications that the court is dealing with an “object” defence as distinguished from a case concerning an “effect” defence.  She explained that in the assessment of an “object” defence, defining the market is not necessary.  

11.The Deputy President considered the core issues for the trial at [89] to [93].

12.The Deputy President addressed the Defendant’s applications to adduce expert evidence in Section G of the judgment.  She discussed the approach the court should adopt at Section G1.  In particular, the Deputy President said at [156]:

“ The Tribunal may give leave, as in any civil case, to adduce expert economic evidence: Order 38, rule 6; CTPD 1, §25(i). The test for granting leave is whether the expert evidence is relevant to the issues in dispute as disclosed on the pleadings. Where the proposed expert evidence is plainly inadmissible or irrelevant, the court ought to exercise its discretion to refuse the admission of such evidence. But where the court cannot form a clear view on the relevance of the proposed expert evidence or where it considers that the proposed evidence is clearly relevant, then it should grant leave for the evidence to be adduced at the trial. See Wong Hoi Fung v American International Assurance Co (Bermuda) Ltd & another [2002] 3 HKLRD 507, §12, Chu J (as she then was).”

There is no complaint by Mr Lee (appearing with Ms Lui and Mr Tse for the Defendant) about that approach though he submitted that the Deputy President had not applied it correctly.

13.The proper approach for admission of expert evidence in the post-CJR era was discussed by the Court of Appeal in Shenzhen Futaihong Precision Industry Co Ltd v BYD Co Ltd [2018] HKCA 408 at [3] to [13].  The approach adopted by the Deputy President, based on the pre-CJR authority of Wong Hoi Fung v American International Assurance Co [2002] 3 HKLRD 507, was more relaxed towards admission of expert evidence.  See in particular [12], [40], [51] of Shenzhen Futaihong Precision Industry Co Ltd v BYD Co Ltd, supra.  At [12], the Court said,

“ … In other words, the court will not give directions for expert evidence to be adduced (carrying with it the incidence of substantial costs being incurred on its preparation and court time spent on the same) simply on the basis that the court cannot rule out a possibility of such evidence being relevant and helpful in the sense as discussed above. If the applicant for expert directions fails to persuade the court on relevance and necessity of such evidence, the application should be dismissed.”

14.In the present case, it is clear from [159] that the Deputy President regarded relevance as the key consideration in the applications concerning expert evidence.

15.At [161], the Deputy President alluded to the three methods to prove an agreement or concertation in the context of parallel conduct.  Then, at [178], she regarded the Defendant as relying on the 2^nd Method and maybe the 3^rd Method also to prove collusion.

16.In Section G3, the Deputy President explained her reasons for disallowing expert evidence on market definition, viz Disallowed Evidence (a). In essence, she held that the proposed evidence in this respect as outlined in the disputed parts of the 2^nd affidavit of Dr Pang was not the pleaded case of the Defendant.

17.It seems to us that the analysis of the Deputy President in this regard was plainly right.  As submitted by Ms Lam (appearing with Ms Xu for Taching), Mr Lee conflated market definition with the structural and behavioural characteristics of the relevant market.  The Deputy President had granted leave to adduce the relevant expert evidence on the latter.  We also agree with the written submissions of Ms Sit SC (with Mr Chan for Shell, and Mr Chan appeared on his own at the hearing) that the purpose of market definition exercise is to identify the products and geographical area covered by the market and these parameters are not in dispute in the present case: the case concerns the industrial diesel market in Hong Kong. 

18.In Section G4, the Deputy President explained her reasons for confining the expert evidence on the Parallelism Issue to the Permitted Evidence.  The other aspects of the proposed evidence as outlined by Dr Pang in the 1^st affidavit was held again to be outside the scope of the pleaded cases.

19.At [199], the Deputy President had this to say by way of a concluding remark,

“ … It is not permissible use of expert evidence to fish for evidence in order to formulate a case.”

20.Subject to our observation above by reference to Shenzhen Futaihong Precision Industry Co Ltd v BYD Co Ltd, supra, we entirely agree with the Deputy President’s case management approach in this respect.

21.In light of the pleaded case before the Court, Mr Lee failed to persuade us that it would be helpful to allow the Defendant to adduce expert evidence pertaining to Disallowed Evidence (b) over and above the Permitted Evidence.

22.We also agreed with Ms Sit that the formulation of Disallowed Evidence (b) in the draft Notices of Appeal is singularly unhelpful.  Whether the evidence as a whole establish collusion is a matter of fact finding to be undertaken by the Tribunal.  It is of no assistance to allow an expert to express a view if something is “better explained” by a hypothesis of collusion.  If the expert wishes to draw attention to the Tribunal relevant matters in the overall assessment, he or she could highlight the same insofar as they come within the scope of Permitted Evidence.  The task of assessing such matters in light of all the admissible evidence remains that of the Tribunal, not the expert.

23.Despite Mr Lee’s efforts, he had not been able to persuade us that the Deputy President had fallen into an error of law in the assessments on Disallowed Evidence (a) and (b).  Nor can we see any reasonably arguable ground for suggesting that the Deputy President was plainly wrong.

24.On Disallowed Evidence (c), the Deputy President rejected the same for the reasons she gave at Section G6.  It seems to turn on whether set-off is available to the Defendant at this stage in light of the statutory regime under the Competition Ordinance Cap 619, in particular Sections 110 and 111.

25.If set-off based on competition grounds is to be permitted (and this is an arguable issue), we think it is reasonably arguable that evidence on damages is required to substantiate such a defence.  Mr Lee also relied on the power of the Tribunal to award damages under Section 94 and Schedule 3 para 1(k) of the Competition Ordinance.  Though we note the argument of Ms Lam that Section 94, being a provision under Part 6 of the Competition Ordinance, is only applicable to enforcement actions by the Commission, we think there are serious issues on what appears to be a lacuna in the statute that merit the consideration by the Court of Appeal at this stage.  It is also a point of general public importance.  We would grant leave to appeal in respect of this ground.

26.Turning to the matters which are only relevant in the Shell proceedings, we shall first address the Redaction Summons.

27.The Deputy President considered the Defendant’s application under the Redaction Summons in Section H of the judgment.  She rejected the application after she gave careful consideration to the contentions of the parties.  At [241] and [242] she summarized her assessment as follows,

“ 241.     Without disrespect, the assertion of Dr Pang on relevance of the redacted documents is made without regard to the pleaded issues.  There is simply no basis for Dr Pang to do a forensic analyses of Shell’s pricing policy on such a wide scale involving other fuel types, other customers or other industry sectors, not even for the purpose of “control” or “benchmarks”.

242.     This not a case of Shell redacting documents unthinkingly as described in Hollander and WH Holding.  Paragraphs 237 and 238 above show that Shell has actively reviewed the necessity for redaction as the case progresses.  The redactions are with reasons and I accept that they are on the ground of irrelevance.  The statement of irrelevance on affirmation is conclusive and Meyer has not begun to challenge the veracity of that statement.”

28.Again it is very much a discretionary decision since the Tribunal has to balance different factors in considering if production of unredacted copies should be ordered under Rule 24(3) of the Competition Tribunal Rules (Cap 619D).  The Deputy President held that the principles discussed in Wong Kar Gee Mimi v Severn Villa Ltd [2012] 1 HKLRD 887 and GE Capital Corporate Finance Group Ltd v Bankers Trust Co [1995] 1 WLR 172 are equally applicable in the context of this rule.

29.We are not persuaded by Mr Lee that the Deputy President erred in law in so holding.

30.We are also not persuaded that the Deputy President had exercised her discretion in a manner that warrants the Court of Appeal to interfere with it.  She did not take account of irrelevant consideration.  She took account of all relevant matters and her decision cannot be said to be plainly wrong.

31.The Deputy President addressed the summons for further and better particulars in Section J of the judgment.  The relevant principles governing applications for further and better particulars were discussed by the Deputy President under Section F1 when she addressed the Defendant’s application against Taching.  At [133] to [135], the Deputy President set out such principles,

“ 133.     The relevant principles are summarized in Million Decade Ltd v Tung Fai (unreported, HCA 1062 and 1660/2013, 20 April 2016), at §§24-27, DHCJ M Ng (as she then was). 

(1)    Pleadings should clearly elicit the issues to enable the other side to know what case he is going to meet and to marshal the required evidence to meet such case, and FBPs are to facilitate this so as to eliminate surprise and achieve fair and open litigation between parties.

(2)    Order 18 rule 12(3B) provides that FBP should not be ordered “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”.  This highlights the emphasis on procedural economy, proportionality and cost-effectiveness in the post-CJR culture that encourages parties not to engage in interlocutory skirmishes over FBP unless there is a genuine need to clarify the opposite party’s case to ensure fairness and to avoid cost-wasting.

(3)    It is inappropriate to make requests for FBP with a view to cross-examine the other side or to expose some weaknesses of the pleaded case of the other side.

134.     O 18, r 12(3B) was a new rule introduced by the CJR to implement Recommendation 34 of the Final Report of the Chief Justice’s Working Party on CJR.  The Working Party stated as follows, at §§268-269:

‘ As between themselves, the parties ought to have leeway to request, by correspondence, such further and better particulars of each other’s pleadings as they consider desirable. However, where voluntary particulars are refused, applications to the court for particulars to be ordered should only be launched where there is a genuine need for clarification of the nature of the other side’s case in order to ensure fairness or to avoid wasting costs. Attempts should also be made to schedule any such applications to be heard at general directions hearings rather than as specific pieces of satellite litigation.

As emphasized in McPhilemy v. Times Newspaper Ltd [1999] 3 All ER 775, given the modern practice of requiring witness statements, expert reports and so forth to be exchanged, satellite litigation merely to clarify pleadings is seldom necessary.  A pleading which conveys the nature of a party’s case, stating the material facts, should not attract an application for particulars even if certain details (which are peripheral or likely to emerge in the usual course) are not disclosed.  … unnecessary applications should attract appropriate costs sanctions.’

135.     It is for the applicant for FBP to satisfy the court that the order is necessary either for disposing fairly of the cause or matter, or for saving costs. It is not enough for him to merely show that the particulars requested are relevant: Well Joint Trading Ltd v Chiu Chung Chiu & ors (unreported, HCA 1768/2011, 9 July 2012), §17, per DHCJ Au-Yeung (as she then was).”

32.Mr Lee did not dispute these principles.

33.We respectfully endorse these principles.  In addition, we would add that in the context of an appeal or an application for leave to appeal against the refusal to order particulars, given the CJR litigation ethos as reflected in Order 1A, this Court will be cautious in entertaining satellite interlocutory appeals that reap no benefit to the fair trial or fair disposal of the action.

34.Thus, in the context of intended appeals against the refusal to order particulars, the correct approach is this: unless an applicant can demonstrate to this Court that, contrary to the assessment by the first instance judge, it is plain that the refusal of particulars would cause substantial prejudice to the preparation of his case, leave to appeal would not be granted.

35.In the present case, after due consideration on all the materials, the Deputy President concluded that the particulars requested by the Defendant were not necessary for the fair disposal of the core issues nor do they save costs.  She also agreed with Ms Sit that the purpose of some requests is to fish for information to support potential (unpleaded) claims of collusion.

36.Mr Lee submitted that the Defendant needs to know the following in order to prepare its evidence and these particulars would achieve such purpose:

(a)     Whether Shell’s price adjustment notices were the result of its own calculations or of collusion (which he called “Adaption Issue”);

(b)     Whether the market was genuinely transparent or the transparency was only artificially generated through direct or indirect collusion between market players (which he called “Market Transparency Issue”).

37.As held by the Deputy President, there is no ambiguity in Shell’s case in respect of these issues.

38.Shell obviously does not say that the price adjustment notices were the result of collusion.  It specifically denied collusion at para 39.1 of the Re-Amended Points of Response: see [250] of the judgment.  Shell has already disclosed the matters it took into account when adjusting its List Prices in the witness statements and documentary evidence.  Mr Lee was unable to demonstrate to us that there is any reasonable basis for the Defendant to suggest Shell is running a case that it followed Taching’s List Prices in fixing its own prices.

39.Likewise, Shell’s case on market transparency has been clearly pleaded, see the analysis by the Deputy President at [43] of the judgment.  Whilst the Defendant is entitled to dispute (and it did dispute) the same, it does not give rise to a ground for seeking unnecessary particulars.  Mr Lee did not begin to address the Deputy President’s analysis at [258] and [267] to [268] in rejecting the requests purportedly on the basis of the Market Transparency Issue.

40.There is no merit in the Defendant’s intended appeal on request for particulars.     

41.For these reasons, we shall only grant leave to appeal on the admission of expert evidence on damages.  We refuse to grant leave in respect of the other parts of the intended appeals. 

42.Since we dismissed a large part of the applications for leave to appeal, we shall order the Defendant to pay forthwith 75% of the costs of Taching and 85% of the costs of Shell in these applications.

43.As for the remaining 25% (for Taching) and 15% (Shell) costs, they would be in the cause of the appeals pertaining to expert evidence on damages.

44.Based on the statements of costs submitted by Taching and Shell and after considering the submissions of Mr Lee, we fix the total costs of Taching at $280,000 and the costs of Shell at $150,000.  Thus, the Defendant shall pay 75% of $280,000, viz $210,000 to Taching and 85% of $150,000, viz $127,500 to Shell.  These sums are to be paid forthwith.

45.We also directed that the appeals pertaining to expert evidence on damages to be heard together with CACV 477 and 478 of 2020.  In light of the fact that the trial is to take place in 2021, we shall direct that these appeals be heard on 5 January 2021 at 10:00 am (estimated half day) with the following directions regarding the filing of appeal bundles and skeleton submissions:

(a)     The Defendant shall lodge and serve appeal bundles (2 sets together with electronic version) and skeleton submissions supporting the appeals by 27 November 2020;

(b)     Taching and Shell shall lodge and serve their respective skeleton submissions in opposition by 4 December 2020; and

(c)     The Defendant shall lodge and serve skeleton submissions in reply by 11 December 2020.

46.Notices of appeal shall be issued by the Defendant pursuant to the leave granted under [41] above by 25 November 2020.

Mr Kenneth Lee, Ms Nana Lui and Mr William Tse, instructed by Robertsons, for the defendant in both cases

Ms Catrina Lam and Ms Cherry Xu, instructed by Herbert Tsoi & Partners, for the plaintiff in CAMP 158/2020

Mr Joshua Chan, instructed by Clifford Chance, for the plaintiff in CAMP 159/2020

Written submissions by Ms Eva Sit SC, instructed by Clifford Chance, for the plaintiff in CAMP 159/2020