Daimler Ag (Formerly Mercedes-benz Aq) v. Leiduck, Herbert Heinz Horst and Another

HCA 4089/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4089 OF 1994

____________

Before: Hon L Chan J in Chambers

Date of Hearing: 27 November 2012

Date of Decision: 30 November 2012

Date of Reasons for Decision: 6 December 2012

_________________________

REASONS FOR DECISION

_________________________

1.There are three applications. Two are issued by the defendants for the 1st defendant to give evidence via video link and to strike out a witness statement of the plaintiff. The third one is issued by the plaintiff for adducing expert evidence. I have already given my decision on them on 30 November, 2012. These are my reasons.

2.The plaintiff applied for a Mareva injunction against the defendant on 29 April 1994.  The injunction was later discharged on different dates in relation to the two defendants.  The defendants have issued a summons on 23 July 2007 seeking an order for an enquiry as to the damages suffered by them by reason of the injunction and an order for the payment of such damages by the plaintiff to them.

3.The summons has been set down for trial commencing on 4 February 2013 and to last for 16 days.  The three applications are for preparation of the coming trial. 

4.The 1st application was filed by the defendants on 20 August 2012 for leave for the 1st defendant to give evidence at the trial from Germany by video link.  This application is hotly disputed.

5.The 2nd application is issued by the defendants on 9 November 2012 to strike out the witness statement of Vladimir Khvalei dated 31 August 2012 served by the plaintiff on the defendants and intended to be used at the trial.  The ground for striking out is that the evidence in this statement is in the nature of an expert report and is in any event scandalous, irrelevant or otherwise oppressive. 

6.There is no dispute that the evidence in this statement is in the nature of an expert report and hence should be struck out on this ground alone. The real dispute is on the 3rd application issued by the plaintiff on 21 November 2012 for leave to adduce expert evidence at the trial.  The expert evidence sought to be adduced would be similar to that contained in the witness statement of Vladimir Khvalei.  The defendants oppose this application on the ground that the expert evidence sought to be adduced is irrelevant to the issue at the coming trial which is on whether there should be an enquiry on damages. They say that such evidence is only relevant to the issue of quantum which is to be canvassed at the enquiry, if there should be one.  Hence, it is unnecessary to adduce such evidence at the coming trial.

Video link

7.The 1st defendant made his 7th affidavit on 25 September 2012 in support of the video link application.  He said he was blind and suffered from a number of serious heart related diseases.  Owing to his deteriorating health, he had been living in a home for the aged since February 2012.  There were doctors, nurses and ancillary medical staff at the home on a 24-hour basis and the home was very close to St Joseph Hospital.

8.He was almost totally immobile and it would be extremely difficult for him to physically travel.  He needed constant assistance in order to be able to move around.  He had made hypothetical enquires with people regarding the possibility of his travelling by air, ship or rail from Germany to Hong Kong and no carrier would accept him unless he could produce a clean bill of health which he could not.

9.The defendants also produced two affidavits by two doctors on the 1st defendant’s state of health.  One affidavit is made by Dr Bernd Langmack on 25 September 2012.  Dr Langmack is a cardiologist and senior consultant at St Joseph Hospital.

10.Dr Langmack said in his affidavit that the 1st defendant was born on 9 January 1930 (and is now 82 years old).  He had been treated as an inpatient and outpatient at his hospital since 2001.  The last time that the 1st defendant was at the hospital was between 5 and 20 April 2012 when he was there as an inpatient.  He was diagnosed to be suffering from the following illnesses:

(a)  Severe coronary heart disease;

(b)  Status post anterior and posterior myocardial wall infarction;

(c)  Status post multiple coronary artery stent-implantations with no further options for any additional revascularisation procedure;

(d)  Chronic heart failure, caused by ischemic cardiomyopathy with severe impairment of left ventricular myocardial function (left ventricular ejection fraction < 30%);

(e)  Recurrent cardiac arrhythmia (ventricular arrhythmia and atrial fibrillation);

(f)  Status post pacemaker implantation;

(g)  Clinical manifestation: chronic cardiac failure (NYHA III-IV) and Angina pectoris (CCS III-IV);

(h)  Retinitis pigmentosa with profound eyesight restriction.

11.Dr Langmack further said that the 1st defendant could no longer undertake air-travel or longer surface travel because any physical and mental stress could cause severe myocardial ischemia with Angina pectoris, acute heart failure and rhythm disturbances and eventually would be life-threatening.  For the same reasons, it would be dangerous to his life if he were to attempt to travel by train or sea.

12.The other affidavit is made by Dr Reinhold Krämer, a general practitioner.  Dr Krämer said that the 1st defendant had been receiving regular treatment from the general practice of which he was a member and the 1st defendant was suffering from the following medical conditions:

(a) arterial hypertension;

(b)  exicosis;

(c) coronary two-vessel disease;

(d)  status post anterior wall infarction;

(e) status post posterior wall infarction;

(f)  permanent atrial fibrillation;

(g) status post pacemaker implantation;

(h)  bilateral amaurosis.

13.Dr Krämer further said that he had treated the 1st defendant on 21 August 2012 and was prescribing medicine to the 1st defendant on a continuing basis.  No improvement of the conditions of the 1st defendant was expected because of the severity of his illness.  The 1st defendant was not capable of air-travel because his severe heart related conditions would make a journey by air life threatening.  He could also not come to Hong Kong by train or sea transportation for the same reasons.

14.However, Dr Krämer did not give any detail on why the 1st defendant had to be treated on 21 August, what treatment was he given and what medicine was prescribed. If the incident on 21 August was of any particular significance, I expect that Dr Krämer would have provided the details of it in his affidavit.

15.Both sides regard the evidence of the 1st defendant at the trial as important.  For the defendants, he is the only witness on two alleged frauds committed by the plaintiff in relation to the obtaining and discharge of the injunction.  The discharge is only in respect of the 2nd defendant.  To prove the alleged frauds is of crucial importance for the defendants’ quest for the inquiry on damages.

16.The plaintiff also wants to cross-examine the 1st defendant.  The plaintiff submitted that the summons for inquiry was issued only some 13 years after the discharge of the injunction against the 2nd defendant on 17 May 1994.  The first head of loss alleged by the 1st defendant was the loss of dividends from the 2nd defendant.  He made this claim in early 2008.  This claim is identical to a claim made by him against the plaintiff in Germany in 1998 which was withdrawn in 1999 on the day just before the start of the trial.  Then in September 2011, the defendants made another claim of loss on the basis of loss of an opportunity by the 1st defendant to sell his shares of the 2nd defendant to a Russian Company Stern-Stroy Limited.  Then in January 2012, the defendants made a 3rd claim based on the loss of an alleged housing project. 

17.The plaintiff also said that the 1st defendant had given inconsistent versions of evidence on the existence of 2nd defendant since the granting of the Mareva injunction in April 1994.  There are also disputes on the authenticity of documents of core relevance to the viability of the claim of damages relating to Stern-Story Ltd. 

18.I should not go into these matters in any detail or make any comment on them for the purpose of the application before me as these are matters for the trial.  However, it is the plaintiff’s case that because of the above matters, the evidence of the 1st defendant for the trial will be controversial and go to the heart of the dispute for the trial.  His credibility will be one of the major issues.  The plaintiff also referred to So Amy & Ors v Au Leslie [1995] 2 HKC 113 and indicated that it would ask for the 1st defendant to give his evidence in chief orally rather than adopting his witness statement.  The cross-examination of the 1st defendant is expected to be thorough and vigorous.

19.I refer to So Amy where Godfrey JA said at 118H to 119B:

“…But the most important factor for a judge to consider in deciding whether or not to take it is the extent to which the evidence of a particular witness is likely to be controversial, and his credibility put in issue. In these circumstances, the way in which the witness responds to the oral examination in chief may be of great importance; and, that being so, it is wrong in principle to make orders applying to all witness statements without regard to the extent to which the witness’s evidence is likely to be controversial and go to the heart of the dispute: see Mercer v. Chief Constable of Lancashire [1991] 1 WLR 367, per Lord Donaldson of Lymington M.R. at p.371 H. By consenting to the course taken in the present case, the judge deprived himself of the advantage he would otherwise have had of seeing and hearing how Leslie and Goldie respectively responded to oral examination in chief. This was, in my judgment, most unfortunate. I have not overlooked para. 3 of the Practice Note [1995] 1 All ER 385 under which witness statements, in England and Wales, stand as evidence in chief unless otherwise ordered; but here I would venture to express the hope that, in future, when judges are faced with applications at the trial to allow witness statements to stand as the witness’s evidence in chief, they will refuse such applications whenever the evidence of the witness is likely to be controversial and his credibility put in issue.”

20.Not only does the plaintiff want the 1st defendant to give evidence, it also wants the 1st defendant to give evidence in the witness box in this court upon his oath rather than from Germany via video link.  The plaintiff referred me to the legal principles applicable to an application to give evidence via video link.  The plaintiff referred to Practice Direction 29, paras 4 and 5 which provide:

“When the Technology Court should be used

4. It is a case management question within the discretion of the court or tribunal concerned whether any proceedings or parts of any proceedings should be conducted in the Technology Court.

5. In making its decision, the court or tribunal will take into account the views of all the parties, the availability of the Technology Court, the subject-matter of the proceedings or the relevant part of the proceedings and all other material circumstances, including in particular, whether the proposed use of the Technology Court is likely :-

(a) to promote the fair and efficient disposal of the proceedings;

(b) to save costs; and/or

(c) materially to delay disposal of the proceedings.”

21.The plaintiff also referred to the judgment of Rogers VP in Re Chow Kam Fai ex parte Rambas Marketing Co LLC [2004] 2 HKLRD 260 at paras 16 to 19:

“Whether the respondent should be permitted to use VCF?

16. The next question addressed by the judge was as to whether the cross-examination could be conducted whilst the respondent was in Macau using VCF. The judge approached this question on the basis that the giving of evidence by VCF was an exception rather than the rule and that it would be a matter of privilege accorded to the respondent and not a matter of right for him to be allowed to do so.

17. In my view the judge was quite correct in this approach. The starting point must be that proceedings are conducted in court. Mr Kat, who appeared on behalf of the respondent, took issue with the approach of the judge where it was said in paragraph 28 of the judgment that “On the other hand, witnesses are obliged by law, the solemnity of the court atmosphere and the threat of immediate sanction to give evidence on oath or under affirmation and to tell the truth."

18. Whether or not the threat of immediate sanction is something that weighs heavily on witnesses is, perhaps, a matter of conjecture. Nevertheless, I have no doubt that the atmosphere of a court is highly important as regards the taking of evidence. The solemnity of court proceedings and its atmosphere is something which, I have no doubt, plays an important role in the way justice is administered.

19. There is no doubt that VCF is a highly useful tool.  It must be a question of judgment in each case as to whether VCF should be used for the taking of evidence.  No doubt, on those occasions when the witness is giving evidence that is technical or purely factual, without important issues as to credibility, a court may be more disposed to allow evidence to be given by the use VCF.  Questions of cost and convenience are no doubt also important considerations that the court will have to weigh in deciding whether to allow evidence to be given using VCF. But, first and foremost, it seems to me that the judge was correct in his approach that a party wishing to give evidence using VCF should establish a sound reason why that privilege should be accorded.”

22.The next judgment relied on by the plaintiff is Raj Kumar Mahajan v HCL Technologies (Hong Kong) Ltd [2010] 5 HKLRD 119 also by Rogers VP at paras 7 to 9:

“7. As far as I am concerned the solemnity of the court is most important. In Hong Kong it is important that the members of the court, both the judges and counsel appearing, are properly attired. It is important that the court proceedings are carried on in court in the way that we do. It does give a solemnity to the occasion. One only has to observe parties and witnesses coming to court to observe their demeanour. It does have an impact. Giving evidence via a television link, in my view, dispels part of that. The place for a judge to sit, for witnesses to give evidence and for submissions to be made, is in court.

8. This so-called VCF system, which Hong Kong does have, and, indeed, the Technology Court is frequently used for it, is a very useful tool but, as I said previously, it is a tool which should be used with some care. If a witness is not giving evidence that is likely to be attacked on the basis of credibility, it may be important. If, for example, one has technical evidence, perhaps from a well known and busy physician or surgeon in a foreign country, who has many other patients under his care and many other considerations and is giving highly technical evidence, it may well be important and useful to have his evidence by video link because otherwise one may not have it at all. But these are very different circumstances.

9. I regret to note that in the case of Sun Legend Investment Limited v Ho Wah Yuk [2008] 4 HKLRD the learned judge there used words to the effect that my observations in the Chow case had been “clearly reversed by the House of Lords”. I wish to dispel any misconception. First of all, what I said was not a proposition of law, it was a statement as to one of the considerations which a court must have regard to when deciding whether to use VCF technology and, secondly, as far as I am concerned, what I said was not reversed.”

23.Finally, the plaintiff referred to the decision of Stone J in Asia-Pac Infrastructure Development Ltd v Ing Yim Leung Alexander & Ors, HCA 16778/1999 dated 8 November 2010 at paras 57 to 62:

“57. It seems to me that there is a very considerable difference in principle between permitting the use of VCF in instances, say, of expert witnesses – the Commercial Court, for example, can recall hearing expert evidence in pre-Technology Court days at the Wanchai premises of Cable & Wireless from an engineer in Falkland Islands – or in terms of taking evidence from peripheral witnesses of fact, when contrasted with permitting a party or a crucial witness who wishes positively to avoid coming to Hong Kong for reasons peculiar to himself simply to be granted permission to proffer his evidence to the trial court, and thus to the judge of primary fact, by means of VCF.

(c) Re-exercise of judicial discretion in the instant case

…

59. In my judgment in a case of this nature, wherein each side accuses the other of lying as to the provenance of the emerging business opportunities in issue, credibility is uppermost – …

…

61. … on any basis Mr Ho evidently is a crucial witness of fact for the plaintiff – indeed I am informed that he is the only witness to be called by the plaintiff, …

62. … and if and in so far as the plaintiff wishes to use Mr Ho’s evidence, Mr Ho will have to come to court to give it: bluntly put, this court wishes to hear his testimony ‘live’, and be in a position to see/scrutinise the witness some ten feet away in the witness box, and not allow him to be ‘shielded’ through the medium of a plasma screen.”

24.In addition to the reasons contained in these decisions in favour of requiring a witness to give evidence in Hong Kong, the plaintiff also referred to the evidence of a German lawyer, Wolfgang Gruber. Mr Gruber referred to two modes of taking evidence in Germany for foreign legal proceedings.  One mode is under the Hague Convention.  That is not favoured by the parties as it will take a long time to arrange and the time available before the commencement of the trial is too short for that. 

25.The other mode is described as passive legal assistance.  But there is no sanction for perjury under this mode.  In the light of the plaintiff’s stance that there are serious inconsistencies and flaws in the 1st defendant’s evidence, the plaintiff submitted that such sanction would be necessary. 

26.For the above reasons, the plaintiff submitted that it would be prejudiced if the 1st defendant should be allowed to give evidence from Germany via video link to Hong Kong.

27.The plaintiff then referred to the 1st defendant’s health conditions.  The plaintiff did not accept the evidence of the two doctors.  But the plaintiff has not offered any contrary evidence on the medical conditions of the 1st defendant.  I think I would have to proceed on the basis of the medical conditions of the 1st defendant as diagnosed by the doctors.

28.Dr Langmack’s conclusion based on his diagnosis is that the physical and mental stress of the air travel or longer surface travel can cause severe myocardial ischemia with Angina pectoris, acute heart failure and rhythm disturbances and eventually would be life-threatening.  Dr Krämer is of a similar view regarding air-travel or travel to Hong Kong by train or sea transportation.  I however do not think they would regard the travel from the 1st defendant’s residence to the nearby international airport in a limousine or other types of spacious vehicles as a risky surface travel.

29.Regarding the above professional assessments of the possibility of risk to health, there is the fact as pointed out by the plaintiff that there was no occasion from 20 April 2012 to 25 September 2012 (when Dr Langmack made his affidavit) that the 1st defendant had to be treated at St Joseph Hospital for any cause. 

30.The 1st defendant was treated by Dr Krämer on 21 August 2012, but as I have observed above, Dr Krämer did not say anything that was significant about that incident that this court should be told.

31.Regarding the physical and mental stress of air-travel, I think one should take a realistic assessment of the conditions of modern day air-travel.  Travelling in the economy class may indeed be uncomfortable particularly for a tall and/or fat person in long haul journeys.  But the same cannot be said of the business class.  For travelling in first class, many people regard it as an enjoyment in itself.  If the 1st defendant should be required to come to Hong Kong, he can surely opt for the cool and comfort of first class air-travel.  If he is still worried about the lack of medical care during the flight, he can engage a doctor to fly with him and to be present in court in the course of his evidence. 

32.The defendants can also consider engaging the service of a commercial medical escort to fly the 1st defendant here and back home.  That may be an expensive option and there is no evidence on the affordability of the defendants.  I however note that the defendants have been engaged in eight court battles with the plaintiff since April 2010 (including the present one) and they were and are always represented by leading and junior counsel.

33.The 1st defendant has also said that he is in near total immobility.  But that is not the view of his doctors.  Dr Langmack only opined against longer distance surface travel whilst Dr Krämer only said he could not come to Hong Kong by air, train or sea travel.

34.The 1st defendant also alleged that no transport provider would take him on without a clean bill of health.  That is however an unsupported assertion.  I also doubt very much whether this assertion would apply to medical escort service.

35.Leading counsel for the defendants repeated the difficulties alleged by the 1st defendant in his affidavit and reiterated the opinions of the two doctors.  Counsel submitted strenuously that it was simply impossible for the 1st defendant to come to Hong Kong to testify.   Counsel further submitted that since the 1st defendant is the most important witness of the defendants’ case, if he is not permitted to testify via video link, serious, if not fatal, prejudice would be caused to defendants.

36.Regarding sanction for perjury, leading counsel for the defendants also submitted that even if the 1st defendant should come to Hong Kong to give evidence, he would go back to Germany immediately afterwards.  It is unlikely that he would be arrested here for perjury before his departure.  Hence, practically there is no difference whether he should give evidence in Hong Kong or Germany.  Therefore, the prejudice from the lack of sanction for perjury is only the plaintiff’s conjecture.

Decision

37.I fully agree with the reasons given by Rogers VP and Stone J on the desirability of requiring witnesses to testify in the court room rather than via video link.  This is particularly so when credibility of key witnesses are concerned.  I think these reasons operate vigorously in this case in relation to the evidence of the 1st defendant. 

38.I also disagree that the sanction for perjury has no practical effect in this case.  The possibility of being arrested before departure from or upon setting foot in this territory again will be a sanction for the 1st defendant to tell the truth on oath.

39.Regarding the physical and mental stress that can result in adverse health consequences which, according to the doctors, would eventually be life threatening, such stress as may result from first class air-travel or travel arranged by commercial medical escort is not particularly strong comparing with the stress brought about by a thorough and vigorous cross-examination.

40.Leading counsel for the plaintiff also submitted that there would be many documents that the 1st defendant would be asked to peruse in the course of his evidence and it would be inefficient for the 1st defendant to give evidence via video link as time would be wasted for him to look for the right document.  

41.I do not think this is a relevant consideration.  The 1st defendant claims that he is blind or at least half blind.  He might be unable to read the documents.  In any event he would require assistance to locate the relevant documents.  Leading counsel for both sides have indicated that if the 1st defendant should be allowed to give evidence via video link, their instructing solicitors would send people to Germany to observe the course of his evidence.  I am sure those who might be sent by the defendants’ solicitors would render whatever assistance the 1st defendant might require in locating documents in the course of his evidence.

42.Weighing and considering all the facts and arguments presented by the parties, I am of the view that if the 1st defendant should be allowed to give evidence via video link, the plaintiff would be prejudiced as the force and effect of the cross-examination, if presented to the 1st defendant through the video monitor, would be weakened. 

43.I am also not convinced that there are sufficient reasons for me to exercise the discretion to grant the 1st defendant leave to give evidence via video link.  I therefore dismiss the defendants’ summons dated 20 August 2012 with a costs order nisi that the defendants do pay the plaintiff the costs of this summons in any event with certificate for two counsel.

Striking out

44.I allow the defendants’ summons dated 9 November 2012 to strike out the witness statement of Vladimir Khvalei dated 31 August 2012.

45.I also make a costs order nisi that the plaintiff do pay the defendants’ the costs of this summons in any event but without counsel fees.  There is not really a dispute on this summons.  The dispute is in the expert evidence summons.

Expert evidence

46.I have already mentioned above that one of the claims put forward by the 1st defendant was the loss of the opportunity of selling his shares in the 2nd defendant to the Russian company Stern-Stroy Limited.  This claim was first mentioned in September 2011.  Mr Helge Leiduck, the son of the 1st defendant, in his 2nd affidavit filed on 30 September 2011 referred to an agreement by the representatives of Stern-Stroy to purchase 70% of the shares of the 2nd defendant at US$20 million and to bring investment of up to US$40 million to the 2nd defendant.  He also produced a letter of intent dated 25 February 1994 purportedly issued by Stern-stroy. 

47.However, he said the alleged deal was ruined by the Mareva injunction.  He produced a further letter dated 1 July 1994 also purportedly from Stern-Stroy terminating the letter of intent. 

48.He also referred to this alleged deal and the purported letters from Stern-Stroy in his witness statement for the trial.  The two purported letters bear a registration no. 7725214235.

49.It is however the plaintiff’s case that Stern-Stroy was only established in December 2002 and was not in existence at the time when the two purported letters were allegedly issued.  The plaintiff says that this is a bogus claim and the two purported letters are fabrications.  It goes further to say that the bogus claim and the fabricated letters cast doubt on the credibility of the 1st defendant and his son generally.

50.In fact after Helge Leiduck had produced the purported letters in his 2nd affidavit on 30 September 2011, the plaintiff responded by filing an affidavit of one Anna Belova, a manager of Baker and Mckenzie’s Moscow office, and dated 6 December 2011 deposing to the result of her company searches and exhibiting various public records she obtained. 

51.The defendants then responded with an affidavit by one Olga Salman and the 3rd affidavit of Helge Leiduck.  Ms Salman said she had worked for Stern-Stroy from January 1992 to January 1995.  She further said that Russia had a new company registration system in 2002 which adopted old registration numbers of companies.  Helge Leiduck also deposed to the existence of Stern-Stroy in 1992.  He further challenged Belova’s evidence as expert evidence of Russian law and hence inadmissible.  

52.The plaintiff’s solicitors then proposed to adduce expert evidence on Russian company law and Russian company registration system to assist the court to decide whether Stern-Stroy was in existence in 1994.  But the defendants’ solicitors said in a letter dated 12 April 2012 that this was a matter of fact to be decided by the judge and not suitable to be the subject of expert evidence.  (The defendants’ solicitors now explain that their stance was that quantum of the defendants’ loss was a matter of fact and could not be confused with the expert evidence of Vladimir Khvalei.)  In the light of the stance then taken by the defendants’ solicitors, the plaintiff’s solicitors filed the witness statement of Vladimir Khvalei on the issue of the existence of Stern-Stroy on 7 September 2012 as factual evidence.  However, when the parties attended before Deputy High Court Judge Lok on 25 June 2012 in a case management conference, counsel for the plaintiff had already indicated to the judge that expert evidence might have to be adduced.

53.After the witness statement of Khvalei was filed on 7 September 2012, the defendants’ solicitors wrote on 22 October 2012 and said that this statement was in the nature of an expert report and that such evidence was relevant to quantum only and not relevant to the coming trial.  They further issued a summons on 9 November 2012 to strike out this witness statement.

54.Leading counsel for the defendants in opposing this application submitted that such evidence would be irrelevant for the trial as it would be relevant only to the exact amount of loss suffered by the defendants.  Counsel said that the trial would determine whether an enquiry should be held but it would not be the enquiry itself.  In order to justify the enquiry, the defendants had to adduce some prima facie evidence of loss at the trial, but not all the evidence as might have to be adduced for the enquiry.  The court also would not hear protracted arguments at the trial on whether the alleged loss would be recoverable.  Hence, the defendants’ witnesses on quantum would not be called at the trial.  Such evidence would only be necessary if the court should direct an enquiry after the trial. 

55.Leading counsel also submitted that to allow the expert evidence to be put in would prolong trial, blur the issues and impose extra psychological and financial pressures on the defendants contrary to the underlying objectives of the Rules of the High Court as set out in O 1A r 1.

56.Leading counsel in her written reply submissions further said that the Stern-Stroy issue would not be canvassed at the trial as it was not listed as an issue in the written submissions of the plaintiff’s leading counsel.  I do not think this is a point taken fairly.  The Stern-Stroy issue was not pleaded as an issue in the defendants’ Amended Points of Claim re Fraud as the two alleged frauds had nothing to do with the existence or otherwise of Stern-Stroy in 1994.  However, the submissions of leading counsel for the plaintiff clearly states in paragraph 25 that there would generally be no enquiry unless the defendants were able to demonstrate with come credible evidence that they had suffered loss as a result of the injunction.  The plaintiff thus wishes to adduce expert evidence to show that the defendant’s evidence of loss of opportunity to sell the 2nd defendants’ shares to Stern-Stroy cannot be credible.

57.Leading counsel for the defendants further referred to some correspondence and the plaintiff’s demand for discovery and interrogatories on the Stern-Stroy issue which were made not for the trial but for an enquiry.  Leading counsel fairly pointed out that these documents and demands came into being at a time when the plaintiff’s defence to the claim for an enquiry had been struck out and an enquiry on quantum was to be held.  I am of the view that the plaintiff’s desire to raise the Stern-Stroy issue for the then scheduled enquiry would not make this issue irrelevant to the question of whether the claim of loss of opportunity to sell the 2nd defendant’s shares to Stern-Stroy is a bogus one.  If an enquiry would be held without the prior determination at a trial of the need for the same, then the plaintiff could only raise this issue at the enquiry so as to resist the liability to pay.

58.Leading counsel for the defendants further submitted that if the Stern-Stroy issue should be raised at the trial, then all the discovery and interrogatories previously raised by the plaintiff on this issue (but later not pursued) should now be completed before the commencement of the trial.

59.These discovery and interrogatories were raised by the plaintiff at the time when an enquiry on quantum had been fixed without a trial for the need of the same because the plaintiff’s points of defence re fraud had been struck out.  These matters were then put on hold after the plaintiff’s points of defence were restored and a trial ordered.  The plaintiff obviously regards these matters relevant only to quantum and need not be pursued at the trial.  Since these matters are not before me, I would not make any observation on them.  They are only matters for the plaintiff.

60.Finally leading counsel for the defendants submitted that a number of additional affidavits should also be adduced by both sides so as to work out the Stern-Stroy issue.  However, to do so would require new directions and a new assessment of period for the trial.

61.I understand that there are two extra days in the period fixed for the trial and they are ample to accommodate the expert evidence sought by the plaintiff.  If the plaintiff would like to confine its evidence to the date when Stern-Stroy had come into being so as to prove the claim relating to it a bogus one, it is a matter for the plaintiff.  Now that I have allowed the expert evidence to be adduced, the defendants may, if they consider it necessary, apply to adduce additional factual evidence that is relevant to the issues at the trial.

Decision

62.Though leading counsel for the defendants has raised many arguments against this application, I do not think the merits of this application have been destroyed.  The simple question is whether the plaintiff should be allowed to establish at the trial that this claim of loss of opportunity relating to Stern-Stroy is a bogus one so that there is no need to hold any enquiry for its quantification.  The plaintiff also wishes to make use of this allegedly bogus claim to further dent the credibility of the 1st defendant and his son and submit to the trial judge that there is no point in conducting an enquiry for any of the defendants’ claims.

63.Viewed in this way, the expert evidence sought to be adduced by the plaintiff is clearly relevant to whether the claim relating to Stern-Stroy is a bogus one and hence relevant to the question of whether an enquiry would be necessary at least on the quantum of this claim.

64.I doubt whether this evidence is relevant to both the trial and enquiry, if there should be one.  The simple reason being that the date when Stern-Stroy was established would only be tried and decided once. If there is no trial but just an enquiry on quantum, then this issue would have to be raised in the enquiry.

65.I think one of the reasons that gave rise to the arguments of whether this issue is relevant solely to quantum is the lack of proper pleadings for the claim for an enquiry.  The pleadings exchanged are only on the existence or otherwise of two alleged frauds that the defendants rely on to say that the injunction and subsequent agreement for discharge in relation to the 2nd defendant were secured by the frauds of the plaintiff.

66.However, the defendants have to prove more before an enquiry would be ordered.  One of the matters is the loss suffered by the defendant.  If these matters are pleaded to by both sides, then the existence or otherwise of Stern-Stroy in 1994 may be distilled from the pleadings as a distinct issue fit for resolution at the trial.  If it should be resolved in favour of the defendants, then other evidence on the quantum of this claim will be adduced at the enquiry.  Otherwise, no more time and costs need be incurred on it.  Though I did not have such analysis in mind in the course of the hearing, I have at the end of it ordered the parties to exchange pleadings on all the issues for and against an enquiry.

67.For the above reasons, I am of the view that the plaintiff’s application for expert evidence should be allowed.

68.I order that:

(1)  the plaintiff and defendants do have leave to adduce expert evidence at the trial of the summons of the defendants dated 23 July 2007 (fixed to be heard from 4 February 2013 to 28 February 2013) (the “Trial”) on Russian company law and on the Russian company registration system in relation to the issue as to the date on which Stern-Stroy Limited with the Individual Taxpayer Identification Number 7725214235 was first established in Moscow, and whether it was an existing company in Moscow as at 25 February 1994 and 1 July 1994, being the dates of the letters allegedly from Stern-Stroy Limited exhibited at “HL-1” and “HL-3” to the 2nd affidavit of Helge Leiduck dated 28 September 2011 and referred to in paragraphs 5 to 6 of the witness statement of Helge Leiduck dated 5 September 2012 (the “Issue”);

(2)  the plaintiff and defendants do have leave to each appoint one expert on Russian company law and/or on the Russian company registration system who shall each provide a written expert report in relation to the Issue, such reports shall be mutually exchanged and filed with the court within 21 days;

(3)  the respective experts of the plaintiff and defendants do, within 7 days from the exchange of their written expert reports as set out in paragraph 2 above, attend a without prejudice joint meeting with a view to agreeing or narrowing down the expert issue(s) to be decided by the court;

(4)  within 14 days from the joint meeting as set out in paragraph 3 above, the experts do produce and file with the court a signed joint report which succinctly identifies:

(a)  the issue(s) on which the experts have reached a common opinion and in respect of each such issue what that common opinion is;

(b)  the issue(s) on which the experts have failed to reach a common opinion and their competing views on each such issue; and

(c)  the reasons for the disagreement of the experts with the opposing views;

(5)  unless otherwise directed by the trial judge, the respective experts of the plaintiff and defendants do attend the Trial to give evidence and to be cross-examined, failing which their report(s) shall not be admitted in evidence.

69.I further make a costs order nisi that the defendants do pay the plaintiff the costs of this summons in any event with certificate for two counsel.

Mr John M Y Yan, SC and Ms Sara Tong, instructed by Baker & McKenzie, for the plaintiff

Ms Alice Mok, SC and Mr Clark Wang, instructed by Robertsons, for the 1st and 2nd defendants

Please refer to CACV12/2013 for the relevant appeal(s) to the Court of Appeal.