Li Xiao Yun and Another v. China Gas Holdings Ltd

HCCL 18/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO 18 OF 2011

____________

_____________

D E C I S I O N

_____________

1.The plaintiffs seek leave to appeal against my decision of 28 February 2013, refusing leave for the plaintiffs to adduce expert evidence. That decision was made in exercise of my discretionary powers under Order 38, and as part of my case management powers for the trial scheduled to take place on 12 March 2013.

2.First, let the record be corrected. It is wrong and misleading for the plaintiffs to suggest that the further expert evidence sought to be produced by the plaintiffs arose from the amendments made to the Defence on 24 January 2013.  From the earliest stage when Reyes J gave leave to the parties to adduce expert evidence on PRC law, which was on 15 December 2011, the directions were for expert evidence to be produced on Circular 78 issued by the State Administration of Foreign Exchange: whether the rules in Circular 78 are applicable to the plaintiffs’ exercise of the Share Options, and the possible consequences to the parties of non-compliance with Circular 78 in the purported exercise of the Options.

3.The question of the consequences of the non-compliance with Circular 78, and the effect on and liability, if any, of the Company were also dealt with by Mr Ma and Mr Wu, the experts respectively appointed by the plaintiffs and the Company, in paragraphs 20 to 22 of Mr Ma’s report of 18 January 2012, and paragraph 32 of Mr Wu’s report of 20 January 2012.  In the Joint Report of the experts which was finally filed pursuant to the meeting of the experts as directed by Reyes J, the plaintiffs’ expert had further addressed the issue of whether the Company and the plaintiffs would have any criminal liability as a result of any non-compliance with Circular 78.

4.The matter of the alleged illegality of the plaintiffs’ exercise of the Options as a result of the non-compliance with Circular 78 was nothing new to the plaintiffs, having been known to the plaintiffs, their legal advisers and their experts as early as the time when the original Defence was filed in October 2011.

5.It was obviously for that reason, and the fact that the experts had already addressed the issue, that the defendants’ re-amendments made in January 2013 were unopposed by the plaintiffs.  No submissions on the re-amendments were made at the pre-trial review on 24 January 2013.  The plaintiffs certainly did not indicate to the court that as a result of the defendants’ re-amendments, there would be need either for further amendments to the plaintiffs’ pleadings, or for further expert evidence to be filed.

6.At the hearing on 28 February 2013, the court was not addressed in length on the plaintiffs’ application to adduce expert evidence.  Leading Counsel for the plaintiffs only informed the court that the defendants had at some stage agreed to the filing of the further expert evidence.

7.Since the matter was not argued at the hearing, it may be appropriate to clarify various aspects of the case and my ruling.

8.The court retains complete control over the use of expert evidence, as can be seen from Order 38 rule 4 and rule 36.  The purpose in reserving control to the Court in this regard is to limit expert evidence to what is reasonably necessary to resolve the issues for determination at trial.  It is not for a party simply to seek leave to produce expert reports.  The court has to be satisfied as to the relevance and cogency of the proposed expert evidence, whether the evidence would be helpful in deciding the particular issue on which the evidence is sought, and that the calling of the expert evidence would be reasonable and proportionate in all  the circumstances of the case.

9.The plaintiffs’ application by its summons of 22 February 2013 was for expert evidence to be adduced on the impact of Circular 7 on the interpretation of Circular 78, by way of Mr Ma’s Supplemental Report of 5 February 2013 (“Supplemental Report”), and for leave to the Company to file its further supplemental report in reply.  That application was made less than 2 weeks before the commencement of trial.

10.In refusing leave, I pointed out that Circular 7 was only promulgated in February 2012.  The plaintiffs’ exercise of the Options was in March 2011.  Even on the face of the Supplemental Report, the relevance of Circular 7 is dubious, and at most slight, as to the purported legislative intent behind Circular 78. Any amendment to or repeal of Circular 78 only took effect in February 2012. No good reason was shown as to why the plaintiffs and Mr Ma only sought to introduce the Supplemental Report in February 2013, when the non-compliance with Circular 78 and the effect on the Company and the exercise of the Options had been known since October 2011. 

11.In my Decision, I also referred to the fact that, as it transpired at the pre-trial review, the plaintiffs had not even complied with the directions made by Reyes J in Oct 2011, as the Joint Expert Report had not even been filed by the time of the pre-trial review, which was in breach of the timetable laid down by the learned judge. 

12.If leave to adduce further expert evidence was to be allowed to both parties, the court can only be effectively assisted by a further joint report of the experts whereby they can identify and deal with the areas in dispute between them as to Circular 7.  If that could not be achieved before the commencement of trial, the alternative would have meant further days of cross-examination at trial.

13.Since the CJR, the courts have endeavoured to make it clear that parties are expected to carefully and thoroughly consider from an early stage all steps leading up to trial, and not to wait until the eve of trial before making last minute interlocutory applications.  A late application in the absence of a good explanation may be dismissed on the basis of delay alone (see eg paragraph 34 of PD 5.2), without evidence of prejudice to the opponent.  The prejudice to timely and efficient disposal of trials, the waste of court resources and time, and prejudice to other more deserving litigants are sufficient.  To allow the plaintiffs here to sit on their case and then to make last minute interlocutory applications, literally when they are at the door of the Court, for amendment, for joinder of parties, for leave to adduce expert evidence, and now to appeal, would be defeating all the objectives of and changes aimed to be made since the CJR, and should not be tolerated.

14.I am not persuaded that the plaintiffs’ appeal against my exercise of discretion have reasonable prospects of success, in that it can be shown that I had exercised my discretion under wrong principles of law, or that I had failed to take into consideration relevant factors, or had taken into consideration irrelevant factors.  It is trite that an appellate court cannot interfere simply because its members consider that they would, if they themselves had sat at first instance, have reached a different conclusion.  The application for leave to appeal is accordingly dismissed, with costs and certificate for counsel.

Mr Eric Leung, instructed by PC Woo & Co, for the 1^st and 2^nd plaintiffs

Mr Simon Westbrook SC, instructed by Baker & McKenzie, for the defendant