Falcon Private Bank Ltd v. Borry Bernard Edouard Charles Ltd and Another

CACV 42/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 42 OF 2013

(ON APPEAL FROM HCA NO. 1934 OF 2011)

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BETWEEN

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HCMP 241/2012, HCMP 407/2012 AND HCMP 2693/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NOS. 241, 407 AND 2693 OF 2012

(ON AN INTENDED APPEAL FROM HCA NO. 1934 OF 2011)

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BETWEEN

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J U D G M E N T

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Hon Kwan JA:

Introduction

1.We have before us an appeal of the 1^st and 2^nd defendants against the decision of To J on 15 May 2012 dismissing their summons to recuse himself (“the Recusal Summons”) in hearing the defendants’ applications to discharge an ex parte injunction granted on 10 November 2011 by Deputy Judge Au-Yeung (as she then was) and to strike out the statement of claim (“the Discharge Summons” and “the Strike-out Summons” respectively).  Leave to appeal was granted by this court (Fok and Barma JJA) on 28 February 2013. A Notice of Appeal was filed on 7 March 2013.  This is CACV 42/2013.

2.In granting leave to appeal, this court also directed that the remainder of the defendants’ application for leave to appeal in HCMP 2693/12 be adjourned to be heard, if appropriate, after the hearing of the appeal against the decision on the Recusal Summons.  It was further directed that two other applications for leave to appeal brought by the defendants, namely HCMP 241/12 and HCMP 407/12, also be re-listed for hearing at the same time as the remainder of the application in HCMP 2693/12.

3.The orders that are the subject of the remainder of the leave application in HCMP 2693/12 are the orders made by To J on 7 June 2012 in respect of the Discharge Summons and the Strike-out Summons.  The leave applications in HCMP 241/12 and HCMP 407/12 are concerned with two unless orders on disclosure made by To J on 27 January 2012 and 22 February 2012 respectively.

4.I will deal with the appeal regarding the Recusal Summons before I consider the three applications for leave to appeal.  In the appeal, it would be necessary to consider four judgments given by To J in this action.  They are dated 27 January 2012 (“the January Judgment”), 22 February 2012 (“the February Judgment”), 9 July 2012 (headed Reasons for Decision for the decision on 7 June 2012; “the July Judgment”) and 8 August 2013 (headed Reasons for Decision for the decision on 8 August 2013; “the August Judgment”).  The July Judgment is 152 pages long and was given on the disposition of a number of applications heard by the judge over four days in May and June 2012, which included the Recusal Summons, the Discharge Summons and the Strike-out Summons.  The other three judgments, though dated the same date as the hearing date, were not given ex tempore.  We were informed by the defendants that the January and February Judgments were both handed down on 30 March 2012.  The August Judgment, to our knowledge, was handed down on 19 August 2013, the day before this appeal was heard.

5.I will first relate the background matters which gave rise to the Recusal Summons.

The ex parte application for an injunction

6.The matters which led to the plaintiff’s application for an ex parte injunction, taken from the January Judgment, may be stated as follows.

7.The plaintiff is a licensed bank in Switzerland with a branch office in Hong Kong.  The 1^st defendant is a company incorporated in Hong Kong with a paid-up capital of HK$10.  The 2^nd defendant, a Swiss national, is and was the sole shareholder and director of the 1^st defendant.

8.In July 2011, one John Andreas Morrison acting on behalf of an English company Bawa Financial Limited (“Bawa”) opened an account with the plaintiff (“the Bawa Account”) and deposited certain floating rate bonds with the plaintiff.  The plaintiff placed the bonds with a reputable Swiss custodian known as SIX SIS AG (“SIX”).

9.On 27 September 2011, SIX erroneously advised the plaintiff of a repayment of principal on the bonds in the amount of US$15,760,320.  Pursuant to SIX’s instruction, the principal repayment was credited into the plaintiff’s account with SIX.  On 29 September 2011, the plaintiff credited the Bawa Account with the principal repayment as well as an interest payment on the bonds in the amount of US$39,010.36.  Prior to these payments, the Bawa Account had a credit balance of US$12,915.41.

10.On 30 September 2011, Morrison informed the plaintiff that he would be instructing the plaintiff to transfer US$10 million to a third party in relation to a “private equity placement”.  By letters dated 2 October 2011, Bawa instructed the plaintiff to make a series of immediate cash transfers in different currencies to different recipients out of the Bawa Account and to transfer the bonds to a securities firm in Canada.  Pursuant to that instruction, the plaintiff made the transfers, including a sum of US$10 million to the 1^st defendant’s account with the Standard Chartered Bank in Hong Kong (“SCB HK”).  This transfer of US$10 million formed the subject matter of this action.

11.On 7 October 2011, SIX notified the plaintiff that its previous instruction relating to the transfer of the principal repayment to Bawa had been made in error and that Bawa was only entitled to the interest payment.  The payment of the principal amount from SIX was reversed on the same day.  The plaintiff then reversed the credit of the principal repayment in the Bawa Account.  But as a result of the various transfers out of that account, the reversal resulted in an overdraft of US$11,767,554.

12.On the same day, the plaintiff also immediately contacted SCB HK by SWIFT requesting the cancellation of the transfer of US$10 million to the 1^st defendant’s account with SCB HK.  On 10 October 2011, SCB HK informed the plaintiff that the said sum of US$10 million had already been credited to the 1^st defendant’s account.  Later, SCB HK confirmed that it was contacting the 1^st defendant to return the funds.

13.In the three weeks that followed, the plaintiff engaged in discussions with Bawa and its Swiss legal adviser and demanded the 1^st defendant to return the said sum of US$10 million.  The 1^st defendant did not respond.

14.It was in those circumstances that the plaintiff made an ex parte application before Deputy Judge Au-Yeung on 10 November 2011 and obtained an injunction restraining the 1^st defendant from disposing of or removing any of its assets within Hong Kong up to the value of HK$78 million and to make disclosure of information (“the Ex Parte Order”).  The order for disclosure in para 4 was in these terms:

“The 1^st Defendant, through its proper officer, do make, file and serve an Affirmation on the Plaintiff’s solicitors on or before 1:00 pm, 13 November 2011, or within 96 hours of service of the Order herein (whichever is later):

[Para 4(1) was concerned with disclosing to the plaintiff’s solicitors information concerning the 1^st defendant’s assets of an individual value of HK$50,000 or more.]

[Para 4(2) was concerned with disclosing to the plaintiff’s solicitors information concerning the whereabouts of the US$10 million received by the 1^st defendant, and if the said sum or any part is not in the possession, custody or power of the 1^st defendant, detailed circumstances as to what has become of the money and details of all assets acquired by the use of the money.]

(3) Exhibiting true copies of all supporting documents in the 1^st Defendant’s custody, possession and/or power in respect of the matters in paragraph 4(2) above, including (but not limited to) relevant banking and accounting documents, correspondence, and receipts.”

15.In applying for the disclosure order, the plaintiff gave the usual undertaking to the court that it will not without leave of the court begin proceedings against the 1^st defendant in any other jurisdiction or use information obtained as a result of an order of the court in this jurisdiction for the purpose of civil or criminal proceedings in any other jurisdiction.

The subsequent orders for disclosure

16.At an inter partes hearing on 30 November 2011 before Suffiad J on the plaintiff’s summons for the appointment of interim receivers for the 1^st defendant, an order was made that the 1^st defendant do file an affirmation by 5 December 2011 deposing whether the said sum of US$10 million was still in its account with SCB HK, and if not, where and to whom the sum had been transferred. This is the second disclosure order against the 1^st defendant.

17.On 2 December 2011, the 2^nd defendant made his 1^st affidavit on behalf of the 1^st defendant stating that the US$10 million “is not in [the 1^st defendant’s account with SCB HK]” and that the sum was transferred from that account to Sunesko LLC on 7 October 2011 pursuant to Bawa’s instructions. Sunesko LLC is an entity with a post box address in the West Indies.  On 8 December 2011, the 2^nd defendant made his 2^nd affidavit stating that the US$10 million was paid into the 1^st defendant’s account with SCB HK on 4 October 2011 and, once received, the sum was transferred to his personal account with SCB Singapore on 7 October and then transferred from his personal account to Sunesko LLC on the same date.

18.On 9 December 2011, at an inter partes hearing, Reyes J ordered the 1^st defendant to “fully comply” with the order of Suffiad J by 7 pm on 9 December 2011 and to provide evidence of the transfer of the US$10 million from the 1^st defendant to Sunesko LLC.  This is the third disclosure order against the 1^st defendant.

19.The 2^nd defendant then made his 3^rd affidavit on 9 December stating that he is an employee of Sunesko LLC and it was as such that he received the payment of US$10 million into his personal account with SCB Singapore pursuant to the instructions of Sunesko LLC.  He provided information of transfers out from his personal account, which were “from Sunesko LL”.  US$5 million was transferred on 10 October 2011 to his account with ANZ Bank in New Zealand and other transfers totalling US$5.6 million odd were made to the UBS AG Swiss Bank account of one Alex Jager from 14 October 2011 to 18 November 2011.

20.On 14 December 2011, the 2^nd defendant made his 4^th affidavit stating that the deposit of the US$10 million into his personal account with SCB Singapore was for Sunesko LLC’s purposes and not for his or the 1^st defendant’s purposes; that three quarters of the said sum is now with Jager who acts for Sunesko LLC; that of the US$5 million paid into his ANZ account, half of that sum was transferred to Jager’s account, and the other half was paid to Sunesko’s clients by way of cheque payments.

21.Also on 14 December 2011, on the plaintiff’s ex parte application, Sakhrani J granted leave to the plaintiff to provide the affidavits filed on behalf of the 1^st defendant pursuant to the Ex Parte Order to the State Attorney’s office in Zurich and to the Hong Kong police (“Sakhrani J’s Order”).  The judge directed that his order, the supporting affidavit filed by the plaintiff and counsel’s skeleton argument were to be kept in a sealed envelope and not be available for inspection without leave until 31 March 2012 or such other time as ordered by the court.

22.The plaintiff disclosed the 2^nd defendant’s affidavits to the Swiss authorities.  On 23 December 2011, the defendant’s solicitors learned about the arrest of Morrison and his partner in Switzerland.

23.The plaintiff issued a summons on 30 December 2011 seeking further disclosure.  This came before Deputy Judge Lok who made the fourth order on disclosure on 6 January 2012 (“Judge Lok’s Order”).  The terms of this order, which led to the two unless orders of To J and was the subject of much debate, read as follows:

“1. The 1^st Defendant (acting by a proper officer) and the 2^nd Defendant do within 14 days of the date hereof file a further affidavit in full and proper compliance with paragraph 4 of the Order of Deputy High Court Judge Au-Yeung dated 10 November 2011, disclosing to the Plaintiff’s solicitors:

[Para 1.1 to 1.7 set out specific documents and information the defendants are required to disclose, they included the bank statements of the 1^st defendant’s account with SCB HK and the 2^nd defendant’s account with ANZ Bank.]

2. In the event that the documents referred to in paragraph 1 is [sic] not in the possession, custody or control of the 1^st or 2^nd Defendant, the Defendants have to explain and provide the whereabouts of such documents in the affidavits.”

24.When the above order was made, Judge Lok was not aware of Sakhrani J’s order and did not know that the plaintiff had been given leave to disclose the defendants’ affidavits to the Swiss authorities.

To J’s unless orders for disclosure

25.On 16 January 2012, the defendants issued the Strike-out Summons seeking to strike out the statement of claim which was filed on 21 December 2011.  On the following day, they issued a summons seeking an extension of time to comply with Judge Lok’s Order and for disclosure of all summonses, supporting affidavits, orders, skeleton arguments and other documents relating to Sakhrani J’s Order and all correspondence relating to the disclosure of the defendants’ affidavits to the Swiss authorities and other persons.

26.The plaintiff countered with its summons on 19 January 2012 for an order that unless Judge Lok’s Order be complied with judgment be entered for the plaintiff in this action.

27.Both summonses came before To J on 27 January 2012, and he gave his reasons for the orders he made in the January Judgment.  A consent summons was filed earlier seeking leave for the defendants to inspect the documents ordered to be kept in a sealed envelope by Sakhrani J and those documents had been disclosed by the time of the hearing before To J.  To J dismissed the defendants’ application for discovery of correspondence relating to the disclosure of the defendants’ affidavits to the Swiss authorities and other persons.  As for the defendants’ application for extension of time to comply with Judge Lok’s order, To J made these remarks in para 24 of the January Judgment:

“The basis of the defendants’ application for extension of time is not that the defendants did not have the information or documents in their possession but their concern that any affidavits they serve will be supplied to the Swiss police as a result of the order of Sakhrani J. They wanted to defer disclosure until they had the opportunity to consider the materials presented to Sakhrani J at the ex parte hearing and to challenge that order. As of today, the defendants had seven days extension already. …”.

28.The judge noted that four orders for disclosure had been made commencing with the Ex Parte Order in November 2011, that the disclosures made so far had been incomplete, and that time is of the essence in a tracing exercise.  He regarded the defendants’ delay as excessive and such delay would not have come about had they acted with total candour.  In paras 27 and 28 of the January Judgment, he rejected the arguments made by the defendants’ counsel, Mr Colin Wright, in these terms:

“27. Mr Wright inundates the court with arguments criticising almost each and every order made.  He argues that the plaintiff has no case against the defendants and the plaintiff’s statement of claim is bound to be struck out in due course.  Hence, the defendants should not be burdened with all these disclosures, wasting their time and costs and suffering prejudice.  Basically, he repeats his submission that it is not the plaintiff’s pleaded case that the 1^st defendant knew that the sum of US$10 million was transferred to his SCB HK account in breach of trust and that the plaintiff would be unable to prove such knowledge on the part of the defendants.  He also argues that the relationship between a bank and its customer is one of debtor and creditor and that a customer holding money in a bank account merely has a chose in action and it is inaccurate to speak of a “transfer” of funds between the bank accounts.  He submits that most importantly the plaintiff has not been frank with the court in failing to draw to the attention of Deputy High Court Judge Au-Yeung the above defence when applying for the ex parte mareva injunction.

28. I am not impressed with that line of arguments nor do I find it necessary to consider them.  I am concerned with the defendants’ non-compliance with a series of court orders. …”

29.Other arguments advanced by Mr Wright were considered by the judge and rejected in paras 29 to 33 of the January Judgment as “obvious delaying tactic”.  To J took the view there has been “contumelious delay”, a substantial sum of money was at stake, and “the circumstances cry out for sanction to enforce compliance” with the disclosure orders.  He noted that the materials placed before Sakhrani J at the ex parte hearing had been disclosed to the defendants.  He repeated his earlier observation that “no argument has been advanced that the defendants do not have the information or documents or have difficulties in complying with the further disclosure order” and that the defendants had a de facto extension of seven days already.  He gave the defendants four days to comply and made an unless order (“the 1^st Unless Order”) in these terms:

“Unless the 1^st and 2^nd Defendants make disclosure in compliance with paragraphs 1 and 2 of the Order of Deputy High Court Judge Lok dated 6 January 2012 by 4:00 pm on 31 January 2012, the 1^st and 2^nd Defendants be precluded from calling evidence in any application for summary judgment or at trial of this Action.”

30.Mr Wright applied to To J for leave to appeal against his decision at the conclusion of the hearing.  The judge refused leave forthwith.  The defendants issued the summons in HCMP 241/12 on 9 February 2012 seeking leave to appeal from the Court of Appeal.

31.On 31 January 2012, the 2^nd defendant filed his 7^th affidavit to comply with the 1^st Unless Order.  In it he stated that he was advised by his solicitors Stephenson Harwood that he was required to provide the court with information on the matters set out in paras 1 and 2 of Judge Lok’s Order that “is in [his] knowledge (and within [his] control to obtain taking reasonable steps to do so).”  He exhibited a letter from ANZ Bank on 18 November 2011 stating that all its services provided to him and his accounts were to be withdrawn unilaterally with effect from 1 December 2011.  He had monitored his ANZ Bank accounts on-line and did not print out any statements when the accounts were in existence.  By the time Judge Lok’s Order was made, his accounts with ANZ Bank were all closed, as was the internet banking service.  He repeatedly telephoned the bank in December 2011, and was not given “any courtesy from ANZ Bank or co-operation from their personnel or copies of documents relating to the account.”  He stated that the documents sought by the plaintiff “are not in [his] possession, custody or control”.  The documents are not in his possession as no copies were taken, and not in his custody or control as ANZ Bank would not provide them.  Insofar as he was required to explain and provide the whereabouts of the account statements by Judge Lok’s Order, he stated that these are in the possession of ANZ Bank and are out of his control.  As for the bank statements of the 1^st defendant with SCB HK, the 2^nd defendant stated that it is his practice to monitor his accounts using the internet and e-banking services and he did not order statements or e-statements for the 1^st defendant’s account, so cannot produce a copy of the bank statement as required by Judge Lok’s Order.  In the time available (four days) and because of the instructions given to SCB when the account was opened, he had not been able to obtain a copy of the bank statement.

32.On 10 February 2012, the plaintiff issued a summons for an order that the defendants be debarred from filing evidence in any application for summary judgment or at trial of this action for failing to comply fully with Judge Lok’s Order and the 1^st Unless Order.  Alternatively, the plaintiff sought an unless order that the defendants do forthwith take all steps as reasonably necessary to comply with Judge Lok’s Order by writing to ANZ Bank and SCB requesting for bank statements and documents regarding the transfer of funds and filing an affidavit to demonstrate compliance and explain particular matters in the 7^th affidavit of the 2^nd defendant, failing which the defendants be debarred from filing evidence in any application for summary judgment or at trial of this action.

33.On 21 February 2012, the defendants issued the Discharge Summons seeking to discharge the Ex Parte Order.

34.On 22 February 2012, To J heard the plaintiff’s summons for enforcement of the disclosure orders and gave the February Judgment as a result.  Although the summons was set down for 15 minutes, the hearing eventually took two and a half hours.  To J described Mr Wright’s stance at that hearing in this way.  Counsel accepted that the 7^th affidavit was inadequate, but contended “there is no obligation to disclose the banking documents which were not in the physical possession of the defendants at the time of the making of the unless order and that the time allowed for the disclosure was inadequate”.  Mr Wright spent most of the time “regurgitating his earlier arguments presented at the hearing on 27 January 2012”, which had been rejected by the judge on the earlier occasion as irrelevant for present purpose.

35.The following criticism of counsel appeared in paras 7 and 8 of the February Judgment and as they formed the basis of the subsequent application for recusal, it is necessary to reproduce them in full:

“7. Mr Wright submits that the 2^nd defendant is not required to disclose anything which he does not actually have.  This is blatantly in contradiction to what the 2^nd defendant said in his 7^th affidavit of what he was advised by his solicitors, i.e. he was obliged to disclose the information in his knowledge, possession, custody or control.  Mr Wright argues without quoting any authority that that phrase means documents which a person actually has in his possession at the time of the making of the order.  That is a wholly layman’s approach to the interpretation of a seasoned phrase used in the courts everyday.  Law students from the universities are born with the concept that the phrase “documents in the possession, custody or control” includes documents which a person does not have in his possession or custody, but has a right to obtain from the person who has them: see Hong Kong Civil Procedure 2012, paragraph 24/2/7.  This is trite law.  Such submission is as much an insult to the intelligence of the court as it is a disgrace to the counsel of such seniority who utters it.  This comment is made not without regard to counsel’s duty to fearlessly uphold the interest of his client; but such duty does not excuse counsel from misleading the court.

8. Another ludicrous argument of Mr Wright is that I did not allow adequate time for the defendants to obtain the documents.  The disclosure was ordered by Deputy High Court Judge Lok on 6 January 2012.  The defendants’ solicitors understood the order to include documents in the control of the defendants. There was no appeal against the order of Deputy High Court Judge Lok.  The defendants’ solicitors should have set in motion the steps to obtain the documents, including writing to the banks if necessary.  No such correspondence had been produced in the 7^th affidavit of the 2^nd defendant.  The 2^nd defendant did not even say his solicitors had written to the banks or he had instructed his solicitors to do so.  The only mention was the bald and vague allegation of oral requests I referred to above.  Then at the hearing before me on 27 January 2012, there was no argument by Mr Wright that the documents were not in the defendants’ possession, custody or control.  There was no argument that more time was needed to write to the banks to obtain the documents.  The argument was focussed on deferment pending the outcome of a review of the order of Sakhrani J, the application for which was yet to be made.  It was therefore assumed that the documents were in the possession of the defendants or otherwise readily available.  The time for compliance was set on that basis.  When the order was made, no objection was raised by Mr Wright that compliance would be impossible because some documents were not available.  The way this matter was conducted by the defendants was to engender to delay.  It appears that very experienced counsel and reputable solicitors are part of it.  They should not have slept on the order of Deputy High Court Judge Lok for over six weeks and then advance a self induced excuse of inadequate time to comply.”

36.The judge then offered the plaintiff the option of entering judgment forthwith or another disclosure order on unless terms.  The plaintiff’s counsel, Mr Douglas Lam, opted for a disclosure order, so To J granted an unless order (“the 2^nd Unless Order”) in the terms of the alternative order sought in the plaintiff’s summons.  He ordered the defendants to pay the plaintiff’s costs on an indemnity basis.

37.Mr Wright applied for leave to appeal against the judge’s decision at the conclusion of the hearing.  Leave was refused forthwith.  The defendants then issued a summons in March 2012 in HCMP 407/12 seeking leave to appeal from the Court of Appeal.  Directions were given by Tang VP that HCMP 241/12 and HCMP 407/12 be heard at the same time and that they be dealt with after the Strike-out Summons and the Discharge Summons which were then pending.

The application for recusal

38.On 7 March 2012, the Strike-out Summons and the Discharge Summons were fixed for hearing before To J on 15 and 16 May 2012.

39.On 28 April 2012, Stephenson Harwood wrote to the plaintiff’s solicitors Karas Lawyers expressing concern about To J’s conduct in this litigation as particularised therein and giving their view that this would lead a reasonable, fair minded and well-informed observer to conclude there was a real possibility that the judge was biased.  Stephenson Harwood sought consent from Karas Lawyers to their application to the judge to recuse himself from hearing the summonses in May.

40.Karas Lawyers did not agree and stated that they saw “no reason whatsoever for arguing bias” in their reply of 2 May 2012.

41.On 7 May 2012, Stephenson Harwood wrote to the judge’s clerk inviting the judge to recuse himself from hearing the Strike-out Summons and the Discharge Summons, submitting that the circumstances were such that a fair minded and informed observer would conclude there was a real possibility that the judge was biased.  The basis of their application was apparent bias.  There was no suggestion at any time of any actual bias of the judge.  The relevant circumstances suggested in the letter were:

(1) the recital in para 2 of the January Judgment that the 2^nd defendant holds himself out as the chairman of Master Vision Group of Banks, a suspected fraudulent business under investigation by the Hong Kong police, and that this recital was virtually a word for word adoption of an incorrect statement in the skeleton submission of the plaintiff’s counsel placed before Deputy Judge Au-Yeung when the Ex Parte Order was made (“the Recital Ground”);

(2) the “quite exceptional” criticism of the defendants’ counsel in paras 27 and 28 of the January Judgment and in paras 7 and 8 of the February Judgment and the remarks about Stephenson Harwood at para 8 of the February Judgment (“the Criticism Ground”); and

(3) the judge’s approach to the directions for the filing and service of the parties’ skeleton submissions for the hearing on 15 and 16 May 2012, by which he directed the defendants to serve skeleton submissions by 4 May 2012 and the plaintiff to serve skeleton submissions by 10 May 2012 (“the Directions Ground”).

42.Karas Lawyers wrote to the judge’s clerk on 8 May 2012, stating that the recusal application should not be entertained.  The judge’s clerk wrote to Stephenson Harwood on 9 May 2012 that the application was dismissed.  The defendants issued the Recusal Summons on 10 May 2012, which was listed for hearing before the judge on 15 May.  In support of the application, the 2^nd affidavit of Malcolm Kemp was filed.  Mr Kemp is the head of the litigation department and the senior partner of Stephenson Harwood.  He mentioned the same three grounds for recusal in his affidavit.

To J’s disposition of the Recusal Summons

43.To J did not invite oral submissions from Mr Douglas Lam on the Recusal Summons.  Having heard Mr Wright’s submissions on this, he came to the view it was “hopelessly groundless and frivolous” and dismissed it on 15 May 2012 with costs to be assessed by gross sum on solicitors and client basis.  He proceeded to hear the Discharge Summons, the Strike-out Summons and other summonses listed before him over four days.  Reasons for dismissing the Recusal Summons were given in the July Judgment and the relevant passages are from paras 11 to 39.

44.The judge went over each of the grounds relied on by the defendants.  I agree with him that the Recital Ground should be rejected.  When this court gave leave to appeal in respect of the Recusal Summons, we did not in fact give leave to appeal regarding the Recital Ground, which is para 57 of the draft Notice of Appeal.  I agree also with the judge there is no substance in the complaint of unequal treatment in that the plaintiff’s counsel was not criticised by the court in making an incorrect statement that the 2^nd defendant held himself out as the chairman of Master Vision.  Mr McCoy, SC, who appeared with Mr Wright in this appeal, did not seek to defend it.

45.As for the Directions Ground, Mr McCoy did not rely on this as a relevant circumstance indicating apparent bias.  The defendants’ contention before the judge that he should have applied Practice Direction 5.4 strictly and literally limiting the plaintiff’s time for serving skeleton submission to within 24 hours of the defendants lodging their skeleton submission is untenable and was rightly rejected by the judge.  However, Mr McCoy relied on the severe manner the judge criticised the defendants’ solicitors in advancing this untenable ground as a relevant circumstance suggesting apparent bias.

46.Hence, the crux of the matter is the Criticism Ground.  It is necessary to quote from the relevant passages in the July Judgment to see what the judge’s thinking was when he criticised counsel and solicitors earlier.  Mr Grossman, SC, who appeared with Mr Lam in this appeal, contended initially that the circumstances relevant to this appeal are confined to the criticisms made by the judge in paras 7 and 8 of the February Judgment.  I do not agree with this. As Sir Anthony Clarke, MR had stated in Howell & Ors v Millais & Ors [2007] EWCA Civ 720 at para 7:

“The material circumstances to be considered by the fair-minded and informed observer will include any explanation given by the judge under review as to his knowledge or appreciation of those circumstances. Where such an explanation is proffered, the reviewing court does not have to rule whether or not the explanation should be accepted or rejected; rather, it has to rule whether or not the observer would consider that there was a real danger of bias notwithstanding the explanation advanced (see In re Medicaments and Related Classes of Goods (No 2) [2001] 1 WLR 700 at [86], [92] and [93]).”

47.Mr Grossman did not persist in his contention that we should only be looking at the February Judgment when we put this question to him.

48.The relevant paragraphs in the July Judgment are set out below:

“21. Nevertheless, I shall go further on the question of counsel’s demerit which earned him the criticism. … Mr Wright’s conduct was a deliberate attempt to mislead the court. Not only did he not apologise for what was a very obvious mis-statement of the law, he stood by his submission and now uses the occasion to attack my impartiality. That is a very serious accusation to make against a judicial officer. While quoting my criticism of Mr Wright in paragraph 7 of my 2^nd Decision, Kemp did not in any fairness to me nor had the candour or courage to quote what it was that I found to be an insult to the court’s intelligence. Those dicta are immediately preceding the part he quoted. The unquoted part has now been underlined. It is a very trite principle that documents in a person’s possession, custody or control includes documents which a person does not have in his possession or custody, but has a right to obtain from the person who has them. According to the 7^th affidavit of the 2^nd defendant, he had been advised by SH [Stephenson Harwood] that he was obliged to disclose the information in his knowledge, possession, custody or control. Thus, even SH was aware of this trite legal principle. Mr Wright’s conduct was either sheer incompetence or a deliberate attempt to mislead the court. The legal principle was so trite that a counsel of his seniority and experience of twenty-five years since call to the English bar could not have got it wrong. He obstinately insisted on his misleading proposition of the law despite his mistake had been pointed out to him. The only inference is that he deliberately attempted to pull wool over the court’s eyes. That is why I said it was an insult to the court’s intelligence and a disgrace to the counsel. In the circumstances, it was appropriate for the court to express its strong sense of disapproval of such misconduct in the hope that such misconduct will not be repeated and future proceedings will be conducted in a more lawyerly manner. When making my criticism, I had due regard to Mr Wright’s duty to fearlessly uphold the interest of his client, but that duty does not excuse him from deliberately misleading the court. The defendants lodge no appeal against my decision on the basis that I erred on the above trite legal principle. That speaks for itself. I stand firmly by my criticism of Mr Wright. The criticism was well justified and appropriate. No fair-minded and informed bystander would consider the court was biased when making the criticism.” (emphasis supplied)

“22. As for the allegation of bias against SH, it is also misplaced. In paragraph 8 of my 2^nd Decision [the February Judgment], I was dealing with Mr Wright’s argument for insufficient time to comply with Deputy High Court Judge Lok’s order. Clearly SH understood correctly that Deputy High Court Judge Lok’s order included documents in the control of the defendants. I had given complement to SH for its correct understanding of the law. Any reasonable solicitor would upon receiving such a disclosure order have started in motion the steps necessary to obtain the document in the custody of another whom his client has control. I do not resile from that comment. If SH considered that a criticism, so be it and it is also justified.

23. Kemp complained about paragraphs 27 and 28 of my 1^st Decision [the January Judgment], but did not state the basis of his allegation of bias. In paragraph 27, I summarised Mr Wright’s arguments relating to the defendants’ defences. In paragraph 28, I expressed that I was not impressed with that line of argument. If the allegation of bias is that I gave no consideration at all or no weight to Mr Wright’s argument, that is wholly misconceived. I made it clear that I did not find it necessary to consider the defence. This is because I was just concerned with the plaintiff’s application for unless order as a result of the defendants’ repeated refusal to comply with a number of previous orders of the court. There was no appeal against those orders. There was no application to discharge the injunction order, as we now have today. It was just not open to me to revisit the question whether those orders should have been made. Mr Wright should not have advanced those arguments which wasted much of the court’s time. There is simply no basis for alleging bias for my not considering Mr Wright’s argument on the defences available to the defendants.

24. In summary, the complaint of bias based on … criticism of counsel is misconceived because … the criticism made of the defendants’ counsel and solicitors were well justified and appropriate.  I fail to see how a fair-minded and informed bystander would be able to find a scintilla of bias in the proceedings before me hitherto and any risk of bias in the proceedings to come.”

“33. … SH had the audacity to seek directions that the plaintiff should only be given one day to file its skeleton submission with the result that the defendants would have six and half days to consider the plaintiff’s skeleton submission before the hearing.

34. The directions that SH sought were absolutely ridiculous. They were based on SH’s distorted sense of fairness and deliberately distorted construction of Practice Direction 5.4 as, in SH’s own words, limiting the plaintiff’s time for lodging and serving skeleton submission within twenty-four hours. That construction is clearly wrong. The directions sought reflected a total lack of good faith in SH’s conduct of this litigation. … SH was obviously trying to exert pressure on the plaintiff’s legal team. …

35. Kemp complained that the directions given on 24 April 2012 reflect my bias in favour of the plaintiff. … This complaint is absolutely ridiculous. …”

“37. The directions I gave did not offend the minimum prescribed by Practice Direction 5.4. They were solely within the discretion of the court in the exercise of its case management function to give. The complaint of bias is solely founded on a deliberately distorted construction of Practice Direction 5.4 and a distorted sense of fairness that fairness means the plaintiff shall only have twenty-four hours to consider and prepare its skeleton submission in reply in a case obviously involving some degree of complexity. I must confess I have never heard similar challenges to a judge’s case management discretion and have never heard any argument that fairness means twenty-four hours for the respondent to consider the applicant’s skeleton submission and to prepare his in reply. I am surprised that such a very tactical position was and is still being taken by a reputable firm of solicitors. The legal basis of the complaint was set on the wrong premises. The moves taken by SH showed that it was not conducting this litigation with good faith.” (emphasis supplied)

“38. … I bear in mind that it is not enough that fairness is done, it must be manifestly seen to done. Even adopting this very high standard of fairness required of the bench, I am still satisfied that a fair-minded and informed bystander could not have a scintilla of doubt that the defendants did not have a fair hearing before me on 27 January 2012 and on 22 February 2012 and could not or would not have or be seen to have a fair hearing in the proceedings to come, ie the Discharge Summons and Strike-Out Summons. Quite on the contrary, the fair-minded and informed bystander would be surprised by the tactical position taken by SH and would easily come to the conclusion that the recusal application is not bona fide made. …

39. … The application is hopelessly groundless and frivolous. Nothing of what I have heard in the Discharge Summons or the Strike-Out Summons justifies a different view. The application was made to provoke and unsaddle a judge whom SH thought would probably rule against the defendants in the forthcoming proceedings. It is an obvious attempt of forum shopping. It is frivolous, vexatious and a blatant abuse of the process of the court. …”.

The test for apparent bias

49.The refusal by a judge to recuse himself from hearing a case is an exercise of discretion.  On an appeal to this court in respect of a discretionary remedy, the principle is that this court is not to exercise the discretion afresh and will only overturn the decision and exercise the discretion afresh if the judge had proceeded on wrong principles or that his exercise of discretion was plainly wrong (Chau Siu Woon v Cheung Shek Kong [2010] 3 HKLRD 49 at 53, para 7, per Cheung JA).

50.The test for determining the appearance of bias, as accepted by the Appeal Committee of the Court of Final Appeal in Deacons v White & Case [2004] 1 HKLRD 291 at 298A to B, para 20, is as follows:

“The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility, or a real danger, the two being the same, that the tribunal was biased.”

51.As the Constitutional Court of South Africa had observed in President of the Republic of South Africa v South Africa Rugby Football Union, 1999 (4) S.A. 147 at 177, the question is whether a reasonable, objective and informed person would on the correct facts reasonably apprehend that the judge has not brought or will not bring an impartial mind to bear on the adjudication of the case, that is, a mind open to persuasion by the evidence and the submissions of counsel.

52.Regarding the notional “fair-minded observer”, this court in Chau Siu Woon at paras 13 and 42 had adopted and applied the following dicta:

“The observer who is fair-minded is the sort of person who always reserves judgment on every point until she has seen and fully understood both sides of the argument. She is not unduly sensitive or suspicious, as Kirby J observed in Johnson v Johnson (2000) 201 CLR 488, 509, para 53. Her approach must not be confused with that of the person who has brought the complaint. The “real possibility” test ensures that there is this measure of detachment. The assumptions that the complainer makes are not to be attributed to the observer unless they can be justified objectively. But she is not complacent either. She knows that fairness requires that a judge must be, and must be seen to be, unbiased. She knows that judges, like anybody else, have their weaknesses. She will not shrink from the conclusion, if it can be justified objectively, that things that they have said or done or associations that they have formed may make it difficult for them to judge the case before them impartially.” (Helow v Secretary of State for the Home Department [2008] 1 WLR 2416 at 2418, per Lord Hope of Craighead)

“Such a person is not a lawyer. Yet neither is he or she a person wholly uninformed and uninstructed about the law in general or the issue to be decided. Being reasonable and fair-minded, the bystander, before making a decision important to the parties and the community, would ordinarily be taken to have sought to be informed on at least the most basic considerations relevant to arriving at a conclusion founded on a fair understanding of all the relevant circumstances. The bystander would be taken to know commonplace things, such as the fact that adjudicators sometimes say, or do, things that they might later wish they had not, without necessarily disqualifying themselves from continuing to exercise their powers. The bystander must also now be taken to have, at least in a very general way, some knowledge of the fact that an adjudicator may properly adopt reasonable efforts to confine proceedings within appropriate limits and to ensure that time is not wasted. The fictitious bystander will also be aware of the strong professional pressures on adjudicators (reinforced by the facilities of appeal and review) to uphold traditions of integrity and impartiality. Acting reasonably, the fictitious bystander would not reach a hasty conclusion based on the appearance evoked by an isolated episode of temper or remarks to the parties or their representatives, which was taken out of context. Finally, a reasonable member of the public is neither complacent nor unduly sensitive or suspicious.” (Johnson v Johnson (2000) 201 CLR 488, 508 to 509, para 53, per Kirby J).

53.Mr Grossman also referred us to the judgment of the Supreme Court of South Australia in IOOF Australia Trustees Ltd v SEAS Sapfor Forests Pty Ltd (1999) 78 SASR 151 in which the court made illuminating comments in the context of recusal arising out of the judge’s attitude to counsel.  I bear in mind these remarks at para 174:

“…disqualifying bias is not established merely by pointing to circumstances indicating tension, or even some hostility, between the judge and counsel. The relevant principles are directed towards ensuring the appearance and the reality of a fair hearing. That is, one in which the case on each side is fairly considered. Just as that does not require that a judge approach the merits of the case with no preconceived views about issues that might arise in the case, so long as the judge is willing to listen fairly to argument on either side, so the principle does not require that the judge not have, or at least not disclose, any adverse views about a particular counsel appearing in the case. What is important is that the judge be willing to consider the case presented by that counsel fairly. It is when the hostility between the judge and the counsel is such that the fair-minded observer might reasonably apprehend that the judge will not fairly consider the case being presented for the client that disqualifying bias is present.”

54.The Supreme Court in IOOF has set out in some detail at paras 186 to 197 the knowledge or information that should be attributed to the fair-minded observer concerning the attitude manifested by the judge towards counsel in a variety of situations in the context of recusal.  I do not propose to set them out, save to mention that I have noted the observation in para 195 Mr Grossman has drawn our attention to, namely, that the fair-minded observer is to be taken to understand that the judge has sworn an oath to do justice and is trained to and will differentiate between counsel and client, and between counsel and the issues to be decided.

55.Lastly, it is incumbent on the party seeking recusal to articulate the relevant reasoning by which the fair-minded observer would attribute a level of prejudgment justifying recusal.  There must be an articulation of the logical connection between the conduct giving rise to the apprehension of bias and the possibility of departure from impartial decision-making (Barakat v Goritsas (No 2) [2012] NSWCA 36 at paras 9 to 12).

If there was a real possibility of bias

56.As I have mentioned before, the Recusal Summons was mounted on the basis of apparent, not actual bias.  In reviewing To J’s decision on his refusal to recuse, we are not assessing his ability to have dealt with the case before him fairly and impartially.  This judgment does not involve any criticism of the judge in that regard.  We are merely tasked with assessing whether a fair-minded observer might entertain a reasonable apprehension of bias in the light of the judge’s severe criticism of the defendants’ counsel and solicitor.

57.The mere fact that a judge has decided a case adversely to a party or criticised the conduct of a party or his lawyers will rarely if ever be a ground for recusal (Howell & Ors v Millais & Ors, supra at para 9).  Chau Siu Woon, supra is an example in which the court held, looking at the matter in the round, there was no apparent bias notwithstanding that the master had become irritated with the litigant in person at times and there was an occasional outburst of temper.

58.I take on board that the fair-minded observer is to be taken to appreciate that a judge has professional training and experience to differentiate between counsel and client, and between counsel and the issues to be decided; that the style and manner of particular counsel may at times prove irritating to a judge (and vice versa); and that occasional departures of judge and counsel from appropriate standards of behaviour in court are nothing more than indications of ordinary human frailty.

59.I also have regard to what Mr Grossman urged upon us that the judge’s trenchant criticism of the defendants’ counsel and solicitor must be looked at in context, namely, the history of “serial non-compliance” with four court orders for disclosure which led to the 1^st and 2^nd Unless Orders made by the judge, as I have summarised earlier.  Mr Grossman pointed out it was apparent there was an increasing sense of frustration on the judge’s part that the court orders for disclosure were not obeyed, despite the 1^st and 2^nd Unless Orders, and that the use of colourful expressions in censorious terms in the judgments was merely an indication that the judge was understandably upset by the behaviour of counsel and solicitor, whose conduct of the proceedings he regarded as engendering delay.  We were reminded by Mr Grossman of other cases in this jurisdiction when the court heavily criticised a party’s legal representatives in strong language and yet there was just one reported instance when an application for recusal was made, which was dismissed by the judge (R v Tan Soon Gin George [1996] 3 HKC 372).

60.Mr Grossman pointed to instances in the judgments which showed that the judge had exercised his discretion in the defendants’ favour in an impartial manner.  In the 1^st Unless Order, rather than acceding to the sanction sought by the plaintiff to enter judgment against the defendants for non-compliance of the court orders, he imposed the lesser sanction of precluding them from calling evidence in any application for summary judgment or at trial if they should continue to fail to comply, accepting what Mr Wright had said about good lines of defence at face value.  And in the July Judgment of 152 pages, the judge had gone out of his way to make a careful analysis of all the arguments advanced by Mr Wright in the Recusal Summons, the Discharge Summons and the Strike-out Summons.  However, I do not regard these matters as helpful for the present exercise.  Whether the judge was in fact fair and impartial in the decisions he made in this case is beside the point, which is whether a fair-minded and informed observer would reasonably apprehend that the judge has not brought or will not bring an impartial mind to bear on the adjudication of the case.

61.What I find most disconcerting in this instance is not a rejection of counsel’s arguments in strong and at times rather offensive language and the attack on counsel’s competence, but the attack in no uncertain terms on counsel’s professional integrity, and to a lesser extent, the solicitor’s integrity.  This is most apparent in para 21 of the July Judgment in which the judge mentioned three times that counsel had attempted to deliberately mislead the court.  This kind of behaviour, if established, amounts to professional misconduct.  The Code of Conduct of the Hong Kong Bar Association provides in para 130 that “a barrister must not knowingly deceive or mislead the Court.”  The Guide to Professional Conduct of the Law Society of Hong Kong provides in para 10.03 that “a solicitor must never knowingly attempt to deceive or participate in the deception of a tribunal.”  And there is well established procedure in the professional bodies to deal with the investigation and determination of complaints of professional misconduct.

62.In R v Lashley [2005] EWCA 2016, the English Court of Appeal quashed a conviction where the conduct of the trial judge towards defence counsel during trial interfered with due process and rendered the conviction unsafe.  The judge had criticised counsel repeatedly on her skill and experience both in the presence and absence of the jury.  In one exchange in the absence of the jury when the judge permitted counsel to cross-examine a police officer as to the circumstances of identification, the judge had said:

“… provided you exercise extreme caution, because it is very easy for you to overstep the mark … we have come across each other before … in your enthusiasm to exercise what you see as the rights of defence counsel, you go close to if not beyond the line on almost every occasion … You do not seem to have the capacity just to deal with things in a proper way … it is perfectly obvious and you know perfectly well how to behave yourself. You are not a baby barrister, you’ve been doing this for some time, so you know perfectly well and everything you do is deliberate.”

63.In allowing the appeal, Judge LJ had this to say about the above exchange:

“This exchange occurred in the absence of the jury during a discussion about a point of law. The defendant, of course, was present. The judge’s observations were wholly disproportionate. … The judge was, of course, entitled to reject her submissions, and to criticise the questions she asked, or intended to ask in cross-examination. What however we have here was a personal attack not only on her skill, but in effect on her professional integrity. He was saying that counsel went beyond the line of propriety, and that she knew what she was doing, and nevertheless did it deliberately. … Indeed we wonder whether the judge can really have appreciated the full implications of and the cumulative effect of the language he was using, and whether he did or not, its likely impact on the defendant, observing these unfortunate exchanges.” (para 29)

“We expect judges to be robust, and we are not troubled when counsel are over-sensitive to criticism. We also recognise that from time to time judges will become impatient, sometimes unjustifiably so, without undermining the safety of the conviction. The stark problem in the present case was that the judge’s attitude and conduct towards counsel for the defendant was unfair. In truth, this trial became over-infused with what appears to have been a repeated and unnecessary demonstration of inappropriate personal animosity towards counsel which involved public criticism not only of her ability, but also of her integrity. These interfered to a marked degree with the normal due process required at every trial. This had the inevitable effect of damaging the defendant’s confidence in the administration of justice in her case. …” (para 48)

64.To J’s criticism of counsel and solicitor is likewise an attack on their professional integrity, not merely their professional skill.  Having come to the view that counsel had deliberately attempted to mislead the court, it must logically follow that counsel would thereby forfeit the privilege given by his profession to be listened to by the court with an open mind.  It is pertinent to have regard to the insidious nature of bias and that it operates on the sub-conscious level.  A fair-minded and informed observer would reasonably conclude there was a real possibility that the judge’s mind would not be open to persuasion by counsel who he was convinced had attempted deliberately to mislead him.

65.The comments made by the trial judge in Lashley were in the course of an oral exchange in the heat of a hearing.  To J’s criticisms of counsel and solicitor were made in his written judgments, delivered some weeks after the hearing.  They must be taken as his considered comments and represented his firm views.  Nor were they isolated utterances.  The comments in the February Judgment were repeated and explained with greater clarity in the July Judgment.  And in the most recent August Judgment, when he dismissed another application of the defendants for recusal in the light of the leave to appeal granted by this court in respect of the Recusal Summons, To J had this to say:

“24. It was unfortunate that leave to appeal my dismissal of the Recusal Summons was granted by the Court of Appeal. I accept that in the light of that decision the circumstances present a real possibility of apparent bias. It would be prudent for me to consult colleagues and the Chief Judge, but only if I am in doubt. For reasons as explained in my decision dated 9 July 2012, I am not in doubt. I had applied the appropriate test in making my decision. Not with the least disrespect to the Court of Appeal, I am satisfied that if the circumstances of the case were fully understood in their proper context instead of in the context of hearing an application for leave to appeal, the reasonable, fair-minded and well-informed individual would not conclude that there was a real possibility that I would be biased if I were to proceed to hear the case. It is important in a case like this, the judge should not yield to tenuous, trivial or frivolous grounds and should not accede too readily to suggestions of apparent bias.

25. It is inconceivable that my criticism of counsel could have been taken by the defendants to the length that they took. …”.

66.Mr McCoy submitted the above passages would demonstrate that the judge would seem to have lost his sense of detachment, and are consistent with his firm view that the Recusal Summons was not made bona fide.  I agree.  These comments would serve to reinforce the view of the “fair-minded observer” that the judge’s mind was closed to persuasion by the defendants’ submissions and that his ability to impartially adjudicate upon them was affected by the view he had taken of their counsel.

67.For the above reasons, I conclude that the judge was plainly wrong in his decision on 15 May 2012 not to recuse himself in hearing the Discharge Summons and the Strike-out Summons.  I reach this decision not without regret, because it would entail a waste of effort and substantial costs.  Notwithstanding a painstaking judgment of over a hundred pages on the Discharge Summons and the Strike-out Summons, the judge’s decision on these applications would have to be set aside and these applications must be heard afresh before another judge.

68.I would mention that Mr McCoy had raised other arguments in this appeal, namely that the judge’s criticism of Mr Wright in para 7 of the February Judgment was unjustified in that the judge had not understood properly counsel’s argument on the proper construction of Judge Lok’s Order and the obligations imposed on the defendants by that order and the 1^st Unless Order, which should be distinguished from the obligation imposed on a party required to give discovery in the ordinary way.  I do not wish to be drawn into the argument if the judge had properly understood Mr Wright’s submission. I note there was subsequent correspondence between Stephenson Harwood and the judge’s clerk in July 2013 regarding how Mr Wright’s submission should be understood when the solicitors requested the judge to issue a corrigendum in respect of the reasons for a decision on 4 February 2013 handed down on 21 June 2013.  Whether the judge had properly understood or had mischaracterised Mr Wright’s submission when he rejected it in the February Judgment does not in any way affect my conclusion there was a real possibility of bias here.  I will deal with Mr Wright’s submission on its own merit when I come to consider the leave applications in HCMP 241/12 and HCMP 407/12.

Conclusion and orders in CACV 42/2013

69.I propose to allow the appeal in CACV 42/2013 and set aside those parts of the order of To J dated 7 June 2012 in relation to the Recusal Summons, the Discharge Summons and the Strike-out Summons.  The relevant parts of the order are paras 2, 3, 4, 7, 8, 9 and 10.  I would remit the Discharge Summons and the Strike-out Summons to the Court of First Instance to be determined by a judge other than To J.

70.As to the remainder of the application for leave to appeal in HCMP 2693/12, that would fall away with the setting aside of the order made on the Discharge Summons and the Strike-out Summons with the allowing of the appeal on the Recusal Summons.  I would simply record that no order be made on the remainder of the leave application in HCMP 2693/12.  As it would not be necessary to make a determination on the remainder of that leave application, I would make no order as to costs.

71.We have heard submissions on costs of the appeal and on the costs wasted in the four-day hearing before To J in the event the appeal is allowed.

72.It is right that costs of the appeal should follow the event, with a certificate for two counsel.  As to the costs of the four-day hearing before the judge that are wasted, I think it is right that the defendants should recover these costs from the plaintiff. I have regard to the stance taken by the plaintiff in the defendants’ application to the judge for recusal, first by letter to the plaintiff’s solicitors dated 28 April 2012 inviting them to give consent, then by letter to the judge’s clerk dated 7 May 2012, and finally by the Recusal Summons.  The plaintiff had opposed the application throughout.  Given the history of these proceedings, which I have set out in some detail above, it seems to me the interests of justice would best be served by granting a stay of the costs awarded to the defendants in this appeal and of 90% of the costs wasted by the four-day hearing (as attributable to the time taken for the hearing of the Recusal Summons, the Discharge Summons and the Strike-out Summons) until after the determination of the Discharge Summons and the Strike-out Summons by a different judge in the Court of First Instance.

The application for leave to appeal in HCMP 241/12

73.As we have indicated to counsel, we propose to deal with the outstanding applications for leave to appeal of the defendants in HCMP 241/12 and HCMP 407/12 on the basis of the written submissions on both sides.

74.I do not propose to repeat the matters which the judge took into account when he made the 1^st Unless Order, which was clearly an exercise of discretion on his part.  The test for granting leave to appeal is whether there is a reasonable prospect of success of the proposed grounds of appeal, or if there is some other reason in the interests of justice the appeal should be heard.

75.The defendants’ primary complaint is that by making the 1^st Unless Order, they were effectively deprived of an opportunity to set aside Judge Lok’s Order (on the basis that the judge was not made aware of Sakhrani J’s Order) or Sakhrani J’s order.  The 1^st Unless Order only allowed the defendants four days to comply with Judge Lok’s Order, it was made on a Friday morning and the deadline for compliance was the afternoon of the coming Tuesday.  The defendants only had one full working day and this was insufficient time to challenge Judge Lok’s Order.  So they had to comply with that order and any subsequent challenge was rendered academic.

76.It was said that the judge had failed to give proper weight to the lack of merit in the plaintiff’s claim (which arguments formed the basis of the Strike-out Summons) when assessing whether the circumstances would justify the making of an unless order.  Further, the judge had misunderstood the facts when he held there was “contumelious delay” of the defendants in complying with the orders for disclosure.

77.The judge was aware of the above matters submitted on behalf of the defendants when he exercised his discretion to make the 1^st Unless Order, see para 24 of the January Judgment which I have quoted in the earlier part of this judgment.  He had taken those matters into account.  He mentioned that as of the date when the summons was heard before him, the defendants had seven days’ extension already, see also para 23 of that judgment.  I am not able to see any justification for setting aside Judge Lok’s Order on the ground that he was not made aware of Sakhrani J’s Order, nor do I agree there is any valid basis for setting aside Sakhrani J’s order.  I agree with paras 21 and 29 of the January Judgment.

78.I can discern no error of principle or factual assessment in the January Judgment.  The judge was entitled to take the view he did in para 28 that he was concerned with the defendants’ non-compliance with a series of court orders, that it was not his function to review each and every one of them, and as of the date of the hearing there was no application to discharge the Ex Parte Order and no appeal of the subsequent orders for disclosure made by Suffiad J, Reyes J and Judge Lok.

79.The defendants do not meet the threshold requirement for leave to appeal to be granted.  I would dismiss their application with costs to the plaintiff.

The application for leave to appeal in HCMP 407/12

80.It was first contended that the judge erred in proceeding to hear the plaintiff’s summons for enforcement of the disclosure orders on 22 February 2012 when the defendants had issued the Strike-out Summons on 16 January and the Discharge Summons on 21 February and these applications were yet to be heard.  There is nothing in this contention.  Nor is there any substance in the argument that the judge had failed to give proper weight to the lack of merit in the plaintiff’s claim.  As mentioned earlier, the judge was entitled to take the view that court orders once made should be obeyed, unless and until they are discharged or set aside on appeal.

81.The main argument of the defendants is that the judge was wrong to hold that they had not fully complied with Judge Lok’s Order and the 1^st Unless Order.  The argument was along these lines:

(1) The obligation imposed on the defendants by Judge Lok’s Order was to file an affidavit disclosing documents and the obligation imposed by the 1^st Unless Order was to file the affidavit required by Judge Lok’s Order.

(2) As a party can only make an affidavit disclosing documents which are physically in his possession at the time of the making of the affidavit, on the true construction of Judge Lok’s Order and the 1^st Unless Order, these orders did not require the defendants to disclose documents which were not within their possession at the time.

(3) Judge Lok’s Order and the 1^st Unless Order did not state in clear and unambiguous language that the defendants were required to write to particular banks requesting for copies of bank statements and documents.  A party should not be punished for not doing a particular act when it is not clearly and unambiguously stated in the court order that this particular act should be done.

(4) There was no evidence to support a finding that the defendants could, by taking reasonable steps, have obtained copies of the bank statements and documents sought in the four-day period imposed by the 1^st Unless Order.

82.I do not think these are tenable arguments.  The construction the defendants sought to place on Judge Lok’s Order – that the obligation was merely to file an affidavit to disclose particular documents – is just wrong.  There is no ambiguity about this order or the 1^st Unless Order. Judge Lok’s Order must be read with the Ex Parte Order, as it is clearly stated in para 1 of Judge Lok’s Order that the further affidavit to be filed must be “in full and proper compliance with para 4 of [the Ex Parte Order]”.  Para 4(3) of the Ex Parte Order required the 1^st defendant to exhibit “true copies of all supporting documents in the 1^st Defendant’s custody, possession and/or power” in respect of the matters set out in para 4(2), including but not limited to relevant banking documents. Banking documents not in the defendants’ possession but are within their power to obtain from the relevant banks are clearly within the disclosure obligation in the Ex Parte Order and Judge Lok’s Order.  That obligation is simply not discharged by the statement in the 2^nd defendant’s 7^th affidavit that the documents are in the possession of the relevant bank and are “out of his control”.

83.As for the time limit of four days imposed in the 1^st Unless Order, this is a matter entirely within the Judge’s discretion.  No argument was advanced to him at the hearing on 27 January 2012 that the defendants would have difficulties in complying with Judge Lok’s Order.  The submission at the time was that disclosure should be deferred until the defendants had the opportunity to consider the materials presented to Sakhrani J and to challenge his order.

84.I do not think there is any reasonable prospect of success in the intended appeal against the decision of the 2^nd Unless Order.  I would refuse leave to appeal and award costs to the plaintiff in this application.

Hon Lunn JA:

85.For the reasons given by Kwan JA, I would allow the appeal in CACV 42/2013, set aside the parts of the order of To J dated 7 June 2012 that she stipulates at paragraph 69 of the judgment and remit the Discharge and Strike-out summonses to be heard by a judge of the Court of First Instance, other than To J.  The judge’s determination in the February judgment that counsel had misled the court and the repeated determinations in the July judgment that he had done so deliberately was a finding of conduct that fell to be regarded as a grave breach of the professional and ethical standards of the Bar.  Plainly, the judge ought to have recused himself.  The judge fell into error in not doing so.  Similarly, I agree with her proposed orders in respect of costs.

86.I agree with Kwan JA that the applications for leave to appeal in HCMP 241/12 and HCMP 407/12 are to be dismissed with costs to the plaintiff.

Hon McWalters J:

87.I agree with the judgment of Kwan JA.

Mr Clive Grossman SC and Mr Douglas Lam, instructed by Lipman Karas, for the plaintiff (respondent)

Mr Gerard McCoy SC and Mr Colin Wright, instructed by Stephenson Harwood, for the defendants (appellants)

Please refer to FAMV49/2013 for the relevant appeal(s) to the Court of Final Appeal.