Deacons (A Firm) v. White & Case Ltd Liability Partnership and Others
Read the full judgment text of CACV 178/2003 on BabelCite. This Court of Appeal judgment was delivered on 11 July 2003 before Rogers VP, Le Pichon JA.
Civil procedure – appeal – extension of time – interlocutory orders – recusal – reasonable apprehension of bias – whether prior decisions automatically void after judge recuses – whether delay justified – law firm partnership dispute – solicitors moving to competitor – discovery – striking out pleadings. Partnership law – former partners – alleged breach of confidence and inducement to leave – pleading of partners' misconduct as justification. Civil procedure – recusal test – objective fair-minded informed observer – borderline cases – cautious approach of trial judge. The plaintiff, Deacons, a Hong Kong law firm, sued White & Case and former partners and solicitors of the plaintiff who had left to join them. Deputy Judge Poon, by orders of 13 March and 1 April 2003, limited discovery and struck out paragraphs 9 to 16 and 26(9) of the defence of the 3rd and 4th defendants on the ground that the matters there pleaded (alleging that partners of the plaintiff had conducted themselves incompatibly with partnership obligations and discriminated against the departing solicitors) were irrelevant to the issues in the action. The trial was fixed for 2 June 2003. On that date the deputy judge disclosed a long-standing friendship with Mr David Zee, a partner of the plaintiff; he subsequently recused himself on 9 June 2003. The 3rd and 4th defendants applied on 17 June 2003 for an extension of time to appeal the March and April orders; Ma JA refused the extension on 20 June 2003. On appeal to the Court of Appeal, the 3rd and 4th defendants argued that, once the deputy judge recused himself for reasonable apprehension of bias, all his prior decisions in the action fell to be set aside automatically. The Court of Appeal held that, although authorities such as R. v. Curragh Inc. [1997] 1 R.C.S. 537, Millar v Dickson [2002] 1 WLR 1615 and Moch v Medtravel (Pty) Ltd t/a American Express Travel Service 1996 (3) SA 1 support the principle that earlier decisions fall once a court determines the trial judge was biased, the present case was materially different because at the time of the March and April 2003 hearings the deputy judge had mistakenly believed Mr Zee was a salaried partner of the plaintiff and not an equity partner. Following Locabail (UK) Ltd v Bayfield Properties Ltd [2002] QB 451, where a judge is ignorant of the disqualifying interest, there is no real danger of bias. The recusal test (whether an objective, fair-minded, informed observer would apprehend bias) applied on materially different facts at the trial stage, when Mr Zee's status as equity partner made him a 'real plaintiff' with a direct personal interest in the outcome. The court further held that the underlying merits of the discovery limitation and striking-out orders were supportable: the impugned allegations, even if true, could not justify the 3rd and 4th defendants joining a competitor that had acquired the plaintiff's special and confidential information. The applications for extension of time were also without merit given the deliberate decision to proceed to trial without appealing, the order for a speedy trial, and the prejudice to the plaintiff caused by further delay. Applications for extension of time refused; appeal CACV 178/2003 dismissed.
Legal issues: Whether prior interlocutory decisions must be set aside once trial judge recuses himself on grounds of reasonable apprehension of bias
Outcome: Applications for extension of time refused; appeal CACV 178/2003 dismissed.
Cited by 7 cases · Cites 3 cases
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CACV000178/2003 HCMP 2591/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL MISCELLANEOUS PROCEEDINGS NO. 2591 OF 2003 (ON AN INTENDED APPEAL FROM HCA NO. 2433 OF 2002) ___________________________
___________________________ CACV 178/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 178 OF 2003 (ON APPEAL FROM HCA NO. 2433 OF 2002) ___________________________
___________________________ Coram: Hon Rogers VP and Le Pichon JA in Court Date of Hearing: 8 & 9 July 2003 Date of Judgment: 11 July 2003 Date of Handing Down Reasons for Judgment: 15 July 2003 ________________________ REASONS FOR JUDGMENT ________________________ Hon Rogers VP: 1.This is an appeal from a determination by Ma JA (as he then was), given on 20 June 2003, whereby the judge refused to extend time for appealing two interlocutory orders of Deputy Judge Poon dated 13 March and 1 April 2003 respectively. The decision of this court was given on 11 July with reasons to be handed down in writing later, which we now do. Background 2.The claim in this action arises from the fact that the 3rd defendant, who had previously been an equity partner of the plaintiff, and the 4th defendant, who had previously been a salaried partner of the plaintiff, and a number of other solicitors previously employed by the plaintiff had left the plaintiff's firm and joined the 1st and 2nd defendants as partners or employed solicitors. The action was commenced on 24 June 2002. An order for speedy trial was made on 29 October 2002. At that time, it was also ordered that there should be a spilt trial between liability and damages. In January of this year, Deputy Judge Poon was designated the trial judge. In that capacity he later heard a number of interlocutory applications. Amongst those applications were the applications which resulted in the decisions in respect of which leave is sought to appeal out of time. 3.There is a further appeal, CACV 173 of 2003, which by consent of the parties was listed to be heard at the same time as the hearing of these applications. For reasons which will emerge that appeal inevitably fell to be dismissed for the same reasons as the applications for extension of time. 4.On 18 and 19 February 2003 the deputy judge had three summonses before him. There was an application on the part of the plaintiff to limit discovery so as to exclude any documents relating to matters raised or referred to in paragraphs 9 to 16 and 26(9) of the defence of the 3rd and 4th defendants. Those paragraphs may be summarised as pleading that various partners in the plaintiff's partnership had conducted themselves in a way which was incompatible with their obligations as partners to the extent that they had furthered their own interests rather than the interests of the partnership. It was also said that those partners had discriminated in important partnership and professional matters against the interests of the 3rd and 4th defendants and the solicitors who had left the plaintiff's employment, both to the detriment of those persons and the detriment of the partnership business. To this extent the nub of the allegations amounted to the allegation that circumstances had been created such that the 3rd and 4th defendants and the other solicitors who left the plaintiff's firm would, naturally, not have wished to remain working as part of the plaintiff's firm. 5.In his judgment of 13 March 2003, the deputy judge came to the conclusion that the matters pleaded in those paragraphs of the defence were not relevant to any of the issues in the action pleaded. It was on that basis that the judge made the order that discovery by the parties should be limited so as to exclude any documents relating to matters raised in those paragraphs of the defence. Consequent upon that judgment and order a summons was issued on behalf of the plaintiff seeking to strike out those paragraphs in the defence of the 3rd and 4th defendants. That application was heard on 1 April 2003 and the deputy judge gave a short oral judgment ordering those paragraphs to be struck out. That decision was not only consistent with but followed upon the reasoning for the order of 13 March limiting the documents on discovery. 6.At the hearing on 13 March the deputy judge also heard a corresponding application on behalf of the 3rd and 4th defendants for discovery of documents which were listed in the schedules to the summons. That application was refused because the judge came to the conclusion that for the most part the discovery sought was irrelevant and in some respects there had been no class of documents which had been defined in the request. The order in respect of that part of the judge's decision was not drawn up until 19 June. 7.The trial of the action was scheduled to commence on 2 June 2003. At the commencement of the hearing the deputy judge informed the parties that he had been a classmate of Mr David Zee, who he understood to be a salaried partner of the plaintiff. Apart from knowing Mr Zee well at university he had stayed in close contact with him after graduation and had been good friends and, indeed, had shared a flat for about 3 years ending in 1990 but, at least for the last 10 years, he had scarcely had any contact with him. The matter was adjourned until 5 June 2003. At the resumed hearing the deputy judge was requested on behalf of the defendants to recuse himself. By that date the judge had been alerted to the fact that Mr Zee was not merely a salaried partner but was an equity partner. As the deputy judge pointed out in his ruling, that status made Mr Zee "a real plaintiff". He would have a direct and personal interest in the outcome of the litigation. It can be borne in mind that the naming of a partnership by its firm name as a party to an action is the equivalent of listing all the partners of the firm. 8.Despite the fact that the deputy judge's connection with Mr Zee in the last 10 years had been minimal the judge decided to recuse himself. In doing so he said:
He went on to say that Mr Zee was neither a close friend nor a casual acquaintance. He considered that it was a borderline case. In the circumstances the judge clearly took an extremely cautious approach. 9.The judgment of the deputy judge was given on 9 June 2003. It was not until 17 June 2003 that the 3rd and 4th defendants filed papers seeking an extension of time to appeal from the orders of 13 March and 1 April 2003. Two days later, on 19 June 2003, the order in respect of the 3rd and 4th defendants' application also the subject of the decision of 13 March was drawn up. A notice of appeal was apparently served on 2 July 2003. It is noteworthy that that notice of appeal, as indeed the two draft notices of appeal in respect of which extension of time is sought, seek only that the orders made should be set aside and the matters be remitted for rehearing by the judge assigned to hear the case. The grounds of appeal are simply that the judge should have recused himself from hearing the relevant interlocutory applications. The merits of the applications are not the subject of any of the grounds of appeal. 10.When the matter came before Ma JA on 20 June, the judge observed that there had been significant delay in seeking extensions of time for appealing. In the course of argument he pointed out that delay was a matter to be judged in relation to the facts of each case. A delay of a few months might, in some cases, not be significant. In the present case there had been an order for a speedy trial and that was due to come on on 2 June. In view of the recusal of the original trial judge a new judge had been appointed to hear the case. In those circumstances, as Ma JA correctly pointed out, the delay even of a week was highly relevant. In the circumstances of the case Ma JA considered that the delay aspect was by itself sufficient to dispose of the applications. In the second place, however, Ma JA went on to consider the fact that the merits of the two orders had not been addressed. For those reasons Ma JA dismissed the application. 11.On this appeal reliance is now placed upon an affidavit of David Nigel Francis seeking to explain the delay. The primary point put forward was that the matter had been mentioned before Madam Justice Chu, the listing judge on 10 June and that thereafter it had taken time to consider the matter and draft the documents. In respect of the merits of the appeal it is said that the 3rd and 4th defendants had been advised by leading counsel at the time that there were grounds to appeal the relevant orders but that a decision had been taken to proceed with the trial without appealing. 12.The primary point taken on this appeal was that the fact the deputy judge had recused himself from hearing the trial of the action on the grounds that there was reasonable apprehension of bias meant that there was likewise a reasonable apprehension of bias in respect of the decisions on the interlocutory matters in March and April. The argument of Mr Chan SC on behalf of the 3rd and 4th defendants was that the decisions fell to be set aside virtually automatically once the judge had, on 9 June, recused himself from hearing the trial. His argument was that once the judge was disqualified on the basis of bias not only was he excluded from taking any further part in the proceedings but any decision which he had made also fell to be set aside. 13.In reliance on Mr Francis's affidavit, Mr Chan argued that Ma JA's views as to the delay in applying for leave to appeal out of time put far too high an onus on the 3rd and 4th defendants and their advisers. In relation to Ma JA's view that there was no underlying merit in any appeal Mr Chan sought to argue that the matters pleaded in paragraphs 9 to 16 and 26(9) of the defence were relevant to some of the allegations in the amended statement of claim and in particular paragraph 38I(a) and 38K. 14.In reliance upon his primary ground that the interlocutory decisions fell to be set aside, Mr Chan relied in particular upon the case is of R. v. Curragh Inc. [1997] 1 R.C.S. 537 and specifically on the passages at pages 542 to 545 in the judgments of La Forest and Cory JJ. At paragraph 8 on page 544 it was said:
The same sentiment was repeated in effect in the subsequent paragraph. 15.Mr Chan also relied upon similar sentiments expressed in the advice given by the Privy Council in the case of Millar v Dickson [2002] 1 WLR 1615. At paragraph 65 of his advice Lord Hope of Craighead said:
Similar sentiments were expressed by Hefer JA in the Appellate Division in South Africa in the case of Moch v Medtravel (Pty) Ltd t/a American Express Travel Service 1996 (3) SA 1 at page 10. 16.Whilst it has been canvassed that these cases involved decisions in criminal proceedings, it seems to me that the important point is that all the circumstances which have a bearing on the suggestion that the judge was biased have to be considered. It seems to me that the deputy judge in paragraph 7 to 9 of his ruling of 9 June 2003 set out the judicial approach to the matter correctly. As he pointed out in his citation from the judgment of the Court of Appeal in In re Medicaments and Related Classes of Goods (No. 2) (CA) [2001] 1 WLR 700 Lord Phillips had observed at paragraph 69 that a judge who is asked to recuse himself is in a difficulty in applying the test of a real danger and hence the test which the judge should apply is whether an objective onlooker might have a reasonable apprehension of bias. 17.In the three cases which have been referred to above which make reference to the decisions in the course of a case failing once it has been decided that bias, or a reasonable apprehension of bias, exists, there was no question of any relevant change in the circumstances between the time when it is determined that the trial judge was biased and the previous decisions or orders which had been made during the trial which the courts considered could not stand. In the present case there is, it seems to me, a very material difference. Up until the time when the deputy judge first broached the subject of his friendship with Mr Zee he considered that Mr Zee was a salaried partner, in other words, an employee, of the plaintiff. That, it seems to me, is a very relevant consideration. Where a judge is determining an interlocutory matter, not on the basis of exercising a discretion but on the basis of whether evidence or documents are relevant to the issues in the proceedings, the fact that he may be a friend of an employee of the plaintiff is quite a different matter from a situation where a judge is a friend of one of the partners of the plaintiff and is determining issues at a trial on oral evidence. The fact that the deputy judge thought Mr Zee was a salaried partner is highly relevant. As was said in the judgment of the court, Lord Bingham, Lord Woolf M.R. and Sir Richard Scott V.-C. in the case of Locabail (UK) Ltd v Bayfield Properties Ltd and Another [2002] QB 451 at paragraph 18:
18.Mr Chan sought to avoid this suggestion on two grounds. First he said that a proper reading of the amended statement of claim showed that Mr Zee was an equity partner and hence the deputy judge would have known of that when he made the decisions in March and April. As to that, I would say that, although a careful reading of the amended statement of claim would disclose that, any person who was under the impression that Mr Zee was a salaried partner might well have missed the point. Moreover, Mr Zee's name appears in a list of names and it would not have been necessary when considering the allegations in the amended statement of claim to identify precisely those names. Mr Chan's reliance on paragraph 69 of the judgment in the Locabail case does not take the matter any further. In my view it is clear from what has happened that there is no ground for suggesting that until the deputy judge was informed as to his misapprehension in June 2003 he considered that Mr Zee was a salaried partner. 19.In those circumstances I do not consider that an attack upon the interlocutory decisions made by the deputy judge in March and April can be challenged on the basis that there was a reasonable apprehension of bias. In my view any appeal based on those grounds would fail. Since those are the grounds upon which the applications for extension of time are based those applications would fail. Likewise Appeal No. CACV 178 of 2003 which does not require leave because it was not out of time must likewise fail since the grounds in the notice of appeal related to bias. 20.Lest there should be any doubt about the matter I would say this about the underlying merits of the relevant applications which gave rise to the decisions. As already indicated the burden of the allegations in paragraphs 9 to 16 and 26(9) of the defence amounted to an allegation that the 3rd and 4th defendants and the other solicitors who left the plaintiff's firm would have done so with some justification having regard to the way in which the partnership was conducted and, in particular, some of the partners conducted themselves. That, it seems to me, can be no justification for those persons joining the 1st and 2nd defendants who were not only a competitor of the plaintiff but by reason of the negotiations between the two firms had acquired special and confidential knowledge of the plaintiff's business. Whilst Ma JA did not have the benefit of Mr Chan's submissions in this regard, it appears to me that the decisions of the deputy judge on the question of relevance are entirely supportable. 21.As regards the question of delay, in my view, no issue can be taken of the way in which Ma JA approached the matter on the basis of the facts known to him. Although the affidavit of Mr Francis does indicate that the 3rd and 4th defendants and their advisers were engaged on the matter in June, if they had wished to progress the trial on a speedy basis, as was apparently the professed intention of all parties, steps should have been taken immediately after 2 June to seek extension of time for appealing those decisions. Were it not for this court accommodating the parties on a very speedy basis, the trial of the action would inevitably have been delayed much further. Whilst appreciating that this would impose strict requirements on the 3rd and 4th defendants and their advisers, that, it seems to me would not be unjust, given the fact that a deliberate decision had been taken not to appeal those orders and to proceed to trial on the basis of the decisions which had been made. Hon Le Pichon JA: 22.I agree.
Representation: Mr Alistair McGregor QC & Mr Anderson Chow, instructed by Messrs Clifford Chance, for the Plaintiff/Respondent Mr Edward K S Chan SC and Mr Ashley Burns, instructed by Messrs Herbert Smith, for the 3rd & 4th Defendants/Appellants |
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