Introduction

The judgment of the Court of Appeal in Shenzhen Futaihong Precision Industry Co Ltd v BYD Co Ltd(1) is another recent example of the courts in Hong Kong trying to narrow the issues in respect of which parties seek permission to adduce expert evidence. In this case, the Court of Appeal refused to interfere with a lower court's case management decision that had (among other things) granted the defendants permission to adduce expert evidence with respect to only one issue out of 10 contested issues that the defendants sought to raise. Besides demonstrating the difficulty in challenging a lower court's exercise of case management discretion, the case also demonstrates a more proactive approach by the courts in examining the necessity for and relevance of proposed expert evidence.

Background

The proceedings are stated to arise out of a substantial dispute between two rival business groups involved in the mass production of mobile phones. In essence, the plaintiffs claimed that the defendants had wrongfully acquired the plaintiffs' confidential trade information and other confidential documents through the actions of a group of the plaintiffs' employees. At the heart of the case was what the plaintiffs claimed to be their confidential information. Such claims are quite common in Hong Kong.

The parties appear to have agreed that expert evidence was necessary with respect to (among other things) certain IT forensics issues and matters of foreign law. However, the defendants also sought the court's permission with respect to another 10 issues that primarily related to the nature of confidential information in the mobile phone market and trends in (and the expansion of) the mobile phone industry at the relevant time (approximately, between 2004 and 2006).

The 10 issues in respect of which the defendants required the assistance of expert evidence (relating to the state of the market at the relevant time) were described by the lower court as "hotly disputed" and as having taken up most of a two-day court hearing.(2) In short, the lower court allowed expert evidence only with respect to one of the 10 issues put forward by the defendants – deciding that the other issues were largely fact dependent and that expert reports would not be helpful. The issue in respect of which the lower court permitted expert evidence related to whether certain alleged confidential information was available in the public domain in or before 2007 and, if so, to what extent.

In granting permission for expert evidence on agreed matters of foreign law that arose, the lower court reformulated the relevant issues and in the process widened them (in part at the request of the plaintiffs). The lower court also permitted amendments to the plaintiffs' formal case to include matters arising out of the alleged conduct of an additional three employees of the plaintiffs.(3)

The defendants obtained permission to appeal the lower court's decisions.(4) Being an appeal against the exercise of a case management discretion, the defendants had to show that the lower court's decisions had not been made in accordance with established principles or that they were otherwise plainly wrong – this is generally regarded as a difficult hurdle to overcome.

Appeal judgment

The Court of Appeal's judgment was a unanimous one. The Court of Appeal rejected all of the defendants' challenges to the lower court's refusal to allow their application to adduce expert evidence with respect to nine of the 10 issues concerning the nature of the industry and relevant trends at the time. The Court of Appeal went through each of these nine issues and decided that the lower court had been entitled to conclude that the matters raised were largely questions of fact, or mixed questions of fact or law, in respect of which expert assistance was likely to be neither relevant nor helpful.

The Court of Appeal's judgment starts with a summary of the relevant principles that guide the courts in determining whether expert evidence should be allowed and, if so, the relevant court directions to be given. In doing so, the judgment usefully traces some of the relevant Hong Kong and English case law principles. The judgment emphasises the courts' control over the issue of whether expert evidence should be allowed and, if so, to what extent, with the criteria of necessity and relevance being crucial.

The judgment also stresses that parties applying for permission to rely on expert evidence at trial should apply for relevant directions well in advance in order to allow sufficient time for the experts to prepare their reports before applying to set down for trial. Normally, the appropriate time to seek such directions is in a party's timetabling and listing questionnaire, although the Court of Appeal acknowledged that the time and manner in which an application for expert directions is made depends on the circumstances of each case – for example, in more routine cases involving personal injury actions, there are established protocols for expert reports.(5) In more complex litigation, such as the case in hand, the timing of the application for expert evidence and what information should be put before the court (in support of the application) is a matter that requires careful thought.(6)

The defendants' appeal was dismissed.(7) While considering each of the defendants' challenges to the lower court's refusal to permit expert evidence with respect to nine of the 10 issues raised, the Court of Appeal's judgment appears to be based on two general principles. First, the need to keep expert evidence under control in order to further the objectives of the court rules – for example, by narrowing the issues in dispute, controlling costs and avoiding delays. Second, in the Court of Appeal's opinion, the defendants were unable to show that the decision of the lower court was plainly wrong.

Comment

When Hong Kong adopted substantial reform to its civil procedure rules in April 2009, one of the key areas identified was the need to better regulate the use of expert evidence (particularly in less complex cases). Almost 10 years on, the courts are now much more proactive in controlling whether expert evidence should be allowed and, if so, to what extent.

In this case, the Court of Appeal went so far as to quote from the Final Report on Civil Justice Reform in order to identify the requirements for the admission of expert evidence.(8)

Often, one difficulty faced by parties in complex commercial litigation is identifying and setting out the precise issues in respect of which expert evidence will be both relevant and helpful. Until parties have exchanged relevant documents in their possession and statements of factual witnesses, identifying the exact parameters of the proposed expert evidence is often difficult. This requires a degree of understanding by the case managing courts.

There is a suggestion in the Court of Appeal's judgment that if a party has difficulty in formulating the precise issues that require expert evidence, they can produce a draft report to support their application(9) – this appears to be a rather novel suggestion for typical large-scale commercial litigation, where the norm is for expert reports to follow after (among other things) adequate disclosure of documents and exchange of witness statements. Usually, the technical issues in respect of which expert evidence may be required are dependent on the underlying documents and the statements of the principal witnesses. However, given that the events in this case appear to go back over 10 years, there may be an issue as to who remembers what.

For further information on this topic please contact Hannah Fletcher, David Smyth or Warren Ganesh at RPC by telephone (+852 2216 7000) or email ([email protected], [email protected] or [email protected]). The RPC website can be accessed at www.rpc.co.uk.

Endnotes

(1) [2018] HKCA 408, CACV 63/2017, 18 July 2018. Also see appeal in CACV 76/2017 (same judgment), being the defendants' unsuccessful appeal against the lower court's decision to allow certain amendments to the plaintiffs' pleaded case.

(2) Including decisions of the lower court on 28 June and 5 July 2016, HCA 2114/2007. Also see lower court's decision on costs, dated 31 August 2016, HCA 2114/2007, at paragraph 20.

(3) Decision of lower court dated 18 July 2016, HCA 2114/2007.

(4) The lower court granted the defendants permission to appeal its decisions on expert evidence (supra, note 2). The lower court also granted permission to appeal its decision to allow the plaintiffs to amend their pleaded case (such permission limited to the exercise of the court's discretion) – decision of the court dated 15 March 2017. The Court of Appeal allowed permission to appeal in CACV 76/2017 (plaintiffs' amendment application) on additional grounds.

(5) Practice Direction 18.1 (The Personal Injuries List).

(6) Supra note 1, at paragraph 10.

(7) CACV 63/2017 (determination of expert evidence) and CACV 76/2017 (plaintiffs' amendment application). The defendants' appeal arising out of the plaintiffs' amendment application raises interesting issues regarding whether the disputed amendments (stated to involve allegations against additional employees of the plaintiffs) amounted to new claims and, if so, whether they arose out of matters already pleaded by the plaintiffs – Section 35 of the Limitation Ordinance (Cap 347) and Order 20, Rule 5 of the Rules of High Court.

(8) 3 March 2004. Section 20 of the report deals with "Expert evidence".

(9) Supra note 1, at paragraph 18.

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