5 April, 2017
In the first instance decision of Fo Shan Shi Shun De Qu Consonancy Investment Co Ltd v Yat Kit Jong [2017] HKEC 557, the Court took a dim view of a party's conduct in respect of expert directions. It held that the party's failure to properly define the scope of the issues to be covered by the expert was a violation of procedural rules and prejudicial to the opposing party, and as such ordered that the party be penalised on costs.
Facts
The case concerned winding up proceedings in which the liquidator rejected the proof of debt provided by the applicant creditor. The liquidator queried the existence, validity and enforceability of both the loan and the accompanying guarantee (both of which were PRC law governed), and sought expert opinion to this effect from a PRC law expert. The liquidator submitted five pages of wide-ranging questions for the expert to answer, which were challenged by the applicant claimant on the ground of irrelevance.
Analysis
The Court considered the proposed list of expert questions submitted by the liquidator in light of the following basic principles:
- Expert evidence must be confined to the live issues between the parties.
- A court should refuse to admit evidence that is plainly inadmissible or irrelevant. However, it may adduce evidence where it is unable to form a clear view of its relevance.
- Expert questions should be closely defined rather than open ended.
The Court made clear that the liquidator's proposed questions fell significantly short of these standards. In particular, the Court found that the liquidator was hampered by its failure to adequately set out the factual evidence in its affidavit, resulting in an over-reliance on the expert report to make its case. It noted that "this is putting the cart before the horse.
A party cannot fish for evidence under the disguise of putting the other party to strict proof or seeking to adduce expert evidence on non-issues." By asserting a positive defence in its proposed questions rather than via affidavit (there were no pleadings in this case) the liquidator effectively deprived the applicant creditor of its right of rebuttal.
In its analysis of the proposed questions, the Court made a number of comments that should be borne in mind when preparing expert directions:
Expert questions should only cover issues set out in the parties' pleadings and/or affidavit evidence.
Matters of fact (in this instance the existence of the loan and the guarantee) should not be covered in expert evidence.
Open-ended questions, such as the loan's compliance with "formalities and/or other requirements" of PRC law, are not acceptable.
Comment
Expert evidence is generally admissible as evidence in civil proceedings where there is an issue in question that requires specialist or technical knowledge. There are two common problems regarding expert evidence: the inappropriate or excessive use of experts and the lack of independence of experts. This case serves as a reminder that the courts will not tolerate the inappropriate use of experts. It also serves as a reminder of the importance of properly drafted expert directions, and the need to ensure that cases are properly pleaded in order to avoid over-reliance on expert evidence. It should be seen in the wider context of the courts' increasingly critical attitude towards delays and unnecessary demand on court time following the 2009 Civil Justice Reforms. The Court was highly critical of the waste of time and costs in this case, criticizing both parties for their roles in dragging out proceedings.
For further information, please contact:
Gareth Thomas, Partner, Herbert Smith Freehills
gareth.thomas@hsf.com
