Cosimo Borrelli v Allen Tak Yuen Chan

Court of First Instance
Mimmie Chan J
14 September 2020

Background

The Defendants in this case applied by their summons of 24 June 2020 (“Summons”) for me to recuse myself from hearing the substantive hearing of the Originating Summons (“OS”) which was issued by the Plaintiff on 4 August 2016 (and amended in May 2018). The OS seeks orders that the Defendants be committed for contempt, firstly, in respect of the 1st Defendant’s breach of the Mareva injunction order made by A Chan J on 29 August 2014 (“Order”), and the 2nd to 4th Defendants’ aiding and abetting the 1st Defendant’s breach, and alternatively, for their interfering with the administration of justice in respect of the Order; and further, in respect of the breach by the 2nd to 4th Defendants of the order of this Court made on 17 June 2016 (“Further Order”).

The initial Order was to restrain the 1st Defendant from selling, dissipating or dealing with his assets, whether in his own name and whether solely or jointly owned. It was granted in aid of a worldwide Mareva injunction granted by the Ontario Court on 28 August 2014, which order also compelled the 1st Defendant to disclose the value, nature and location of his assets worldwide. Disclosure made by the 1st Defendant in the Ontario proceedings revealed that he had transferred US $1.3 million to the 2nd Defendant, and US $2.6 million each (the 3 sums transferred together referred to as “Monies”) to his daughters, the 3rd and 4th Defendants, on 9 June 2011. On the Plaintiff’s application on 9 January 2015, A Chow J granted an order in Hong Kong, which extended the Order to the bank accounts of the 2nd to 4th defendants in Hong Kong, into which accounts the transfers had been made by the 1st Defendant. The 2nd to 4th Defendants were further ordered to make disclosure of “how the monies received by them had been used and expended, and the current whereabouts of the money (or any part thereof) with full particulars and documents in support” (“Disclosure Order”).

Background

The Plaintiff contended that the 2nd to 4th Defendants had not fully complied with the Disclosure Order, and on 12 November 2015, A Chow J made an under requiring the 2nd to 4th Defendants to comply with the Disclosure Order by 10 December 2015 (“Unless Order”). Notwithstanding the filing by the 2nd to 4th Defendants of affidavits and affirmations in purported compliance with the Unless Order, the Plaintiffs applied, and obtained from this Court on 17 June 2016, the Further Order that the 2nd to 4th Defendants should file corrective affidavits in order to comply with the Disclosure Order and the Unless Order, and further to provide documentary evidence in support of their corrective affidavits.

In the Amended OS, the Plaintiff claims (inter alia) that the 2nd to 4th Defendants had deliberately and knowingly failed to make disclosure as required under the Further Order, and were in breach thereof, such that they should be committed for contempt. The Plaintiff further claims that the 2nd to 4th Defendants had made transfers from and disposal of the Monies in their accounts, with knowledge that the Monies were assets of the 1st Defendant, and had (inter alia) aided the 1st Defendant’s breach of the Order.

The substantive hearing of the Amended OS was initially fixed for 24 September 2020 but was on 2 September 2020 adjourned by consent.

In the affirmation filed in support of the Summons, the Defendants explained that the application for recusal is founded purely on “apparent bias”, claiming that there is a real risk that I may be perceived by an objective bystander, with knowledge of all the background facts, to have prejudged the issue in the contempt proceedings, of the ownership of the Monies transferred from the 1st Defendant to the 2nd to 4th Defendants.

Legal principles

The legal principles applicable to an application for recusal are not disputed by any of the parties: the test being whether the circumstances would lead a fair-minded and informed observer to conclude that there is a real possibility that the tribunal is biased ( Deacons v White & Case Limited Liability Partnership (2003) 6 HKCFAR 322. 

The relevant test was again referred to at paragraph 36 of the judgment of Fok PJ in HKSAR v Md Emran Hossain (2016) 19 HKCFAR 679 : “The test for apparent bias in Hong Kong is the reasonable apprehension of bias test applied by the Appeal Committee in its determination in Deacons v White & Case Limited Liability Partnership at [18]-[21], namely: 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 … that the tribunal was biased.”

As highlighted by Kwan JA in Falcon Private Bank Ltd v Borry Bernard Edouard Charles Ltd [2014] 3 HKLRD 375 : “… 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 Goritas (No 2) [2012] NSWCA 36 at [9]-[12]).”

In this case, the circumstances which have been referred to by Counsel for the Defendants, as having a bearing on the suggestion that the tribunal was biased, are that in the Decision of this Court handed down on 17 June 2016 (“Decision”), the Court made the following observation (at paragraph 9): “I agree with Counsel for the Trustee (ie Plaintiff), that at this stage, it is no longer open to the 3rd Parties (ie 2nd to 4th Defendants) to further argue whether or not the Monies belonged to Chan (ie 1st Defendant), or to dispute that under the Chow Order (ie Disclosure Order), and as explained in the Unless Order, the 3rd Parties are compelled to provide a historical trail of the fund flow of the Monies from the SCB Accounts.”

Legal Argument

Counsel argued that the “crucial issue” to be determined at the hearing of the contempt proceedings under the OS is whether the Plaintiff is able to prove beyond reasonable doubt that the Monies held in the names of the 2nd to 4th Defendants were the 1st Defendant’s monies on the date of the transfer, and in observing that it was no longer open to the 2nd to 4th Defendants to argue whether or not the Monies belonged to the 1st Defendant, this Court had prejudged the question of fact which constitutes the crucial issue in the contempt proceedings, and there is a real possibility of bias. It was also suggested that in having granted leave to commence the contempt proceedings, there is reason for this Court to recuse itself.

The circumstance relied upon by the Defendants to claim pre-judging of the crucial issue they allege is not made out.

Paragraph 9 of the Decision should be read in the proper context. The Decision was on the Plaintiff’s application to compel the 2nd to 4th Defendants’ full compliance with the Disclosure Order and the Unless Order. There had been no appeals against those orders or their contents, which on their face extended the Mareva injunction (under the Order made in August 2014) to the 2nd to 4th Defendants and their bank accounts, under the Chabra jurisdiction of the Court, and by their express terms required the 2nd to 4th Defendants to disclose how the money received from the 1st Defendant had been used and expended, and to disclose their current whereabouts, with full particulars and documents in support. Accordingly, at the stage when the Court was asked to grant the Further Order to compel the 2nd to 4th Defendants to comply with the Disclosure Order, it was simply not open to the 2nd to 4th Defendants to argue again, whether the Monies belonged to the 1st Defendant, nor whether they had to provide the historical trail of the Monies in the accounts covered by the Disclosure Order. On its face, the Disclosure Order had been extended to the 2nd to 4th Defendants’ accounts, despite the fact that the accounts were not in the name of the 1st Defendant. In granting the Disclosure Order on Chabra basis, the learned judge had already been satisfied that the 1st Defendant had substantive control over the 2nd to 4th Defendants, or their assets. Whether the Monies in the accounts of the 2nd to 4th Defendants belonged to the 1st Defendant, or to the 2nd to 4th Defendants, was simply not determined in the Decision.

Even if there was any determination, as the Defendants claim, of the ownership of the Monies, and even if I had granted leave to the Plaintiff to commence contempt proceedings prior to the Plaintiff’s issue of the OS, I am not satisfied that the fair-minded and informed observer would conclude that there is a real possibility that I am or would be biased.

As Leading Counsel for the Plaintiff pointed out, and as highlighted in the authorities (Hossain (2016) 19 HKCFAR 679, ZN v Secretary for Justice [2016] 1 HKLRD 174), the test of apparent bias is considered from the viewpoint of an observer who is fair-minded, informed, with the qualities described in Helow v Secretary of State for the Home Department [2008] 1 WLR 2416: not unduly sensitive or suspicious, who takes a “balanced approach to any information she is given”, who takes the trouble to inform herself on all matters that are relevant, and appreciates that the context forms an important part of the material which she must consider before passing judgment.

Whilst the observer is taken to be reasonable, the High Court of Australia highlighted in Johnson v Johnson (2000) 201 CLR 488 (and cited in Hossain) that the person being observed is “a professional judge whose training, tradition and oath or affirmation require [the judge] to discard the irrelevant, immaterial and the prejudicial”. The significance of the judicial oath was also highlighted by Fok PJ in his judgment in Hossain, at paragraph 42: “The significance of the judicial oath, which in Hong Kong (like in other jurisdictions) imposes on judges a duty to ‘safeguard the law and administer justice without fear or favour, self-interest or deceit’, is not to be overlooked: it is an important bulwark of judicial impartiality. It expresses the ‘general rule of the common law … that judges must apply the law as they understand it to the facts of individual cases as they find them without fear or favour, affection or ill-will, that is, without partiality or prejudice’. The fair-minded and informed observer will be aware of the oath and that judges will generally ‘try to live up to the high standard which it imposes’: see Davidson v Scottish Ministers (No 2) [2004] HRLR 34, [18].”

The courts have also emphasized that the participation of the same judge in a subsequent hearing involving the same parties and subject matter does not necessarily give rise to an appearance of bias (as in Hossain itself, and in Vanderbilt v Azumi & Others [2017] EWCA Civ 2133, Otkrite International Investment Management Ltd v Urumov [2014] EWCA Civ 1315, and JSC BTA Bank v Ablyazov (No 9) [2013] 1 WLR 1845). As Rix LJ pointed out in JSC (at paragraph 65), although matters of mere convenience cannot palliate the appearance of bias, through the eyes of the fair-minded and informed observer, there is not only convenience but also justice to be found in the efficient conduct of complex civil claims with the help of the designated judge system. In Hong Kong, it is also the practice for cases on specialist lists such as the Commercial List and the Construction and Arbitration List for there to be continuity of a designated judge for both interlocutory matters and final trial. Actual bias or a real possibility of bias must of course conclude the matter of recusal in favour of the applicant, but there must be substantial evidence of actual or imputed bias before there should be recusal. The issue of recusal is wholly fact-sensitive, and a finding of pre-judgment has been rare.

It is not infrequent for a judge who had to form and express a view as to the credibility of a party or an important witness at a prior hearing, to be further involved in the litigation of the same case. In JSC BTA Bank v Ablyazov and others (No 9), Rix LJ pointed out that the judge bearing in mind his own findings and observations made at a prior hearing when deciding on a subsequent matter in the same litigation is part and parcel of his judicial assessment of the litigation before him, and is not prejudging by reference to extraneous matters or preferences. At paragraph 70 of his judgment, Rix LJ concluded thus: “(The judge) is judging the matter before him, as he is required by his office to do. If he does so fairly and judicially, I do not see that the fair-minded and informed observer would consider that there was any possibility of bias. … The judge has been at all times bringing his objective judgment to bear on the material in this case, and he will continue to do so. Any other judge would have to do so, on the same material, which would necessarily include this judge’s own judgments.”

In Vanderbilt v Azumi, the Court highlighted the same point at paragraph 29 of the judgment of Lord Justice Floyd: “The mere fact that a judge has decided applications or issues in the past adversely to a litigant is not generally a reason for that judge to recuse himself at further hearings: if that were not the case, the same judge could not make two successive interim decisions in the case without risking accusation of bias. It would make it impossible for there to be a designated judge assigned to the hearing of complex cases with multiple interim applications. The fair-minded and informed observer does not assume that because a judge has taken an adverse view of a previous application or applications, that he or she will have pre-judged, or will not deal fairly with, all future applications by the same applicant.”

Put shortly, a fair-minded and informed observer would not consider that by virtue only of the involvement of the same judge in the hearing of a prior matter, even if it should involve the judge expressing a view or making a finding on credibility or other issues in that matter, that there was any real possibility of bias on the part of the judge. This is essentially because it cannot be assumed that, having heard one matter, the judge would approach the case with a closed mind at a subsequent hearing. As explained by Laws LJ in Sengupta v Holmes [2002] EWCA Civ 1 104 

(and quoted in paragraph 43 of Fok PJ’s judgment in Hossain), the fact that judges do change their minds under the influence of oral argument is a central feature of the adversarial system. In the words of Laws LJ (at para 36 of his judgement): “It is not only judges who in various states of affairs may be invited - they may invite themselves - to change their minds. Absent special circumstances a readiness to change one’s mind upon some issue, whether upon new information or simply on further reflection, and to change it from a previously declared position, is a capacity possessed by anyone prepared and able to engage with the issue on a reasonable and intelligent basis. It is surely a commonplace of all the professions, indeed of the experience of all thinking men and women.”

Significantly, Laws LJ pointed out that the fair-minded and informed observer must have the above matters in mind, as it simply reflects his fair-mindedness.

Decision

In conclusion, when deciding to issue the Further Order, it is clear from the Decision that this Court had not resolved the factual merits of the Plaintiff’s application for a committal order in respect of the Defendants’ alleged contempt, on ownership of the Monies, on the Defendants’ knowing and deliberate assistance of the 1st Defendant’s breach of the Order as alleged, and other issues which are properly for determination of the OS. There is no basis for the application for recusal.

Similarly, in granting leave to issue committal proceedings, the court was only filtering out obviously unfounded or oppressive applications for committal (para 52/2/1 Hong Kong Civil Procedure 2020), without deciding the merits of any issue for determination at the substantive hearing of the application for contempt. There is no prejudgment which would lead any fair-minded and informed observer to conclude that there is a real possibility of bias.

Having rejected the Defendants’ claim of apparent bias on the merits, it is not necessary to address the issue of whether any claim has been waived by delay in this case.

The Summons is dismissed, with costs to be paid by the Defendants to the Plaintiff, with Certificate for Counsel.

– Thomson Reuters 

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