CHAN WAI TAK v. CHAN MAU PING AND OTHERS

HCA2321/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2321 OF 2009

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REASONS FOR DECISION

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1.  The trial of this action was scheduled to be heard over 6 days from 23 to 30 August 2011. On the third day of the dates fixed, I ordered that the trial be adjourned on certain conditions and made consequential directions. I set out below the reasons for my decision.

2.  By his order dated 22 January 2010 (“the Wong Order”), Master J. Wong gave leave to the plaintiff to issue a Concurrent Writ of Summons in this action against the 4^th, 5^th and 7^th defendants and to serve a copy of the said Concurrent Writ of Summons on the 4^th, 5^th and 7^th defendants out of the jurisdiction.  He further ordered that the 4^th, 5^th and 7^th defendants should have 28 days from the date of service of the Writ of Summons to file an Acknowledgement of Service.

3.  On 26 February 2010, the plaintiff’s solicitors wrote to the Senior Judicial Clerk of the High Court seeking the assistance of the High Court to effect service of the Concurrent Writ of Summons and the Wong Order (and Chinese translations thereof) on the 4^th, 5^th and 7^th defendants through the assistance of the judicial authorities of Mainland China.  By a letter dated 7 July 2010, the Registrar of the High Court wrote to the plaintiff’s solicitors to inform them that service of the documents as requested had been effected on the 4^th defendant at “佛山市禅城區華遠東路13號第29樓E2b室” (“the 1^st Address”) but that service at “廣東省豐順縣湯坑鎮文武路12-6號” (“the 2^nd Address”) had been unsuccessful.  Enclosed with the letter were the relevant certificates of service and non-service issued by the “佛山市禅城区人民法院” (“Foshan Court”).  The certificate of service of the Foshan Court recorded that the relevant documents had been served on the 4^th defendant at the 1^st Address on 12 April 2010.  It further recorded that the 4^th defendant was present at the 1^st Address at the relevant time but that after she had heard the explanation of the process servers, she had refused to sign to acknowledge receipt of the documents.  The documents were accordingly simply left with her.

4.  Despite the fact that the Foshan Court had confirmed that the Concurrent Writ of Summons and the Wong Order had been duly served on the 4^th defendant, the 4^th defendant has not filed any Acknowledgement of Service.  Nor had the 4^th defendant taken any steps in these proceedings until the events I shall describe below.

5.  In early August 2011, the 1^st defendant applied for leave to file a supplemental witness statement.  That application was supported by an affirmation made by the 1^st defendant.  In that affirmation, the 1^st defendant deposed to the fact that he had been tied up in defending a criminal prosecution against him and that the trial of that prosecution only came to an end on 13 June 2011.  The 1^st defendant stated that he was acquitted of all charges.  He then went on to explain that after being acquitted, he tried his best to locate the 4^th defendant.  He stated that he met with the 4^th defendant in early July and that the 4^th defendant had told him that she had never received any document from the plaintiff.  The 1^st defendant further stated in his affirmation that up to the date of that affirmation no document had been disclosed by the plaintiff about the service of the Writ on the 4^th defendant. The 1^st defendant was, at the time he made his affirmation, unaware of the letter dated 7 July 2010 from the Registrar of the High Court to the plaintiff’s solicitors and the documents attached thereto.

6.  The 1^st defendant further stated in his affirmation that upon his request, the 4^th defendant had agreed to provide and had eventually provided new documents to him on or about 23 July 2011.  The 1^st defendant explained that these new documents were mainly internal documents of the 7^th defendant.

7.  A supplemental witness statement of the 1^st defendant was eventually filed in which reference was made to some of the documents which the 1^st defendant claimed had been provided to him by the 4^th defendant.  Further, the 1^st, 2^nd and 6^th defendants subsequently filed a supplemental list of documents disclosing others of the documents which the 1^st defendant claimed had been provided by the 4^th defendant to him but which had not be referred to in the supplemental witness statement of the 1^st defendant.

8.  The first one and a half days of the 6 days fixed for the trial of this action were taken up with dealing with certain procedural matters including, in particular, 2 summonses issued by the 1^st, 2^nd and 6^th defendants.  On the second day, after I had heard arguments from counsel in relation to the second of these summonses, I reserved my decision until 2:30 p.m. that afternoon.

9.  Shortly after 2 p.m., I was informed by my clerk that a fax had been received from the 4^th defendant. In her fax, the 4^th defendant stated that she had received a telephone call that same day informing her that the trial of the present action had commenced.  She also stated that she had been engaged for the past 2 years in attending to her other businesses in Hua Dong.  She claimed that she had not received any legal documents and was unclear about the progress of this action.  She therefore requested to be allowed to appear at the trial in person and to testify.  She claimed, however, that she would need 2 weeks to prepare the information and materials relating to the 7^th defendant.  She also indicated that she would attend in person at the trial on the following day.

10.  On the resumption of the hearing at 2:30 p.m., after I had delivered my decision on the outstanding summons and dealt with and ruled on certain arguments as to costs, I informed the parties of the fax which had been received and enquired if they had any knowledge of it.  Mr Lee Tung Ming, counsel for the plaintiff, and Mr James Tze, who appeared with Mr Jeffrey Li for the 1^st, 2^nd and 6^th defendants, informed me that they had no prior knowledge of the fax before being informed of the same by me. Mr Tze, however, informed me that the 1^st defendant had indeed contacted the 4^th defendant by telephone.  After hearing submissions from Mr Lee and Mr Tze, I adjourned the hearing until the following day.

11.  On the resumption of the hearing on the following day, the 4^th defendant was present in court.  Before I heard from her, I was informed by Mr Tze that the 1st defendant wished to act in person so that Mr Tze and Mr Li (and those instructing them) would henceforth only represent the 2^nd and 6^th defendants.

12.  Mr Lee stated that the position of the plaintiff was that he would very much like to proceed with the trial.  He submitted that the certificate of service of the Foshan Court clearly proved that the 4^th defendant knew very well of her having been made a defendant but had chosen not to file an Acknowledgement of Service.  He further submitted that the 4^th defendant’s statement in her fax of the previous day that she had not received any documents relating to this Action must be untrue.  Mr Lee further relied on the contents of the affirmation made by the 1^st defendant in support of his application for leave to file and serve a supplemental witness statement to demonstrate that the 4^th defendant not only knew of the present action against her but also knew of the upcoming trial of this action.

13.  Mr Lee submitted that the whole purpose of the 4^th defendant suddenly appearing was to have the trial adjourned.  He pointed out that there were a lot of outstanding matters on the part of the 4^th defendant and he submitted that as trial date is a milestone date, it should not be disturbed except under exceptional circumstances.

14.  Mr Tze indicated that his clients’ position was neutral.

15.  In addressing this court, the 4^th defendant claimed that she knew about this matter in early 2010 because people in the trade had heard about it and had received documents.  She said that she knew that the plaintiff would file a lawsuit to get back the 7^th defendant.  She claims to have taken advice from lawyers in Mainland China but she claimed that as she had not received the relevant legal documents, she had not paid attention to this matter.  She stated that based on the legal advice she had received, one of the points she would be raising in defence against the plaintiff’s claim against her would be that if what the plaintiff said was true, that is to say, that the 7^th defendant was held on trust for him, this would be illegal under the law of Mainland China as the 7^th defendant is a private mainland enterprise but foreign investors are not allowed to have interests in private mainland enterprises but could only set up foreign invested companies.  She admitted that she had indeed met the 1^st defendant in early July but she reiterated that she had checked but had found that she had not received any legal documents relating to this action.  She stated that she had provided certain documents to the 1^st defendant at the end of July but she said that these were not all of the relevant documents.  She repeatedly said that contrary to what had been stated in the certificate of service of the Foshan Court, no documents relating to this Action had ever been served on her.  She therefore applied for leave to file a defence, a witness statement and a list of documents.

16.  Mr Lee then submitted that what the 4^th defendant had said simply reinforced the point that she had long been familiar with the proceedings.  He submitted that whilst the court could not stop the 4^th defendant from taking part in the trial, it should, in exercise of its discretion, debar the 4^th defendant from putting forward any evidence whether in the way of documents or testimony.  When I asked Mr Lee how the court would know the parameters of the dispute between the plaintiff and the 4^th defendant if she were to take part in the trial without filing a defence, Mr Lee submitted that the parameters of the dispute would simply be that the 4^th defendant could dispute the plaintiff’s case but could not put forward a positive case.

17.  The 1st defendant and Mr Tze indicated that they had no objection to the trial being adjourned.

18.  Given Mr Lee’s submission that the 4^th defendant could not be stopped from taking part in the trial, and in view of the fact that only a possible 3 ½ days were left of the original 6 days allotted for the trial of this action, I asked the defendants how long they anticipated their cross-examination of the plaintiff’s witnesses would take.  The 1^st defendant indicated that it would take him a day to cross-examine the plaintiff’s witnesses.  For his part, Mr Tze estimated that his cross-examination would take about an hour.  The 4^th defendant said that it was difficult for her to say how long her cross-examination would take as she had not yet read the documents in the case.  However, she indicated that it would take her a long time to cross-examine the plaintiff’s witnesses.

19.  I told the 4^th defendant that if I were to exercise my discretion in her favour, she would have to bear the costs of and occasioned by the adjournment.  I added that I would also require her to pay the sum of $485,000 into court as security for such costs ordered to be paid by her.  This figure was arrived at after Mr Lee and Mr Tze had provided estimates of the costs of and occasioned by the adjournment which they would be seeking from the 4^th defendant in the event that the trial had to be adjourned.  I asked the 4^th defendant if she would be prepared to accept these conditions.  She said she would.

20.  I then gave an indication to the parties as to the directions which I would give if I were to adjourn the trial of the action and invited their comments and submissions.  Having heard the parties’ comments and submissions, and having given the matter further consideration, I ordered that the trial of this action be adjourned for a trial de novo before another bilingual judge and that the costs of and occasioned by the adjournment be borne by the 4^th defendant.  I also gave the 4^th defendant leave to file her defence, list of documents and witness statement(s) but such leave was conditional upon the 4^th defendant paying the sum of $485,000 into court as security for the costs of and occasioned by the adjournment would she had been ordered to pay.  I also gave other consequential directions.

21.  I set out below the reasons for my decision:

(a)  By the time I gave my decision, there were only just over 3 of the original 6 days allotted for the trial of this action left.  Whilst this may, on an optimistic estimate, have been sufficient for the completion of the evidence (but not final submissions) without the participation of the 4^th defendant, with the participation of the 4^th defendant, and even assuming that she would not be allowed to adduce evidence, it would have been impossible for even the evidence stage of the trial to be completed within the time left (especially given the 4^th defendant’s lack of preparation).  My assessment of the situation was confirmed to be correct because after I told the parties that I was minded to adjourn the trial, Mr Lee told me he estimated that the length of the adjourned trial would be 8 days and the other parties did not disagree with this estimate.  

(b)  I am of the view that it is desirable that the 4^th defendant should participate in the trial of this action.  On the plaintiff’s case, she is one of the two parties (the other being the 5^th defendant upon whom the plaintiff has, up until now, been unable to effect service) holding the shares in the 7^th defendant on behalf of the plaintiff.

(c)  From a case management perspective, it would be highly undesirable for the issues between the plaintiff and the 4^th defendant not be properly crystallised in pleadings filed.  In this regard, I was particularly concerned that the plaintiff should be given a clear idea of the case which the 4^th defendant proposes to put forward in relation to the allegedly illegality under Mainland Chinese law of the arrangements which the plaintiff had to put in place in relation to the beneficial ownership of the 7^th defendant.  It was for this reason that I decided to give leave to the 4^th defendant to file a defence.

(d)  Since the trial has in any event to be adjourned for the reasons set out in (a) above, I am of the view that in the interests of enabling this court to arrive at a just and correct determination of the dispute between the parties, the 4^th defendant should be allowed to put forward evidence both in the form of documents and the testimony of witnesses.  I therefore gave her leave to file her list of documents and witness statement(s).

(e)  I do not accept the 4^th defendant’s explanation that she had not taken any steps in these proceedings because she had not been served with any of the documents and, in particular, that what is set out in the certificate of service of the Foshan Court is untrue.  I find that the Concurrent Writ of Summons and the Wong Order had in fact been served on the 4^th defendant as stated in the certificate of service.  For reasons best known to herself, she chose not to take any steps in these proceedings until the third day of the trial.  It is therefore due to the fault of the 4^th defendant that this trial has had to be adjourned. In the circumstances, it is only just and proper that she should bear the costs of and occasioned by the adjournment.  Furthermore, as the 4^th defendant is resident in Mainland China, she can just as easily return to Mainland China as she has suddenly appeared.  That may make it extremely difficult if not impossible, for the parties seeking to recover such costs to recover them from her.  Accordingly, I decided that she should provide security for such costs as a condition for leave to be granted to her to file her defence, list of documents and witness statement(s).

HCA2321/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2321 OF 2009

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BETWEEN

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REASONS FOR DECISION

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1.  On 23 August 2011, the first day of the trial of this action, several matters fell to be dealt with before the plaintiff could open his case. However, for the reasons which are set out below, these matters could not be immediately dealt with, and accordingly, after I had given various directions, I adjourned the hearing until 10 a.m. on 24 August 2011. On 24 August 2011, after these matters had been dealt with and after hearing submissions, I ordered that the costs of and occasioned by the adjournment be borne by the1^st,2^nd and6^th defendants. I now give reasons for my decision.

2.  As I have indicated above, several matters had to be dealt with before the plaintiff could open his case.  First, the1^st, 2^nd and 6^th defendants had, on 22 August 2011 (one day before the first day of the trial), issued and filed a summons seeking leave to file the Witness Statement of Chan Wai Fan.

3.  Secondly, Mr James Tze, who appeared with Mr Jeffrey Li for the 1^st, 2^nd and 6^th defendants, indicated that his clients might wish to make an application to strike out parts of the Supplemental Witness Statement of the plaintiff which had been filed and served on the previous day.  The reason why the Supplemental Witness Statement of the plaintiff had been filed so late was because a Supplemental Witness Statement of the 1^st defendant had been filed and served late, in early August 2011, and the defendants represented by Mr Tze had therefore consented to the plaintiff filing a Supplemental Witness Statement on the day before the first day of the trial.

4.  Thirdly, Mr Lee Tung Ming, counsel for the plaintiff, took issue with 2 new bundles of documents which had been served on 20 August 2011.  These 2 new bundles of documents contained copies of the documents which had been disclosed in a 2^nd Supplemental List of Documents of the 1^st, 2^nd and 6^th defendants filed on 10 August 2011 and served on the plaintiff on 11 August 2011.  A few more documents were added to these 2 bundles in the morning on 23 August 2011.

5.  In relation to the first matter, I pointed out to Mr Tze that no affidavit had been made by his clients to explain the lateness of their application for leave to file the Witness Statement of Chan Wai Fan.  Mr Tze accordingly asked that his clients be given leave to file such an affidavit.  Accordingly, I directed that Mr Tze’s clients should file the affidavit in support of the application by 2 p.m. on 23 August 2011 and that the hearing of his client's application be adjourned to 10 a.m. on 24 August 2011.

6.  In relation to the second matter, Mr Tze informed me that he had not had sufficient time to take instructions from his clients to confirm whether or not they did in fact wish to make the application to strike out. He asked for more time to do so.  I therefore directed that if the 1^st, 2^nd and 6^th defendants wished to proceed with the application to strike out, they should file and serve by 3 p.m. on 23 August 2011 their summons in respect of this application as well as their skeleton submissions and list of authorities.  This application would also be dealt with on 24 August 2011.

7.  With regard to the third matter, as I have indicated above, the majority of the documents contained in the 2 new bundles of documents were disclosed for the first time in the 2^nd Supplemental List of Documents of the 1^st, 2^nd and 6^th defendants filed on 10 August 2011 and served on the plaintiff’s solicitors on 11 August 2011.  Despite the fact that these documents were disclosed for the first time less than 2 weeks before the commencement of the trial of this action, copies of these documents were not supplied to the plaintiff’s solicitors until 15 August 2011, in response to the plaintiff’s solicitors’ request by letter dated 11 August 2011.  Further documents were then added to the 2 bundles in the morning on 23 August 2011, the first day of the trial.  None of the documents in the 2 bundles had been referred to in any of the Witness Statements filed on behalf of the defendants.  A further complication was that Mr Tze stated in the course of his submissions that his clients would not in fact be relying on all the documents in the 2 bundles.

8.  I agreed with Mr Lee's submissions that it was highly unsatisfactory for the 1^st, 2^nd and 6^th defendants to simply lodge two new bundles of documents without indicating the issues before the court to which such documents relate.  As held by the Honourable Mr Justice Lam in Hong Lok School Limited & Anor v. Chow Sai Yiu & Anor, HCA17139/1999, Unreported, 7 July 2003, it behoves a litigant giving discovery at the eleventh hour to provide the court and the other side with full and accurate information at least as to the following to enable the court to exercise its discretion properly in dealing with possible objections from his opponents:

(a) the reasons why these documents were not disclosed earlier;

(b) the provenance and the makers of these documents;

(c) the relevance of these documents to the issues before the court; and

(d) the availability or non-availability of the makers to attend trial for cross-examination in case his opponents makes an application under section 48 of the Evidence Ordinance.

9.  As the only concern which had been raised by Mr Lee to the new documents was that the plaintiff did not know the issues to which they relate, I directed that the 1^st, 2^nd and 6^th defendants supply to the plaintiff’s solicitors and to the court by 2 p.m. on 23 August 2011 a list of the documents in the 2 bundles of documents which they wished to rely upon together with the issue(s) to which each of the documents is relevant.

10.  To give the 1^st, 2^nd and 6^th defendants time to comply with my directions, I adjourned the hearing until 10 a.m. on 24 August 2011.  I also reserved the question of the costs of and occasioned by the adjournment to be dealt with on 24 August 2011 after I had heard and considered the two applications of the 1^st, 2^nd and 6^th defendants.

11.  Pursuant to the directions which I had given, the1^st, 2^nd and 6^th defendants filed and served the following in the afternoon on 23 August 2011:

(a) the 7^th affirmation of Chan Mau Ping Tandy in support of their application for leave to file the Witness Statement of Chan Wai Fan;

(b) a Summons dated 23 August 2011 in relation to their application to strike out paragraphs 36 to 44 of the Supplemental Witness Statement of Chan Wai Tak and the 8^th affirmation of Chan Mau Ping Tandy in support of this application; and

(c) a document entitled “Counsel’s Submission on the defendants’ Second Documents Bundle”.

The 1^st, 2^nd and 6^th defendants also filed and served a 3^rd Supplemental List of Documents for the purposes of formally providing discovery of the additional documents which had been inserted into the 2 new bundles in the morning on 23 August 2011.

12.  Based on the above, I find that the adjournment of the trial was occasioned and necessitated by:

(a) the very late application by the 1^st, 2^nd and 6^th defendants for leave to file the Witness Statement of Chan Wai Fan and the request by them for time to file an affidavit in support of such application;

(b) the very late disclosure by the 1^st, 2^nd and 6^th defendants of the documents disclosed in the 2^nd and 3^rd Supplemental Lists of Documents and the very late supply of copies of such documents to the plaintiff;

(c) the failure by the 1^st, 2^nd and 6^th defendants to supply to the plaintiff full and accurate information relating to the documents disclosed in the 2^nd and 3^rd Supplemental Lists of Documents as should have been supplied pursuant to the guidance given in the judgment of the Honourable Mr Justice Lam in Hong Lok School Limited & Anor v. Chow Sai Yiu & Anor;and

(d) the request by the 1^st, 2^nd and 6^th defendants for time to consider whether or not to apply to strike out parts of the Supplemental Witness Statement of Chan Wai Tak and to file a summons for this purpose.

13.  I therefore ordered that the costs of and occasioned by the adjournment should be borne by the 1^st, 2^nd and 6^th defendants.

Mr Lee Tung Ming, instructed by Messrs Anthony Siu & Co., for the Plaintiff

Mr James Tze and Mr Jeffrey Li, instructed by Messrs Christine M. Koo & Ip, for the 1^st, 2^nd and 6^th Defendants

The 3^rd Defendant in person, absent

HCA2321/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2321 OF 2009

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BETWEEN

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D E C I S I O N

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BACKGROUND

1.  In his Supplemental Witness Statement dated 22 August 2011, in response to allegations made by the 1^st defendant in his Supplemental Witness Statement dated 1 August 2011 that the plaintiff is not the owner of the 7^th defendant, the plaintiff referred to and produced various documents with a view to demonstrating that the 1^st defendant actually knew very well of the plaintiff’s interest in the 7^th defendant.  Such documents consisted of several affirmations filed in committal proceedings commenced by the plaintiff against the 3^rd defendant complaining of the 3^rd defendant’s breach of the undertaking given by him to the court on 4 December 2009 as well as selected exhibits to such affirmations. Some of those affirmations and documents related to an e-mail purportedly sent by Mary Lu which suggested that Mary Lu and other former staff of the 7^th defendant had been asked by the plaintiff to fabricate evidence against the 3^rd defendant.  The affirmations and documents also included an affirmation made by the plaintiff in which the plaintiff had sought to demonstrate that the disputed e-mail was a forgery, forged by using a simple computer trick. 

2.  The plaintiff adverted to the fact that the Honourable Mr Justice Chung, who tried the committal proceedings, had found that one of the alleged e-mails “could well have been fabricated” and had found the 3^rd defendant to be in contempt of court in breach of the undertaking which he had given to the court.  The Judgment of the Honourable Mr Justice Chung is already included in the trial bundles. 

3.  In his Supplemental Witness Statement, the plaintiff also adverted to the fact that an officer of the Commercial Crime Bureau of the Hong Kong Police had recently invited him to ask Mary Lu to provide information about the use of the allegedly forged e-mail in the committal proceedings and that he had been told by the officer that the matter had been referred to them for investigation by the Secretary for Justice.  The plaintiff then went on to say that he had been advised by the solicitors that, in those circumstances, it was likely that the matter had been referred by the Honourable Mr Justice Chung to the Secretary for Justice for investigation. 

4.  The plaintiff then went on to observe that the fact that the 1^st defendant had gone to such lengths to provide to the 3^rd defendant the allegedly forged e-mail to help the 3^rd defendant in defending the committal proceedings was evidence that both the 1^st and 3^rd defendants were involved in the plot to rob him of the 7^th defendant. 

THE APPLICATION

5.  By Summons dated 23 August 2011, the 1^st, 2^nd and 6^th defendants (hereinafter referred to collectively as “the defendants”) now apply to strike out paragraphs 36 to 44 (“the Disputed Paragraphs”) of the Supplemental Witness Statement of the plaintiff which raised the aforesaid matters.  The application is said to be made under Order 38 rule 2A(13) of the Rules of the High Court and the Court’s inherent jurisdiction. 

6.  Before dealing with the grounds relied upon by the defendants in support of the application, I should first state that I find that the defendants reliance on Order 38 r. 2A(13) is wholly misconceived. 

7.  Order 38 r. 2A(13) provides as follows :

“The judge may refuse to give a direction under paragraph (12) in relation to a witness statement, or may exclude from such a direction any words or passages in a statement, if he considers that inspection should not be available-

(a) in the interests of justice on national security;

(b) because of the nature of any expert medical evidence in the statement; or

(c) for any other sufficient reason.”

8.  Order 38 r. 2A(12) provides as follows :

“Subject to paragraph (13), the judge shall, if any person so request course of the trial, direct the Clerk of Court to certify as open to inspection any witness statement which was ordered to stand as evidence in chief under paragraph (7)(a).”

9.  It is accordingly clear that Order 38 r. 2A(13) has nothing to do with applications to strike out witness statements or parts of witness statements. 

10.  The defendants’ application is made on 3 grounds :

(a)   the finding of the court in the committal proceedings is inadmissible;

(b)   the Disputed Paragraphs are scandalous, irrelevant or oppressive; and

(c)   the contents of the Disputed Paragraphs in themselves may be a violation of the criminal law itself.

11.  I shall deal with each of these grounds in turn. 

Ground (a)

12.  The defendants argue that “it is a well-settled principle that evidence/finding/conviction of court is inadmissible” (sic). In support of such proposition, the defendants’ counsel rely upon Hollington v. Hewthorn & Co. Ltd [1943] 1 K.B. 587 where the English Court of Appeal held, at p. 596, that :

“A judgment obtained by A against B ought not to be evidence against C, for, … ‘It would be unjust to bind any person who could not be admitted to make defects, or to examine witnesses or to appeal from the judgment he might think erroneous: and therefore … The judgment of the court upon facts found, although evidence against the parties, and all claiming under them, are not, in general, to be used to the prejudice of strangers.’ This is true, not only of convictions, but also of judgments in civil actions. If given between the same parties they are conclusive, but not against anyone who was not a party.”

13.  Whilst the defendants’ submission that “it is a well-settled principle that evidence/finding/conviction of court is inadmissible” (sic) is unsupported by authority and clearly incorrect, the above statements of principle in the judgment of the English Court of Appeal are uncontroversial and trite.  However, I accept the submission of Mr Lee Tung Ming, counsel for the plaintiff, that in making reference to the committal proceedings and the evidence which was filed in such proceedings, the plaintiff is not seeking to rely on any judgment or finding of the court in the committal proceedings.  Instead, what the plaintiff is seeking to do is to invite this court to find that the 1^st defendant had provided the disputed e-mail to the 3^rd defendant to help the 3^rd defendant in defending the committal proceedings and that this was evidence that both the 1^st and 3^rd defendants were involved in the plot to rob the plaintiff of the 7^th defendant.  Whether or not I will make such findings will depend on the evidence which will emerge at this trial.  The plaintiff is not contending that I should make such findings by reason of the findings of the Honourable Mr Justice Chung.  I do not accordingly see any merit in this ground relied upon by the defendants.

Ground (b)

14.  The defendants’ argument under this ground is that the purpose of the committal proceedings was to determine whether the 3^rd defendant had breached his undertaking and that the ownership of the 7^th defendant had not been touched upon in those proceedings.  That is uncontroversial.  The defendants then go on to argue that “Not only the finding in that proceedings is not relevant to the present trial but the prejudicial value outweighted its evidential value.”(sic).  The defendants accordingly argue that if the Disputed Paragraphs were allowed to remain, “the 1st Defendant would have substantial prejudice as when the finding was made he was not entitled to dispute within that proceedings, which means the 1st Defendant would suffer from one-sided attack”. 

15.  I see no merit in this ground either.  As I have indicated above, the evidence contained in the Disputed Paragraphs is to support the plaintiff’s case that the 1^st defendant had provided the disputed e-mail to the 3^rd defendant to help the 3^rd defendant in defending the committal proceedings and that this was evidence that both the 1^st and 3^rd defendants were involved in the plot to rob the plaintiff of the 7^th defendant.  I do not understand the plaintiff to be contending that I am bound to make such findings based on the findings of the Honourable Mr Justice Chung in the committal proceedings. 

Ground (c)

16.  In support of this last ground, the defendants relied upon the provisions of the Organised and Serious Crime Ordinance (Cap. 455) and specifically sections 3, 4 and 7 and Schedule 2 thereof. 

17.  Section 3(1) of the Ordinance provides that :

“The Secretary for Justice may, for the purpose of an investigation into an organized crime, make an ex parte application to the Court of First Instance for an order under subsection (2) in relation to a particular person or to persons of a particular description.”

18.  Section 3(2) of the Ordinance provides that :

“The Court of First Instance may, if one such an application it is satisfied that the conditions in subsection 4(a), (b) and (d) or subsection 4(a), (c) and (d) are fulfilled, make an order complying with subsection (3) in respect of the particular person, or persons of the particular description, to whom the application relates.”

19.  Section 4(1) of the Ordinance provides that :

“The Secretary for Justice or an authorized officer may, for the purpose of an investigation into-

(a) an organized crime; or

(b) the proceeds of organized crime of any person who has committed or is suspected of having committed an organized crime; or

(c) the proceeds of a specified offence of any person who has committed, or is suspected of having committed, that specified offence,

make an ex parte application to the Court of First Instance for an order under subsection (2) in relation to particular material or material of a particular description, whether in Hong Kong or, in the case of an application made by the Secretary for Justice, elsewhere.”

20.  Section 7(1) of the Ordinance provides that :

“Where an order under section 3 or 4 has been made or has been applied for and it has not be refused or a warrant under section 5 has been issued, a person who, knowing or suspecting that the investigation in relation to which the order has been made or applied for or the warrant has been issued is taking place-

(a) without lawful authority reasonable excuse makes any disclosure intending to prejudice the investigation; or

(b) …

commits an offence.”

21.  The defendants argue that there is an investigation ongoing and that any disclosure of the investigation would be an offence under section 7 of the Ordinance and will certainly prejudice the investigation.  They therefore contend that the court should exercise its discretion not to allow the evidence in the disputed paragraphs of the plaintiff’s Supplemental Witness Statement. 

22.  I am of the view that the defendants’ argument is misconceived.  As submitted by Mr Lee, one of the preconditions for the application of section 7 is that an order under section 3 or 4 of the Ordinance has been made or has been applied for and has not been refused.  There is nothing before me to indicate that any order under section 3 or 4 has been made or has been applied for.  Nor is there any evidence that the plaintiff has made any disclosure intending to prejudice an investigation being made pursuant to an order made or applied for under section 3 or 4 of the Ordinance.  There is accordingly no merit in this last ground relied upon by the defendants. 

23.  In the circumstances, I dismiss the defendants’ application. 

Mr Lee Tung Ming, instructed by Messrs Anthony Siu & Co., for the Plaintiff

Mr James Tze and Mr Jeffrey Li, instructed by Messrs Christine M. Koo & Ip, for the 1^st, 2^nd and 6^th Defendants

The 3^rd Defendant in person, absent

HCA2321/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2321 OF 2009

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BETWEEN

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D E C I S I O N

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1.  By their Summons dated 22 August 2011, one day before the first day of trial, the 1^st, 2^nd and 6^th defendants (“the defendants”) sought leave to file a Witness Statement of Chan Wai Fan (“Dr Chan”). The application was not supported by any affidavit explaining why the application was being made so late. When this was pointed out to Mr James Tze, counsel for the defendants, he asked for the hearing of the summons to be adjourned to today for the defendants to be given an opportunity to file such an affidavit. I accordingly directed that the hearing of the summons be adjourned to today and that the defendants should file and serve their supporting affidavit by 2 p.m. yesterday. The 7^th Affirmation of Chan Mau Ping Tandy (“the 1^st Defendant’s 7^th Affirmation”) was duly filed in support of the defendants’ application.

2.  Given that one and a half days of the time allotted for the trial of this action has already been taken up by this present application, the defendant’s unsuccessful application to strike out parts of the Supplemental Witness Statement of the plaintiff as well as other matters arising out of the defendants’ very late disclosure of a large number of documents which they wish to rely upon at the trial of this action, I propose to give only very brief reasons for my ruling.

3.  As held by the Honourable Mr Justice Lam in Guangzhou Green-Enhan Bio-Engineering Co. Ltd & Anor v. Green Power Health Products International Co. Ltd & Ors, HCA4651 of 2002, 2802 of 2003 and HCMP74 of 2004, unreported, 21 August 2004, in dealing with late applications such as the present, the court is required to conduct a balancing exercise.

4.  In the 1^st Defendant’s 7^th Affirmation, the explanation which he provided for the lateness of the present application is that it was not until early July 2011 that he mentioned to Dr Chan that this action would be tried in August 2011.  It was only then that Dr Chan asked if he could help and this eventually led to a draft witness statement being prepared.  This was sent to Dr Chan on about 10 August 2011 and Dr Chan indicated that he had to consider the contents of the draft and whether he could attend court to testify.  The 1^st defendant explains that it was not until 22 August that Dr Chan agreed to sign the witness statement and to testify.

5.  Whilst Mr Lee Tung Ming, who appears for the plaintiff, has made certain criticisms, probably valid, of the explanation provided by the 1^st defendant, it appears to me that what is more important in the balancing exercise in the present case is the relevance of the testimony to be provided by Dr Chan and whether the plaintiff would suffer serious prejudice if leave is granted for such evidence to be adduced.

6.  The arguments of the parties were originally centred on three paragraphs of the original draft of the witness statement, paragraphs 3, 4 and 5.  However, in his reply submissions, Mr Tze conceded that the defendants no longer sought to rely on paragraph 5 and that this paragraph would be deleted from the witness statement if leave was otherwise given to the defendants to file it.

7.  In paragraph 3 of his witness statement, Dr Chan states that at or about the end of 2006, he had a gathering with the plaintiff and the 1^st defendant during which he came to know that the 1^st defendant had found some PRC investor to establish a PRC company (the 7^th defendant) to cooperate with the plaintiff’s Hong Kong company.  I accept Mr Tze’s submission that this evidence is relevant to the core issue in this action.  Mr Lee submits, however, that what is set out in paragraph 3 is unsatisfactory because Dr Chan has only said that “he came to know” the matters set out in paragraph 3 without identifying who it was who had told him such matters.  Mr Lee also submitted that the 1^st defendant had not said anything about this gathering in any of his witness statements.  However, Mr Lee was unable to point to any prejudice which would be suffered by the plaintiff if Dr Chan is allowed to testify to the matters set out in paragraph 3.  Indeed, as submitted by Mr Tze, the points which Mr Lee made can be explored in cross-examination of Dr Chan.

8.  In paragraph 4 of the witness statement, Dr Chan states that in about May 2009, the 1^st defendant discussed with him a matter concerning the pocketing of money by the plaintiff from the 7^th defendant and asked him for suggestions as to how to handle the matter.  He then said that he recommended that the 1^st defendant should post more harsh management measures to protect the PRC investor’s interest.  Dr Chan also stated that he recommended that the 1^st defendant and the investors should cease cooperation with the plaintiff if such measures should fail.  Mr Lee submits that Dr Chan’s testimony in this paragraph relates only to a collateral matter.  I do not agree. Substantial parts of the witness statements of the plaintiff and of the 1^st defendant deal with the measures which were put in place at the 7^th defendant from about May or June 2009, the plaintiff and the 1^st defendant putting forward different explanations as to why such measures were put in place.  Dr Chan’s testimony in paragraph 4 is accordingly relevant to this dispute between the parties.  Mr Lee also submits that what Dr Chan says in paragraph 4 is of no probative value as it is all premised on what the 1^st defendant had told him.  I am again not able to agree with Mr Lee’s submission.  If what Dr Chan says is accepted to be true, this may shed some light on the veracity of the 1^st defendant’s explanations.  Mr Lee is also not able to point to any prejudice which would be suffered by the plaintiff if Dr Chan is allowed to testify to the matters set out in paragraph 4.

9.  As the evidence contained in the two disputed paragraphs are indeed relevant to the issues in this action and as Mr Lee is not able to point to any prejudice, let alone serious prejudice, which will be suffered by the plaintiff if the defendants are given leave to file and rely on the Witness Statement of Dr Chan, I grant leave to the  defendants to file the Witness Statement of Chan Wai Fan as per the draft annexed to the defendants Summons dated 22 August 2011, as amended by the deletion of paragraph 5.

Mr Lee Tung Ming, instructed by Messrs Anthony Siu & Co., for the plaintiff

Mr James Tze and Mr Jeffrey Li, instructed by Messrs Christine M. Koo & Ip, for the 1^st, 2^nd and 6^th Defendants

The 3^rd Defendant in person, absent

HCA 2321/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2321 OF 2009

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BETWEEN

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J U D G M E N T

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1.  This is essentially a dispute between the two sides regarding the true ownership of the 7th defendant, a company on the Mainland.

2.  The plaintiff says that he is the beneficial owner of the 7th defendant, whereas the present position of the 1st to 3rd defendants, as well as of the 6th defendant, is that the 7th defendant is wholly owned by the 4th defendant.

3.  Certainly the Court cannot decide the factual dispute on paper. On the materials filed, there are many factual disputes.

4.  The plaintiff seeks interlocutory relief against the four defendants; that is to say the 1st to 3rd defendants and the 6th defendant. The plaintiff also seeks a Mareva injunction against the 1st defendant.

5.  Mr James Tze, for the four defendants, fairly realistically accepts and concedes that the plaintiff is entitled to the interlocutory relief sought in paragraphs 1 and 2 of the amended summons against the four defendants. Indeed they have previously given undertakings to similar effect, and Mr Tze, on behalf of them, has offered to have those undertakings continued until after judgment or further order of the court. He only opposes the interlocutory injunction sought in paragraph 2A of the amended summons against the 3rd defendant. He argues that there is no arguable case against the 3rd defendant. He points out that the pleaded causes of action against the 3rd defendant are that of constructive trusteeship based on dishonest assistance and of conspiracy.

6.  I reject Mr Tze’s argument. At this interlocutory stage, the plaintiff may apply for interlocutory relief that is just and convenient to grant at this stage. The interlocutory relief need not be founded upon any substantive relief claimed against the 3rd defendant at trial. This cannot possibly be a surprising proposition because, for instance, a Mareva injunction is not required to be founded on a permanent freezing order to be sought at trial.

7.  In the present case, the plaintiff certainly has an arguable case that he is the owner of the 7th defendant. This is plainly evident from the many emails that have been exhibited in which he was addressed as “the boss”. This is also evident from the very substantive role he has played in the running of the business of the 7th defendant, including the recruitment of staff and the secondment of employees from his own company to the 7th defendant.

8.  Indeed, Mr Tze has conceded on behalf of the four defendants that the plaintiff is entitled to the interlocutory injunctive relief sought in paragraphs 1 and 2 of the amended summons, thereby conceding that the plaintiff has an arguable case regarding his ownership of the 7th defendant.

9.  That being the case, certainly the plaintiff may approach the Court pending the final resolution of the substantive disputes for injunctive relief regarding who should and who should not be involved in the running of the business and affairs of the 7th defendant. Whether the Court should grant him relief would depend on a consideration of the balance of convenience.

10.  The 3rd defendant was one of the seconded employees from the plaintiff’s company to the 7th defendant. Such secondment has been terminated. Indeed, according to the 3rd defendant, his employment by the plaintiff’s company has come to an end. On the other hand, Mr Tze has informed the Court that it is not the case of the 3rd defendant that he is now employed by the 7th defendant. Neither the 4th defendant nor the 7th defendant has stepped in to suggest that they require the continued service of the 3rd defendant in the 7th defendant’s business.

11.  That being the case, and bearing in mind that the plaintiff has an arguable case that he is the true beneficial owner of the 7th defendant, the balance of convenience certainly lies in favour of granting to the plaintiff the injunction he seeks, to prevent the 3rd defendant from further taking part in the management of the 7th defendant and from remaining in the premises of the 7th defendant.

12.  Mr Tze argues that there is a distinction between the plaintiff and the 7th defendant. Taken to the highest, the plaintiff is the beneficial owner of the 7th defendant. The two of them are separate entities. Mr Tze fairly accepts that this is a highly technical distinction. The reality of the matter is that if the plaintiff is indeed the beneficial owner of the 7th defendant, he is quite entitled to manage and control the affairs of the 7th defendant. According to the plaintiff, this was indeed the position in the past.

13.  For these reasons, I reject Mr Tze’s arguments and I have come to the conclusion that the plaintiff is entitled to the interlocutory injunction sought in paragraph 2A of the amended summons.

14.  I turn to the other contested matter at today’s hearing, namely the Mareva injunction sought against the 1st defendant.

15.  Mr Tze argues that whilst the plaintiff has an arguable case against the 1st defendant for denying his beneficial ownership of the 7th defendant for which allegedly he is a trustee, the plaintiff does not have a good arguable case against the 1st defendant.

16.  There is certainly a distinction between an arguable case and a good arguable case for the purposes of granting a Mareva. However, on the evidence presented before the Court, nothing arises from that distinction.

17.  I have mentioned that there are many materials in support of the plaintiff’s claim that he is the beneficial owner of the 7th defendant. That said, I am not suggesting for a moment that the plaintiff’s case is watertight, but that is not the test for, nor the definition of, a good arguable case. There certainly are oddities in the plaintiff’s case. The fact that there were no contemporaneous documents such as a declaration of trust to evidence the alleged “consensus” amongst the parties regarding the plaintiff’s beneficial ownership in the 7th defendant and the 1st defendant’s and the others’ trusteeships of the plaintiff’s beneficial ownership and interest in the 7th defendant is certainly one of those oddities. That the plaintiff would have allowed the 1st and 2nd defendants to exert more and more control over the running of the business and affairs of the 7th defendant in the name of “corporate governance and internal control” would certainly raise some eyebrows given his alleged complete beneficial ownership of the 7th defendant. The fact that he was prepared to buy off, as it were, the defendants’ camp’s interest, whatever it might be, in the 7th defendant for almost 1 million is another oddity, at least on the face of the materials presented before the Court.

18.  However, the Court is not here to try the disputes on the papers, nor does all this mean that the plaintiff does not have a good arguable case.

19.  As I said, having considered the evidence as a whole, I have no doubt that the plaintiff has a good arguable case. Whether he will eventually succeed at trial is quite another matter. But for the purposes of his application for a Mareva, as I said, on the evidence, I have come to the view that he has shown a good arguable case.

20.  The next question is a real risk of dissipation of assets. Based on the plaintiff’s own case (and, as I said, he has shown a good arguable case), the 1st defendant has exhibited a relatively low standard of commercial morality in the whole matter. His alleged denial of the plaintiff’s beneficial ownership of the 7th defendant does not inspire confidence on others as to his possible future conduct regarding his own assets in the light of the claim made by the plaintiff against him. If authority is required, the first instance judgment of Godfrey J, as he then was, in Honsaico Trading Limited v Hong Yiah Seng Company Limited [1991] HKLR 235, which has been followed in many subsequent cases in appropriate circumstances, is sufficient for the purpose.

21.  In my view, based on the plaintiff’s case, there is certainly a real risk of dissipation of assets on the part of the 1st defendant.

22.  That leaves the question of the amount to be frozen, as it were, under the Mareva injunction, and the question of fortification. I approach the two matters together. I bear in mind that the plaintiff obviously has difficulty in accurately estimating the real worth of the 7th defendant, which will, despite the interlocutory injunction that I am granting and the undertakings that Mr Tze has offered, remain in the hands of the defendants’ camp for the time being. Various figures have been suggested by the plaintiff ranging between RMB5 million and RMB9 million. On the other hand, the 1st defendant has suggested a much lower figure of RMB2 million.

23.  I accept Mr Lee’s argument for the plaintiff that the plaintiff has difficulties in accessing the financial papers of the 7th defendant. However, the plaintiff bears the burden of proof. On the other hand, the defendants’ side is expected to stand in a better position regarding access to financial papers, but Mr Tze says that his client, the 1st defendant, does not own the 7th defendant and his relationship with the alleged owner of the 7th Defendant, ie the 4th Defendant, has deteriorated. That is why the 1st defendant’s estimate is not backed by any financial documents either.

24.  I have looked at the matter in the round. I have considered the fortification to the tune of HK1 million offered by the plaintiff. I have also borne in mind that even if one could accurately estimate the real worth of the 7th defendant, it does not follow that the Court must grant a Mareva to the extent of the full value of the 7th defendant as estimated.

25.  The basis of the Mareva is that the defendants’ side might well dissipate the assets of the 7th defendant in the meantime so that even if the plaintiff were to be successful at trial, what he would get back from the defendants’ side would be a company already stripped of its assets. That is no doubt a possibility, but there is no certainty that that would happen, and even if that were to happen, it does not follow that there would be no remedy against the individual defendants, whether in Hong Kong or on the Mainland. Moreover, the 1st defendant is a Hong Kong resident with several properties in Hong Kong, including a matrimonial home, the net value of which, according to Mr Tze, is more than $2.5 million.

26.  I have borne everything in mind. Doing the best I can, I am prepared to grant a Mareva for the sum of HK$4 million, subject to fortification by the plaintiff of his cross-undertaking in the sum of HK$1 million either by cash or by an unconditional and irrevocable bank guarantee.

27.  As for the 1st defendant, if he can, by appropriate means such as a bank confirmation, satisfy either the court or the plaintiff that one or more of his properties are and will remain of a net value of more than $4 million, then he can, hopefully by consent, but if not, by an application to the court, have the terms of the Mareva varied so as to have the other properties defreezed. But I would leave it to the 1st defendant and to the plaintiff.

28.  For all those reasons, upon the continuation of the undertakings already given by the 1st, 2nd, 3rd and 6th defendants until after judgment or further order, I make no order as regards paragraphs 1 and 2 of the amended summons.

29.  In relation to paragraph 2A of the amended summons, which is a further interlocutory injunction against the 3rd defendant, I make an order in terms of the paragraph, except that I would change “until trial” to “until after judgment”.

30.  In relation to paragraph 3 of the amended summons, which is the Mareva injunction against the 1st defendant, I will make an order in terms of paragraph 3 of the amended summons, except that I would change the ceiling from RMB9 million to RMB4 million, and I would only be prepared to grant the Mareva upon the fortification by the plaintiff of his cross‑undertaking as to damages in the sum of HK$1 million by cash or by bank guarantee. In other words, the Mareva injunction would only become effective upon the fortification. I will also change the words “until trial” to “until after judgment”.

31.  I have thus far not dealt with the disclosure in aid of Mareva prayed for in paragraph 4. For the reasons advanced by Mr Lee in his written submissions, I am with the plaintiff. A suitable provision should be inserted in the order to the effect that any disclosure ordered to be made by the 1st defendant shall not prejudice the 1st defendant’s claim of privilege against self-incrimination. He can make his claim in the affirmation or affidavit of disclosure. But subject to that, I am prepared to grant an order in terms of paragraph 4 of the amended summons.

32.  Of course, paragraph 2A against the 3rd defendant is granted upon the plaintiff’s usual undertaking as to damages, but for that undertaking I require no fortification. The fortification required is in relation to the undertaking as to damages in respect of paragraphs 3 and 4, so it includes the disclosure order.

33.  I give the parties liberty to apply for further or other orders.

[Submissions on costs]

34.  Plaintiff’s costs in the cause. Costs of the application to amend the summons be to the 1st, 2nd, 3rd and 6th defendants.