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BEIJING HANTONG YUZHI CONVENTION CENTRE LTD v. LAO YUAN YI
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Civil Action2010
BEIJING HANTONG YUZHI CONVENTION CENTRE LTD v. LAO YUAN YI
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BEIJING HANTONG YUZHI CONVENTION CENTRE LTD v. LAO YUAN YI
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87055-EN-2013-05-07
BEIJING HANTONG YUZHI CONVENTION CENTRE LIMITED v. LAO YUAN YI
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HCA 1208/2010
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 1208 OF 2010
____________
BETWEEN | ||
| BEIJING HANTONG YUZHI | ||
| CONVENTION CENTRE LIMITED | ||
| 北京瀚通譽智會議中心有限責任公司 | Plaintiff | |
and | ||
| LAO YUAN YI 勞元一 | Defendant | |
| ____________ | ||
| Before: Hon Au-Yeung J in Chambers |
| Date of Hearing: 2 May 2013 |
| Date of Decision: 7 May 2013 |
_____________
D E C I S I O N
_____________
1. The parties are unable to agree on whether or not Mainland law experts should undergo cross-examination at the trial.
2. The facts of this case have been set out in my decision dated 1 February 2013. There will be a trial on a preliminary issue as to whether or not the plaintiff has the locus standi to sue, for which expert evidence is required. Each party’s expert has prepared 2 reports and they have produced 2 joint statements. The plaintiff seeks to cross-examine the defendant’s expert on various issues.
The principles
3. A party’s right to cross-examine witnesses should not be lightly taken away. Accordingly, whilst Order 35 gives power to the court to give directions, before trial, to limit the time to be taken in cross-examining a witness, the court must not detract from the principles, amongst others, that each party is entitled to a fair trial and must be given a reasonable opportunity to lead evidence and cross-examine witnesses: Order 35, rules 3A(1)(a), 2(b) and 2(c).
4. In exercise of its case management powers, whether before or during a trial, the court can deter a party from wasting time on useless cross-examination. This power must, of course, be exercised judiciously and in clear cases.
5. Not every case involving expert evidence justifies cross-examination. In Wynn Resorts v Mong Henry, HCA192/2009, 12 February 2010, Chu J (as she then was), the core issue was the construction of an Article in Ordinance No. 5/2004 of Macau. There was as yet no conclusive or binding interpretation of the general scope and particular meaning of that Article: para 31 of the judgment. In dealing with an application for summary judgment, Chu J was of the opinion that it was for the court to come to a view as to whether the Article covered the credit agreement in issue in that case. The court held that it was in as good a position as it would be at trial to decide on the dispute between the parties without the need for cross-examination of the experts.
6. Mr Chiu acting for the plaintiff relies on various authorities in support of the plaintiff’s application. They establish the principle that a judge ought to give a reasoned judgment. Where there are disputes as to expert evidence, the judge has a duty to resolve the dispute with adequate reasons. See Welltus Ltd v Fornton Knitting Co Ltd, CACV268/2011, 14 March 2013, para 19-23, following the English Court of Appeal in English v Emery Reimbold & Strick Ltd [2002] 1 WLR 2409; Flannery & anr v Halifax Estate Agencies Ltd [2000] 1 WLR 377.
7. These are perfectly sound principles but, without disrespect, they are not relevant to the plaintiff’s application. The decision of Chu J in Welltus illustrates the relevant principles.
Application of the principles
8. The present case concerns Mainland law. I have perused the various expert reports. Many legal provisions and legal literature have been referred to, the applicability of some of which is in dispute. Ultimately it is a question of interpretation by the court as to which legal provision with the relevant judicial interpretation by the Mainland court that will apply to the present case. The experts have been given ample opportunity to state their views, highlight their differences and state their reasons. It is quite different from the situation where, eg 2 surveyors hold different views as to the source of leakage from premises or 2 medical experts give different diagnoses, when it will be essential to have the experts attend for cross-examination to resolve the differences.
9. In addition, I agree with Mr Shiu for the defendant that specific points on which cross-examination of the defendant’s expert is allegedly required are not matters for cross-examination of experts. I set out the questions which the plaintiff seeks cross-examination and my views below:
(i) Question 1: the basis for the defendant expert’s assertion that various procedures had not been performed by the winding up committee of VTI China. The rules did not specify that such procedures, if carried out, had to be made public. The defendant has failed to answer the distinction drawn by the plaintiff’s expert between “administrative rules and regulations” (管理性行政法規) and “legal effect rules and regulations” (效力性行政法規).
This is not the plaintiff’s case. The plaintiff’s case is that such procedures only govern non-financial state-owned enterprises but not a financial enterprise like VTI China. It is also not the plaintiff’s case that it had duly complied with these procedures. The rest of the question is a matter of interpretation of Mainland law already referred to in the expert reports. Question 1 does not require cross-examination of the defendant’s expert.
(ii) Question 2: the relevance of a particular regulation and whether it had retrospective effect on a transaction.
Each party has asserted a different date on which the sale and purchase agreement took effect, one before the regulation took effect and one after. This is an issue of fact. The issue of whether or not a legal provision had retrospective effect does not even arise, as neither expert ever assert that it does.
(iii) Questions 3 and 4: why certain legislative provisions apply to the present case.
This is a matter for submission.
(iv) Questions 5 and 6: who would be entitled to commence legal proceedings in certain situations and where no such entity can be found, whether the plaintiff as 清算責任人or shareholder or beneficial owner of the shares of VTI Shanghai would have been accepted by the Chinese court as the appropriate party to commence proceedings. The plaintiff also wants to cross-examine on the distinction between 出資人和股東and 出資額和股權.
These are matters that have been canvassed in the reports. The question is for the court to answer having regard to the legal provisions and literature laid before it.
10. I can see no ground for allowing cross-examination of experts in this case. The plaintiff’s application is dismissed.
Other matters
11. The rest of the directions are not in dispute and I shall make an order in terms. However, there has been breach of previous directions. By the order dated 1 February 2013, I have directed the parties to provided a joint memorandum for any further directions needed for trial of the preliminary issues. The parties failed to comply with this but sent in pages of correspondence to the court to argue on those directions. In fact what was required was that the joint memorandum should set out succinctly in the form of a checklist all matters that require directions on, stating the respective proposal of each party where there is dispute, eg “there be lodging of trial bundles 14 days (P’s proposal) / 28 days (D’s proposal) before trial”, etc. For failure to comply, I am minded to disallow all costs arising therefrom, save as to the issue of cross-examination of experts.
12. I direct as follows:
(i) Time for setting down for trial of preliminary issue be extended to 14 May 2013.
(ii) Two days be reserved for the trial.
(iii) A pre-trial review is to be fixed 4 weeks before trial of the preliminary issue. A joint memorandum of outstanding matters is to be lodged with the court at least 7 days before the pre-trial review. The court may give paper directions and dispense with an oral hearing.
(v) Bundles used for the hearing on 22 January 2013 are to be updated by the plaintiff, served and lodged with the court at least 42 days before trial.
(vi) There be double sided printing for updating documents, submissions and authorities.
(vii) On a nisi basis, there will be no order as to costs save that costs of the hearing concerning cross-examination of experts be to the defendant to be summarily assessed on 21 May 2013 at 3 pm on the papers without attendance. The defendant shall file and serve his statement of costs by 14 May 2013. The plaintiff shall file and serve its grounds in opposition by 20 May 2013.
13. I thank Mr Chin and Mr Shiu for their assistance.
| (Queeny Au-Yeung) Judge of the Court of First Instance | |
| High Court |
Mr Vincent Chin, of P H Chin & Company, for the plaintiff
Mr Arthur Shiu, of TH Koo & Associates, for the defendant
85555-EN-2013-02-01
BEIJING HANTONG YUZHI CONVENTION CENTRE LTD v. LAO YUAN YI
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HCA 1208/2010
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 1208 OF 2010
____________
BETWEEN | ||
| BEIJING HANTONG YUZHI CONVENTION CENTRE LIMITED | Plaintiff | |
| 北京瀚通譽智會議中心有限責任公司 | ||
and | ||
| LAO YUAN YI 勞元一 | Defendant | |
| ____________ | ||
Before: Hon Au-Yeung J in Chambers
Date of Hearing: 22 January 2013
Date of Decision: 1 February 2013
_____________
D E C I S I O N
_____________
1. There are 3 applications before the court:
A． The defendant’s application to strike out the claim, alternatively for an order that the question of whether the plaintiff has locus standi be tried as a preliminary issue.
B． The plaintiff’s application for leave to re-amend the reply.
C． The plaintiff’s application to file and serve a further affirmation in opposition to the defendant’s application.
2. As the case has not yet been set down for trial, there is really nothing in principle that should prevent the plaintiff from re-amending the reply. Mr Man, counsel for the defendant, very sensibly did not resist leave to amend.
3. That leaves only applications A and C. Mr Man submits that even the latest version of the reply and the affirmation of the plaintiff will not salvage its case. Therefore the affirmation should not be admitted and the statement of claim should be struck out and the claim dismissed.
The facts
4. The defendant, as he admits, was holding as representative on behalf of 上海中創國際投資有限公司 (“VTI Shanghai”) 50% shares in a Hong Kong company Praiseup Limited (“Praiseup”) and the board of Praiseup so confirmed in January 1996 (“1st Confirmation”).
5. Praiseup held certain properties in Shanghai which were reserved for foreign investors only.
6. VTI Shanghai is a wholly owned subsidiary of 中國新技術創業投資公司(“VTI China”). Both of these companies are PRC companies.
7. VTI China was subject to winding up and a winding up committee was appointed (“the VTI China Winding Up Committee”).
8. The VTI China Winding Up Committee sold the assets and properties of VTI China to 中國華融資產管理公司(“Huarong”).
9. Upon completion of the winding-up process, Huarong sold, among others, all interests of VTI Shanghai in Praiseup to the plaintiff pursuant to an agreement dated 23 October 2007 (“the 2007 agreement”). The plaintiff avers that the defendant holds the 50% shares in Praiseup on trust for the plaintiff since then.
10. The plaintiff avers that the defendant acted in breach of his duty as trustee of the plaintiff and/or as an officer in charge of VTI Shanghai in failing to transfer the shares in Praiseup to the plaintiff.
11. The defendant denies the alleged trust. He claims VTI China was to lend money to VTI Shanghai for the acquisition of 50% shares in Praiseup but VTI China only contributed loans equivalent to 18.53% of the total acquisition cost. The defendant avers that VTI Shanghai’s ownership of Praiseup had come to 18.53%. Loans that VTI China made to VTI Shanghai remained outstanding even when the former went into liquidation.
12. On 6 September 2001, VTI Shanghai agreed to set off the loans due to VTI China by transferring 18.53% shareholding of Praiseup to VTI China. The defendant (as director of Praiseup) agreed in writing that VTI China had acquired 18.53% shareholding of Praiseup, which was being held by the defendant (“the 2nd Confirmation”).
13. The defendant challenges the plaintiff’s locus standi to claim against him (para 13 of the amended defence) in that:
(i) The 2007 agreement did not, on a true construction, have the effect of transferring to the plaintiff the interests of VTI Shanghai in the shareholding of Praiseup.
(ii) VTI Shanghai is a separate legal entity notwithstanding that it is wholly owned by VTI China. Neither VTI China nor the VTI China Winding Up Committee had the power to sell and validly transfer to Huarong assets held by VTI Shanghai and hence Huarong could not have acquired valid title or validly sold or transferred the same to the plaintiff.
(iii) Since the defendant (being the sole legal representative of VTI Shanghai) has never consented to the purported sale, the interest of VTI Shanghai in the shareholding of Praiseup could not have been validly sold or transferred to Huarong and in turn to the plaintiff.
14. The plaintiff asserts that according to Mainland law, the State Council had right and power through the VTI China Winding Up Committee to deal with assets of VTI China and all its subsidiaries including VTI Shanghai. On about 26 October 1999, an officer called Huang Wei De was sent by the VTI China Winding Up Committee to take over all the management of VTI Shanghai and since then, despite the fact that the defendant was still the registered legal representative of VTI Shanghai, he had ceased to be authorized to manage it. The defendant should comply with all instructions of the VTI China Winding Up Committee and could no longer deal with assets of VTI Shanghai without approval.
15. In its draft re-amended reply, the plaintiff pleads that the relevant law should be the Hong Kong law of trust. In substance it is submitted that the defendant was holding the one share of Praiseup as bare trustee and equity will intervene to compel him to deliver up the trust property.
The legal principles
16. Striking out is only for plain and obvious cases. There should be no trial upon affidavit. Disputed facts are to be taken in favour of the party whose pleading is sought to be struck out. Nor should the court decide difficult points of law in striking out proceedings. The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out. Where the legal viability of a cause of action is sensitive to the facts, an order to strike out should not be made. See Hong Kong Civil Procedure 2013, Vol 1, para 18/19/4.
17. For trial of preliminary issues, the general rule is that all the issues in the case are to be tried at the same time. There is power to order that different issues in the case be tried at different times, but the departure from the general rule is ordered only if it is just and convenient. It is for the party who seeks such a departure to demonstrate that it is indeed just and convenient. Hong Kong Civil Procedure 2013, Vol 1, para 33/4/9:
“The Court of Appeal in Lee Yiu Kwan v. Ting Yin Wah & Another [2004] H.K.E.C. 1222 set out a convenient summary of some of the principles relevant to the exercise of the court’s discretion to deal with preliminary issues of law with or without application of the parties … :
(i) The question of law or construction to be determined by the court under the order should be stated or formulated in clear, careful and precise terms, so that there should be no difficulty or obscurity, still less any ambiguity, about what is the question that has to be determined.
(ii) Where the issues of fact are interwoven with the legal issues raised, it will be undesirable for the court to split the legal and factual determination, for to do so would in effect be to give legal rulings in vacuo or on a hypothetical ruling, which the court will not do.
(iii) An order for the separate trial of separate issues is a departure from the general rule that all disputes should be tried together, and therefore generally speaking, such an order should only be made in exceptional circumstances or on special grounds.
(iv) Where costs can be saved by obtaining a ruling on a point of law which requires serious argument and consideration being disposed or before trial, the point should be raised in the pleading and application should be made under O.33 rr.3 and 4(2) for the trial of this point as a preliminary issue.
(v) The order, as a rule, will only be made if the objection raises a serious question of law, which, if decided in favour of the party objecting, would dispense with any further trial, or at any rate with the trial of some substantial issue in the action. The order should not be made in respect of matters to which by reason of the obscurity either of the facts or the law ought to be decided at the trial.
(vi) The order for the trial of a preliminary point of law should not be made where there are facts in dispute, and if made may be set aside at the hearing.
(vii) A point of law may in special circumstances be ordered to be set down and argued before the trial, although it is not raised on the pleadings.
(viii) The order should make clear what is the precise point of law to be decided.
(ix) Only such questions of law can properly be raised as preliminary issues as must necessarily arise in the action and the court will not decide fictitious questions or questions in which those who are interested, or are likely to be, are not present or are not in esse.
(x) The House of Lords has strongly protested against the practice of the Court of First Instance allowing preliminary points of law to be tried before and instead of first finding the facts, since this course frequently adds to the difficulties of the Courts of Appeal and tends to increase the time and cost of legal proceedings.
(xi) Where for the purposes of deciding questions of law it is necessary or desirable to ascertain the facts beyond those that appear in the pleadings, the court should not order the trial of those questions as a preliminary point of law, especially where the law is itself unsettled or obscure.
(xii) An “issue” which involves dealing with the whole subject matter of the action without any evidence is not a preliminary point and should not be ordered to be tried as such.”
(Hong Kong Civil Procedure 2013, Vol 1, para 33/4/9A)
Case management
18. The CMC has been adjourned to be dealt with by me after the summonses are dealt with. At the commencement of the hearing, I have explored with the parties a case management issue – whether the court should proceed with hearing the striking out application or direct a hearing of a preliminary issue. Having heard the parties, I consider that the latter course is more preferable.
19. The parties have filed witness statements. They have each produced a set of Mainland legal opinion on the locus standi issue, with a joint statement of the experts on issues that they agreed, those that they disputed and reasons for the dispute. It was after all these were done that the defendant immediately took out his summons for striking out.
20. At the time the learned Master adjourned the summons for hearing before a judge, the state of affirmation evidence was not complete. As thing stood then, the defendant did have substantial reasons for issuing the summons. The plaintiff’s pleaded case was on the basis of the defendant holding Praiseup shares on behalf of VTI Shanghai, not VTI China. [Mr Miu, counsel for the plaintiff, makes clear in paragraph 34 of his skeleton submission that the plaintiff is not pursuing the present action on behalf of VTI Shanghai but in its own name and right. The amended reply and proposed re-amended reply did not accept that the 2nd Confirmation bound anybody as it was only signed by the defendant.] There was no alternative pleaded case that the plaintiff derived status to sue based on the 2nd Confirmation.
21. What the plaintiff was doing, effectively, was enforcing the company’s rights as a shareholder of VTI Shanghai. Its case ignored all concepts of independent corporate identity.
22. As things developed, the affirmations filed by the parties included new discovery from the plaintiff (including important agreements) and yet another around of Mainland legal opinions. The defendant’s “legal opinions” came from an affirmation by one Mr Zhang who does not profess to be a Mainland lawyer. Despite the fact that the defendant should have the last word on his summons, the plaintiff now applies to put in, 4 months after the defendant’s last affirmation, another affirmation of the plaintiff’s solicitor exhibiting a Mainland legal opinion. Such delay was caused, allegedly by a change of legal team, which this court does not regard as a good explanation.
23. Mr Man seeks to persuade me that this is an open-and-shut application such that even with the latest version of reply and affirmations from the plaintiff’s side, the claim should be struck out.
24. I have reservations on this view. There are a number of Mainland legal provisions to consider. The defendant has relied on new legal provisions in his expert report filed in reply. The plaintiff’s latest expert evidence purports to answer them, lay emphasis on the distinction between清算組和清算責任人, challenges the relevance and weight of the authorities relied on by the defendant and alleges that the plaintiff is suing as the 清算責任人of VTI Shanghai. This may require deeper analyses of the plaintiff’s case.
25. The court could, of course, have disregarded the plaintiff’s late evidence when hearing the strike-out application. However, the new expert evidence cannot be said to be irrelevant at least to the question of whether or not the statement of claim can be amended. It will also be relevant if the court directs a trial on preliminary issue.
26. Of course, if the late expert evidence is admitted, Mr Man has indicated clearly that his client will have to answer some of the allegations and expert evidence in further reply is required. Needless to say, once the new evidence is adduced, there is no point proceeding with the striking out application which may leave unresolved the question of locus standi if the application is unsuccessful.
27. I have taken into account the following additional matters.
28. The pleadings have closed. The listing questionnaires filed by both parties only indicated further steps to be required for filing of list of documents and hearsay notices apart from dealing with the striking out application and anything that might arise from it. There are no major obstacles to setting down for trial.
29. The locus standi issue is a distinct issue involving uncomplicated and very limited factual dispute. The bulk of the arguments is on Mainland law and whether Hong Kong trust law applies and is demonstrably well suited to trial as a preliminary issue. The factual witnesses will be limited.
30. The legal experts have had the opportunity to comment on each other’s views already and cross-examination is unlikely to be required, or, even if required, is unlikely to take more than an hour for each expert. Counsel have estimated the trial of preliminary issues would not take any more than 2 days (although it still sounds excessive to me). The rest of the case, such as the loan from VTI China to VTI Shanghai, how the 2nd Confirmation came about and its legal effect, are quite separate issues involving 3 factual witnesses.
31. The outcome of a split trial will have a dispositive effect. It is still time and costs saving. Between a draconian strike-out application and trial on preliminary issue, the latter will achieve a more just and cost-effective result. Having considered all the circumstances, I decline to deal with the striking out application and direct a hearing of preliminary issues with the following directions:
On application B – the plaintiff’s summons to amend:
(1) There be leave to the plaintiff to file and serve the re-amended reply; service is dispensed with.
(2) There be an order nisi that costs of and occasioned by the amendments be to the defendant.
On application C –the plaintiff’ssummons to adduce evidence:
(3) Leave to the plaintiff to file the affirmation of Mr Vincent Chin affirmed on 14 January 2013; service is dispensed with.
(4) There be an order nisi that costs be to the defendant.
On application A –the defendant’s striking out summons:
(5) There be a trial of the following preliminary issue: whether the plaintiff has locus standi to sue in this action. For the avoidance of doubt, this issue will include whether or not Hong Kong trust law applies to give the plaintiff locus.
(6) Leave to the defendant to file and serve a further affirmation in reply by 22 February 2013.
(7) The parties’ experts shall prepare a joint statement by 8 March 2013, having regard to the 2 expert reports filed in relation to the striking out summons. The joint statement shall set out the matters on which the experts agree, those on which they disagree and the reasons for disagreement.
(8) No further affirmation or expert evidence shall be filed.
(9) Leave to use the affirmations filed in relation to the defendant’s striking out summons at the trial of the preliminary issue.
(10) Subject to filing of the statements of truth, all reports of the legal experts shall be adduced without the need to call the experts to give oral evidence, unless application is made to this court in writing on or before 22 March 2013 identifying the specific points on which cross-examination is needed.
(11) Leave to each party to file and serve a supplemental list of documents by 22 March 2013.
(12) Leave to each party to file and serve hearsay notices by 22 March 2013.
(13) Any further directions needed for trial of the preliminary issues should be applied for by 22 March 2013 by a joint memorandum to this court.
(14) Trial counsel’s certificates setting out the estimates of time shall be submitted to this court for determining the length of trial by 22 March 2013.
(15) Leave to set down on or before 5 April 2013 for trial of the preliminary issue before a bilingual judge.
Costs on the defendant’s summons
32. The plaintiff has resisted the striking out application. But for the new evidence from its side, the striking out could well have proceeded. The plaintiff also resisted the trial of preliminary issues but has failed. Overall, the plaintiff should bear the costs of the defendant’s summons and I make an order nisi to that effect.
33. There shall be summary assessment of costs on the papers on 25 February 2013 at 4:30 pm. No attendance is required. The defendant shall file and serve his statement of costs by 15 February 2013. The plaintiff shall file and serve its grounds in opposition by 22 February 2013.
34. I thank counsel for their assistance.
| (Queeny Au-Yeung) | |
| Judge of the Court of First Instance High Court |
Mr Nelson Miu and Ms Ann Lui, instructed by P.H. Chin & Co, for the plaintiff
Mr Bernard Man, instructed by TH Koo & Associates, for the defendant