COSIMO BORRELLI as Trustee of the SFC LITIGATION TRUST v. ALLEN TAK YUEN CHAN AND OTHERS

HCMP 1987/2016

[2019] HKCFI 1376

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1987 OF 2016

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D E C I S I O N

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1.  This is an application made by Mr Danny Wu (“DW”) to set aside the Writ of Subpoena Ad Testificandum and Duces Tecum dated 12 October 2018 (“Subpoena”) which has been served on him by the Plaintiff in this action, for the trial of the committal proceedings against the Defendants in respect of their contempt of court.

2.  The issue of the Subpoena arose out of an affirmation made by DW in HCMP 2174/2014 (“2174/14”), in proceedings between the Plaintiff and the Defendants. The Affirmation of DW was made in November 2016 (“DW 1”) to oppose an application by the Plaintiff to join DW and 3 companies as defendants in 2174/14, and to seek discovery against DW.  In DW 1, DW deposed to the fact that in September 2014, he had been asked by the 1^st Defendant in these proceedings (“AC”) to help AC make some payments in renminbi (“RMB”) to certain recipients on the Mainland.  DW outlined in DW 1 the payments made by AC to bank accounts of 3 companies under DW’s control (“Company Accounts”), and the payments DW made to entities/individuals on the Mainland as designated by AC, on AC’s instructions (together referred to hereafter as “Transactions”).  The Transactions were all made between September 2014 and October 2014, after AC had made payments and transfers of his money into the Company Accounts in September 2014.  The Plaintiff claims in the contempt proceedings that the Transactions constitute AC’s breach and the other Defendants’ assistance of AC’s breach of the injunction order made by the Court on 29 August 2014, whereby AC had been restrained from disposing of his assets. 

3.  The Subpoena was issued on 12 October 2018, requiring DW to attend Court “to give evidence on behalf of the Plaintiff”, and further required DW to produce at the time designated documents, being:

 1. Original bank statements for the period from 1 September 2014 to 1 December 2014 for account numbered 862-0-719759-3 held by Goldocean International Investment Limited with Fubon Bank (Hong Kong) Limited.

 2. Original bank statements for the period from 1 September 2014 to 1 December 2014 for account numbered 862-0-714132-6 held by Gold Alliance Investments Limited with Fubon Bank (Hong Kong) Limited.

3.  Original bank statements for the period from 1 September 2014 to 1 December 2014 for account numbered 863-502-006574 held by Sea Harmony Marine Limited with Industrial and Commercial Bank of China (Asia) Limited.

4.  Original supporting statements in relation to a the remittance on 9 October 2014 of the Hong Kong Dollar equivalent of RMB14.5 million to a bank account held by the 2^nd Defendant through Unison Foreign Exchange Limited.

5.  All records of communication between DW and any of the Defendants (including, without limitation, letters, emails, text messages, WeChat or similar electronic messaging services) between 1 September 2014 and 1 December 2014 that refer to any request by the 1^st Defendant that DW assist the 1^st Defendant to settle payments on his behalf in RMB to recipients in the PRC.

6.  All documents (whether original or copy) in the possession of DW recording, referring to or evidencing DW (or entities or individuals acting at DW’s direction) making payments to persons in the PRC at the direction of the 1^st Defendant in the period from 1 September 2014 to 1 December 2014.

4.  DW applied on 6 December 2018 to set aside the Subpoena.  The grounds of his application are that:

(1)  there was no affidavit filed in support of the Plaintiff’s application for the issue of the Subpoena;

(2)  there was material non-disclosure by the Plaintiff in its application for the Subpoena;

(3)  the Subpoena for production of documents is impermissible discovery, fishing and unnecessary;

(4)  the Subpoena to testify is a fishing expedition, and unnecessary.

Absence of affidavit in support

5.  There is no rule or authority which requires the filing of an affidavit in support of an application for the issue of a Subpoena.  Counsel for DW has only referred to para 38/19/8 of Hong Kong Civil Procedure 2019, which refers to the practice of an application for leave to issue a Subpoena being made ex parte, to a practice master, on affidavit.  It may be good practice to make the application by affidavit, but I agree with the Plaintiff that there is no statutory requirement.  Order 38 rule 14 is silent on such requirement.  The Court has frequently granted leave to issue subpoenas on ex parte applications made by letter, and at times, on oral applications made in the course of a hearing. 

6.  As counsel for the Plaintiff has highlighted, this practice is in line with the function of the initial application to the Court for authorization to issue the Subpoena: as a filtering process in the manner explained by the Court of Appeal in Li Wai Tat v Li Man York [1998] 1 HKLRD 121.  As Mortimer VP stated in the judgment, “a party is entitled to call the oral evidence of witnesses who will assist him in presenting his case as a general right”, and the judge has the duty of filtering an application for a subpoena, but it is only a filter process.  Mortimer VP went on to explain the role of the judge in the “filter process”:

“He will ask himself such questions as: are the proceedings of such a nature as one would expect evidence to be called? Is this a course or matter being heard in chambers in which oral evidence is appropriate? Is the application for a subpoena an abuse of process? Provided the answers to such questions are in favor of the applicant, he should give his note and grant leave. That filter process is one in which the judge should not and cannot take it upon himself to decide issues relating to the relevance of any evidence that may be given and its usefulness.”

7.  It is of course open to a witness served with a subpoena to apply to set it aside, if there are good grounds for doing so, eg as an abuse of process.  However, the Court of Appeal held in Chan Cheung Ming Jacky v Siu Sin Man [2014] 5 HKLRD 189 that an opposing party only has a limited interest in setting aside a subpoena, in ensuring that the hearing does not expand beyond the trial of the issues pleaded and matters necessarily ancillary thereto.

8.  I can find nothing in the decision of the Court in Wong Wai Wing v Mang Fan Lin [2019] HKCFI 1185 which supports DW’s contention for the necessity of an affidavit.  In Wong Wai Wing, although there were directions for the filing of affidavits, the Court only set aside the subpoena issued on the ground of delay.

9.  In this case, the Plaintiff’s application for issue of the Subpoena was made by the letter dated 24 May 2018 from the Plaintiff’s solicitors to the Court (“Letter”).  The grounds of the application are set out in the Letter, and the Letter was copied to the solicitors for the Defendants.  The Subpoena was issued by the Court on the basis of the Letter.

10.  In the absence of any express provision in Order 38 rule 14 requiring the filing and service of an affidavit in support of an application for the issue of the Subpoena, I reject DW’s application to set aside on the first ground of any alleged irregularity.  I would however agree that it is good practice for such an ex parte application to be supported by affidavit, whenever possible, and to have such affidavit to be served together with the subpoena, when it is issued, on the party summoned.  If there are good reasons why this should not or could not be done, then the applicant can so inform the Court.

Material non-disclosure

11.  DW’s complaint is that in the Letter, the Plaintiff’s solicitors (“Solicitors”) referred to DW 1 and stated that at the trial of the committal proceedings, the Plaintiff seeks to rely on DW 1 and the evidence therein as to the transactions and transfers of money DW had engaged in on AC’s instructions, which transactions and transfers the Plaintiff claims to constitute AC’s contempt of court and breach of the relevant Mareva injunction order granted by the Court in 2174/14 on 29 August 2014.  The Solicitors claim in the Letter:

“In the circumstances, as the Plaintiff will rely upon (DW’s) evidence, the Plaintiff considers that fairness to the Defendants requires that (DW) be made available for cross-examination at trial. DW is however not associated with the Plaintiff, but rather, is an associate of the 1^st Defendant. The Plaintiff accordingly seeks the issue of a subpoena to (DW) to attend trial to give evidence, to address the documentary evidence for which production is sought and so that he will be available for cross-examination on this affirmation if required by the Defendants.” (Emphasis added)

12.  DW takes objection to the statement made in the Letter that he is “an associate of” AC.  He claims that it had been made clear in DW 1 that he was not associated with AC, and that he had genuinely believed that he had cause to utilize the money transferred into the Company Accounts.  He also states that DW 1 had been used by the Plaintiff without his consent.  Counsel argued that these matters should have been disclosed to the Court in the application for the issue of the Subpoena, but were not.

13.  I agree with the Plaintiff that objectively read, the reference in the Letter to DW being “an associate of” AC is innocuous.  It was only suggested that based on what DW had stated in DW1, he was associated or had dealings with AC, and none with the Plaintiff, rather than suggesting that DW was involved in, or had aided or abetted, any wrongdoing on the part of AC.  The Plaintiff has since confirmed in the affidavit filed in response to DW’s setting aside application that there is no wrongdoing alleged against DW.

14.  It is not entirely clear what focus or significance DW seeks to place, at this stage of the setting aside application, on the fact that DW1 was made in 2174/14 only to oppose the application to join him as a defendant.  The Letter made it clear that DW1 was an affirmation which had been made by DW in the underlying 2174/14 which gave rise to the contempt proceedings against AC. Counsel for DW clarified at the hearing that he was not disputing that it is the Plaintiff’s right to call evidence for the committal proceedings, nor was he claiming that the Plaintiff could not use DW1 because of the implied undertaking not to use documents for any purpose other than in the litigation in which the documents were disclosed.  It appears that DW’s case is that the Plaintiff should not be permitted to call DW to be cross-examined on all matters, just because he had made DW1 for specified purposes.  This will be covered when the issue of the necessity of the Subpoena is dealt with, below.

15.  In the context of whether the Subpoena should be set aside for material non-disclosure, what was relevant to the Court’s consideration (in the filter process) prior to the issue of the Subpoena, were the proposed use of DW1, for which the proposed Subpoena was required, and the circumstances in which DW1 was made.  The circumstances in which DW1 was made and filed, and the manner of the proposed use of DW1 and of the evidence therein contained, had been disclosed in the Letter and was also clear from DW 1 itself, submitted to the Court at the time of the application.  I fail to see any non-disclosure of any material fact.  The probative value and any inference and conclusion to be drawn from the substance and content of DW1 are matters for the trial of the committal proceedings.

Whether the Subpoena for production is permissible

16.  I reject DW’s submission that the documents sought to be produced under the Subpoena are unnecessary and constitute a fishing expedition.  The Subpoena seeks production by DW of specified documents, being bank statements and remittance documents for and around the designated period of the Transactions, to which DW had deposed in DW1 as having been undertaken at AC’s requests and/or on AC’s instructions.  It also seeks production of records of communication between DW and the Defendants during and around the period of the Transactions, which refer to AC’s requests and instructions to DW, as well as documents which record, refer to or evidence DW’s payments to persons on the Mainland at the direction of AC during the relevant period.

17.  The abovementioned documents are all related to and evidence the Transactions, which DW admits he had undertaken at the relevant period at AC’s requests, and which the Plaintiff claims are dealings which come within the scope of the Court order said to have been breached by the Defendants.  They are clearly relevant to the issues raised in the contempt proceedings, and are not in terms of scope unjustifiably wide to be oppressive. 

18.  DW claims that no dispute has been raised as to the authenticity of the documents already exhibited to DW 1, and that it is unnecessary for him to produce the original documents.  DW also claims that as opposed to compelling him as a third party to produce the documents, the Plaintiff should have obtained discovery from the Defendants themselves, as they should also have knowledge as to the payee of the funds.

19.  Bank statements of the Company Accounts would be in the possession of the companies, or DW who controls these companies, rather than the Defendants. DW did not dispute in DW 1 that he had access to the bank statements of the Company Accounts, and he produced a set of statements of the Company Accounts for the period between September 2014 and November 2014. 

20.  I agree with the Plaintiff, that whilst it may be open to the Plaintiff to attempt to obtain some of the other documents (such as records of communication between the Defendants and DW as to the transfers and payments) from the Defendants, the availability of such a remedy does not mean that the Plaintiff should be barred from seeking the Subpoena to compel DW to obtain the documents in DW’s possession, when they are clearly relevant.

21.  I do not accept the submission made by Counsel, that DW has already deposed (“in the clearest terms”, as submitted) that he does not have in his possession the documents sought to be produced in the Subpoena. 

22.  In DW 1, DW had only deposed (in paragraph 21) that due to the shortness of time, he could not (at the time of making DW 1 in November 2016) retrieve documentary records or proof of the fact that he had made payments in RMB on behalf of AC, to entities or individuals on the Mainland as directed by AC.  What he could not do in November 2016 was to retrieve documentary records in the time available to him - there was no confirmation that they were no such records.

23.  In his 2^nd affirmation made on 2 March 2019 (“DW 2”), DW referred to the fact that there was no need for him, in November and December 2016, to “make further inquiries into the existence and/or whereabouts” of the documents sought by the Plaintiff in 2016, as he had made a payment into Court.  He repeated the difficulties he had in obtaining the documents back in November 2016 and, in paragraph 5 (d) of DW 2, DW only stated that “due to the excessively wide scope of the request”, he was not in the position to identify precisely what the Plaintiff seeks to obtain from him.  He further stated that even if there were some documents in 2014 other than those identified and already disclosed by him in DW 1 in November 2016, he believed (in March 2019) that none of such other documents were in his possession anymore.

24.  The gist of the statement made in paragraph 5 (d) of DW 2 is that DW did not know precisely the documents required by the Plaintiff.  If he could not identify the documents, he was simply not in the position to confirm that there were no such documents in his possession.  At the hearing in May 2019, Counsel for DW purported to confirm his instructions from DW, but there has been no further confirmatory affidavit from DW.  I find no clear statement at all in either DW 1 or DW 2, that the relevant documents sought in the Subpoena are not in the possession of DW.

25.  It is good practice for a party to obtain original documents for use at the trial, and to do so in good time, instead of leaving these matters until the pre-trial review.  The Defendants may not have raised any dispute yet, as to the need for the original bank statements and documents of the Transactions, but in view of the nature of the contempt proceedings, and the materiality of the bank statements and documents evidencing the transfers and the Transactions, I cannot find the production of the original documents to be unnecessary.

Whether the Subpoena for testimony is permissible

26.  The Letter states, as the ground for the application for the Subpoena compelling DW to give evidence, that as the Plaintiff seeks to rely upon DW 1, the Defendants should be given the opportunity to cross-examine DW. 

27.  In Big Island Construction (HK) Limited v Wu Yi Development Company Limited HCA 1957/2005, the Court outlined the proper practice for applications for leave to subpoena a witness to give evidence.  In the Decision, the Court explained that generally speaking, a party is entitled, as a general right, to call the oral evidence of witnesses who will assist him in presenting his case, but the gist of the Court’s decision is that the party seeking to call oral evidence must act with due diligence well in advance before the trial begins, and the Court and the other parties must be given notice of the nature of the evidence sought to be called.  Poon J (as Poon JA then was) stated in paragraphs 3 to 5 of the Decision:

“2. Generally speaking, a party is entitled to call the oral evidence of witnesses who will assist him in presenting his case as a general right: see Li Man York Evelyn v Li Wat Tat Walton [1997] 3 HKC 532. However, he must act with due diligence in approaching his witnesses well in advance before the trial begins. Based on the witnesses’ response, the following practice should be adopted.

3. If the witness is willing to assist, the party intending to call him should properly prepare his witness statement and exchange it with the other side in accordance with the court’s directions. If he fails to do so, he may not be allowed to call the witness: see Order 38 rule 2A(10) of the Rules of the High Court.

4. If the witness is unwilling to testify and the party has decided to subpoena him nonetheless, he should so inform the court and the other side at the case management conference. And he should apply to issue the subpoena once the trial dates are known. Upon the issue of the subpoena, he should inform the other side forthwith. The other side should then decide if he wishes to apply to set aside the subpoena on grounds such as that the witness’ evidence is irrelevant or that the trial will be unduly expanded beyond the issues raised in the pleadings and matters necessarily ancillary thereto: see Phipson on Evidence (16^th edn), paragraphs 8-05, 8-08 and 8-20. Any setting aside application should be taken out as soon as practicable. All the applications pertaining to the subpoena should be disposed of before the pre-trial review.

5. The above practice for subpoenaing a witness is to facilitate the more efficient, expeditious and fair management and disposal of cases and to ensure that the trial proper will not be impeded.”

28.  In Chan Cheung Ming Jacky v Siu Sin Man [2014] 5 HKLRD 89, the Court of Appeal expressed broad agreement with the observations made by Poon J, subject only to two caveats relating to the limited interest of an opposing party in setting aside a subpoena, and the dismissal of an application for the issue of a subpoena on the basis of delay alone.

29.  The Letter states that the Plaintiff will rely upon DW 1, and that the Subpoena should be issued to require DW’s attendance for the Defendants to cross-examine DW.  The affidavit filed by the Plaintiff in opposition to DW’s application to set aside the Subpoena simply states that DW 1 provides evidence which is relevant for the proper disposal of the committal proceedings, particularly in relation to the payments arranged by AC. 

30.  If it is the Plaintiff’s intention to rely on DW’s evidence, it is incumbent on the Plaintiff to at least act with due diligence to approach DW, and ascertain whether DW is willing to provide a witness statement for the Plaintiff to serve on the Defendants, which should outline the precise evidence which is sought to be used by the Plaintiff.  If DW is indeed unwilling to testify, the Plaintiff may then take steps for a subpoena to be issued, with proper notice to the Defendants, as to the nature and scope of the evidence to be given by the witness.  In this case, there is no evidence that the Plaintiff had ever approached DW for preparing a witness statement.  DW had not been served with the Letter (or any affidavit made in support of the application for the issue of the Subpoena, as DW sought to highlight).  The Subpoena itself only states that DW is required to attend court “to give evidence on behalf of the Plaintiff”, without specification as to the substance of the evidence required from DW, for DW to properly consider at the earliest opportunity whether the evidence sought from him is relevant, or within his capability to give, and to decide on the most cost effective manner of proceeding.

31.  The Plaintiff has not, in my judgment, acted with the due diligence expected from the Court, as outlined in Big Island Construction (HK) Limited, to further the underlying objectives of the CJR, in ensuring that the trial can be conducted in the most cost-effective and fair way, and in the interests of all parties to the relevant proceedings.  I acede to DW’s application to set aside the Subpoena Ad Testificandum.  There is sufficient time between now and the trial for proper and further steps to be taken by the parties, to ensure that the necessary evidence can be presented and for the trial to take place in the most proportionate and effective way in line with the CJR objectives.

32.  The fair costs order to make in the circumstances is that DW is to pay 50% of the Plaintiff’s costs of DW’s application to discharge the Subpoena, and I make such an order nisi.