LEE TAK (or TUCK) YAN AND OTHERS v. THE PRUDENTIAL ENTERPRISE LTD AND OTHERS

HCCW594/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO.594 OF 1999

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D E C I S I O N

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1. There are before the court three summonses ("the three Summonses") issued by the 1st, 6th and 7th respondents in HCCW594/1999 ("the Winding-Up Petition"), the 2nd, 6th and 7th defendants in HCA1240/2001 ("the Interstitial Action") and the 2nd and 5th defendants in HCA4225/2001 ("the BPR Action"), each applying for an order under Order 4, rule 9, Rules of the High Court that the three actions be tried together or one after another. The summonses were previously adjourned at the request of the 6th defendant in the BPR Action, Andrew Ma & Company. The summonses are heard together with the pre-trial review of the Winding-Up Petition, the trial of which has been scheduled to commence on 17 November 2003 and to last for 60 days.

Order 4, rule 9 application

2. The Prudential Enterprise, Limited ("the Company"), who is a nominal party in the three actions, takes no position on the application. The represented parties in the three actions agree in principle to an Order 4, rule 9 order, but disagree as to whether the three actions should be tried together or sequentially.

3. For the applying parties, they ask for all the actions to be tried together. Mr Samathur Lee, who is the 4th respondent in the Winding-Up Petition and the 4th defendants in the other two actions, takes the same position. The petitioners and plaintiffs in the three actions, on the other hand, ask that the actions be tried one after another. Specifically, they ask that the Interstitial Action be tried after the conclusion of the Winding-Up Petition, to be followed upon its conclusion, by the BPR Action, with gaps of three and two weeks in between.

4. Andrew Ma & Company is neutral on whether the actions should be tried together or sequentially. It has however expressed reservations as to whether it can prepare in time for a full trial in November this year. In its solicitors' letter dated 5 August 2003 to the solicitors for the represented parties, it was indicated that it would amend its defence and that it was also considering an application on the ground that it was improperly joined to the BPR Action. It also pointed out that discovery and exchange of witness statements and expert reports in the BPR Action have yet to be done. The letter suggested adjourning the application to after 10 September to await the return of leading counsel to Hong Kong.

5. The 3rd third party in the BPR Action, SH Leung & Co., agrees that the application should be adjourned to mid-September to enable the parties to have some agreement as to the further conduct of the proceedings. Its solicitors also indicated in correspondence that it was considering making a striking out application.

6. The unrepresented parties in the three actions have not indicated their views on the application.

7. It is not in dispute that an order under Order 4, rule 9 is desirable. Clearly, there is substantial overlapping of issues between the Winding-Up Petition and the Interstitial Action, and between the Winding-Up Petition and the BPR Action, and to a lesser extent between the two writ actions. Although the parties are not exactly the same, the 8th to 10th defendants in the Interstitial Action, who are not involved in the other two actions, had not entered appearances. Andrew Ma & Company and SH Leung & Co. are the only parties who are involved in only one of the three actions. Given the substantial overlapping of issues and parties, it is desirable that the disputes in the three actions be resolved on one occasion and by the same judge. But as to whether the three actions should be tried together or one after another, the matter has to be approached from the perspective of case management rather than principles of law.

8. In making case management decisions, the court is primarily concerned with savings of time and costs, and also with the avoidance of unnecessary delay, undue complexity and overloading of issues. In the present context, the main merit of having the three actions tried together is that the common witnesses will be saved the inconvenience of having to testify on more than one occasion and to repeat some of their evidence. This is of particular significance to some of the petitioners and plaintiffs who are resident abroad and also to some of the respondents and defendants, who are busy businessmen and professionals. The same will apply to some of the common experts.

9. That said, however, I am not confident that trying the three actions together necessarily achieve a great deal of savings in time and costs. Although there is substantial overlapping of issues between the actions, the breadth and depth of the evidence of the common witnesses, both factual and expert, do vary. Take, for example, the Blue Pool Road settlement and the subsequent allotment of shares in the Company, while they are common issues in the Winding-Up Petition and the BPR Action, the latter has a wider dimension in that there are also issue of conspiracy and claim of negligence involving Andrew Ma & Company. A combined trial will mean that these extended issues will also need to be covered when the witnesses testify.

10. On the other hand, the inconvenience of having witnesses repeating their evidence in different trials can be minimized through the adoption or admission in the subsequent trials of their evidence given on the earlier occasion.

11. In my view, a combined trial of the three actions suffers from two drawbacks. Firstly, it has the distinct and real risk of losing part or all of the currently reserved trial dates. Both Andrew Ma & Company and SH Leung & Co. have expressed reservations about their being ready for trial in November 2003. Independent of their reservations, the objective fact is that, apart from service of pleadings, the other pre-trial interlocutory steps in the BPR Action have not been undertaken. Even with regard to pleadings, Andrew Ma & Company is contemplating amendment of its defence. It is rather unlikely that the pre-trial preparations can be accomplished in the three months leading to mid-November. The improbability increases when the summer vacation and availability of counsel and expert are taken into account. It must not be assumed that because most of the parties in the BPR Action are already involved in the Winding-Up Petition, discovery and the exchange of witness statements and expert reports can be done very expeditiously. One must give due acknowledgement to the fact that Andrew Ma & Company and SH Leung & Co. have no involvement in the Winding-Up Petition, which has been underway since 1999. The allegations they face in the BPR Action are serious ones and their professional reputation is at stake. They will need the time normally afforded to parties in civil litigation to get their discovery, witness statements and expert reports done. In addition, in order that they can meaningfully and fully participate in a combined trial, they will have to familiarize themselves with the discovery and evidence in at least the Winding-Up Petition. The amount of catching-up work is considerable.

12. Mr Wong, SC, refers to the fact that a similar application had been made in October 2002 such that Andrew Ma & Company and SH Leung & Co. had been forewarned. It may well be that the present application comes as no surprise to them. But the reality remains that the BPR Action has some mileage to make before it is ready for trial. On the basis of the materials before the court, it cannot be said that Andrew Ma & Company and SH Leung & Co. have been guilty of delaying the progress in getting the case ready for trial.

13. Mr Yu, SC, appears to suggest that if by November, Andrew Ma & Company and SH Leung & Co. are indeed not ready for trial, then the court may accommodate them by some structuring of the trial and of the sequence of witnesses. I am not sure whether this is indeed feasible and, even if feasible, whether it is a fair and appropriate course to take. If a case is not ready for trial or if the parties to it, through no fault of their own, are not fully prepared for trial, it will not be right for the court to press ahead with the trial, hoping that the case or the parties will in due course become ready. Certainly this is not the right approach with regard to the BPR Action, given the gravity of the allegations and the complexity of the issues.

14. The risk of losing the November 2003 trial dates is a matter not to be taken lightly. The Winding-Up Petition was started four years ago. The Company is an active ongoing concern. Considerable amount of assets are involved. At least one of the petitioners, Mr T.Y. Lee, is in his advanced age and does not enjoy good health. The Petition should be resolved as soon as possible. If the commencement of the trial has to be deferred, it will cause great inconvenience to the court diary and other hearings may have to be vacated. Worse still, the trial may have to go part heard. In the worst-case scenario, the trial may have to be re-fixed. Given the length of the trial and the busy court diary, this will result in another year's delay, if not more.

15. Secondly, the issues and evidence, both factual and expert, in the Winding-Up Petition are both complex and voluminous. The trial bundles are expected to be no less than 50 in number. The complexity will be intensified with a combined trial of the three actions. This is particularly so with regard to the conspiracy and negligence claims in the BPR Action and the defence of the defendants. Additionally, there are multiple parties, some of whom are unrepresented, with differing degree of familiarity with the facts and issues involved. A combined trial is, in the circumstances, difficult to manage and is not conducive to effective resolution of disputes.

16. Having regard to the aforesaid matters, I am of the view that the appropriate course is for the trials of the three actions to take place one after another with directions that will minimize the repetition of evidence. To this end, there will be directions that the evidence in the Winding-Up Petition, insofar as it is relevant, to stand as evidence in the Interstitial Action. Similarly, the evidence in the Winding-Up Action and the Interstitial Action, which is to be tried after the Winding-Up Petition, insofar as it is relevant, will stand as evidence in the BPR Action.

17. Mr Wong, SC, submits that the evidence in the BPR Action should also stand as evidence in the Winding-Up Petition and the Interstitial Action. He argues that, without such directions, his client will be prevented from advancing his defence in the BPR Action in the other actions. In my view, the directions Mr Wong, SC, proposes effectively means a combined trial, which is contrary to an order that the trials of the three actions should be heard one after another, albeit close in time and on one occasion. The prejudice he identifies is unreal. If his client's defence in the BPR Action is relevant to and has been raised or pleaded in the Winding-Up Petition and/or the Interstitial Action, there is nothing to prevent his client from putting it forward in the Winding-Up Petition and/or the Interstitial Action. But if it is irrelevant and/or has not been raised or pleaded, then irrespective of the directions on evidence, the defence cannot be put forward in the other actions.

18. I will further grant leave to Andrew Ma & Company and SH Leung & Co. to take part in the trial of the Winding-Up Petition, if they so wish. Mr Harrington says that the prejudice Andrew Ma & Co. suffers from having to face a full trial in November 2003 will not be lessened by an order for sequential trials with leave for it to take part in the trials of the other two actions. I cannot agree. Evidently, the amount of preparations required for meeting a full trial and that for taking part in related proceedings is different. Secondly, though leave to participate in the other trials is granted, it is up to Andrew Ma & Company to decide whether to take part and, if so, whether actively.

19. As to whether there should be gaps between the three trials, I take the view there should be short breaks of say, a week or so, between the trials for the purpose of consolidations and preparations. Further to preserve flexibility, it is more appropriate to give an indicative period of trial dates instead of fixed dates for the second and third trials. A period of eight weeks from the scheduled conclusion date of the trial of the Winding-Up Petition is therefore reserved for the trials of the two writ actions.

Orders on the three summonses

20. Accordingly, I make the following orders on the three summonses :

(1) The trial of HCA1240/2001 to commence after the conclusion of the trial of HCCW592/1999 with the estimated length of trial being two weeks.

(2) The trial of HCA4225/2001 to commence after the conclusion of the trial of HCA1240/2001 with the estimated length of trial being three weeks.

(3) A period of eight weeks immediately after the scheduled conclusion date of the trial of HCCW594/1999 be reserved for the trials of HCA1240/2001 and HCA4225/2001.

(4) The evidence in the trial of HCCW594/1999, insofar as it is relevant to the issues in HCA1240/2001 and HCA4225/2001, do stand as evidence in the trials thereof.

(5) The evidence in the trial of HCA1240/2001, insofar as it is relevant to the issues in HCA4225/2001, do stand as evidence in the trial thereof.

(6) Leave to the 6th defendant and the 3rd third party in HCA4225/2001 to take part, if so advised, in the trials of HCCW594/1999 and HCA1240/2001.

(7) There is an order nisi that the costs of the three summonses, including half of the hearing time on 8 August 2003, be in the cause of the respective proceedings.

Directions on trial of the Winding-Up Petition

21. With regard to the directions to be made for the trial of the Winding-Up Petition, I must point out that the parties already have four years to plan and prepare their case and evidence. There had also been many applications and contested hearings on discovery and evidence. I consider that, given the multiplicity of parties and issues involved, the court has to insist on strict observance of the procedural rules and court directions so as to ensure that the trial does not get out of hand. Unless consented to by the opponents, new affidavits and expert reports cannot be introduced for the trial without prior leave of the court. Additionally, leave will not be granted for further factual or expert evidence in the absence of very cogent reasons for it not to be introduced earlier.

22. As for the logistics of the trial such as the layouts of the trial bundles and the number of bundles to be kept in court, the legal representatives of the parties, with their experience and in the spirit of co-operation, ought to be able to agree on them. I do not consider it necessary to make any direction in this regard.

23. The directions I make for the trial in the Winding-Up Petition are as follows :

(1) The time for filing expert reports under paragraph 1 of the Order made on 31 October 2002 is extended to 4 September 2003.

(2) Leave to the parties to file and exchange, if so advised, supplemental expert reports in reply to expert reports served on 31 July 200 and to be served on 4 September 2003.

(3) The 1st respondent is to serve on the petitioners his draft final affidavit.

(4) If the petitioners do not give notice of objection within 14 days of being served with the 1st respondent's draft final affidavit,

(a) the 1st respondent will have leave to file his said final affidavit and to rely on it at the trial; and

(b) the petitioners will have leave to file and serve by 30 September 2003 their affidavit(s) in reply.

(5) The affidavits filed in support of and in opposition to the Petition and its amendments do stand as evidence in chief of the deponents at the trial, unless otherwise directed at the trial.

(6) The deponents of the affidavits do attend trial for cross-examinations, failing which his affidavits will not be admitted as evidence of the trial.

(7) The petitioners do have leave to adduce in evidence the 1st, 2nd and 3rd affidavits of Lee Chai Cheong without calling him to attend trial for cross-examination, the said deponent having died on 29 February 2000.

(8) The petitioners and the respondents do before 10 September 2003 exchange a list of factual and expert witnesses to be called by them at the trial, and a list of the affidavits filed in the interlocutory applications, or the parts thereof, that they intend to adopt as evidence of the trial.

(9) The petitioners do before 15 September 2003 lodge with the court and serve on the parties the pleadings, affidavits and exhibits bundles for the trial.

(10) The petitioners do before 30 September 2003 lodge with the court and serve on the parties the rest of the trial bundles.

(11) An agreed list of issues is to be lodged with the court by 15 October 2003. Failing agreement, the parties are to lodge with the court their respective lists of issues by 15 October 2003.

(12) The petitioners do lodge with the court and serve on the parties their opening submissions by 7 November 2003.

(13) Live Notes be arranged for the trial with the costs involved to be shared by the parties in such proportions to be agreed between them.

(14) There is an order nisi that the costs of the pre-trial review, including half of the hearing time on 8 August 2003, be in the cause of the petition.

24. As for the summons issued by the 1st respondent on 5 August 2003 under Orders 33, 35 and 39 of Rules of the High Court, as requested by the 1st respondent, it will be adjourned for argument on an early date to be fixed with half a day reserved, and with the costs of the summons reserved.

Directions for the Interstitial Action

25. As for the Interstitial Action, I make the following directions :

(1) The time for the exchange of witness statements under paragraph 2 of the Order dated 6 March 2003 be extended to 22 August 2003.

(2) The witness statements do stand as evidence-in-chief at the trial, unless otherwise directed.

(3) The plaintiffs do lodge with the court and serve on the defendants the trial bundles that are additional to the trial bundles for HCCW594/1999, no later than seven days before the commencement of the trial.

(4) The plaintiffs do lodge with the court and serve on the parties their opening submissions no later than three clear days before the commencement of the trial.

(5) Live Notes be arranged for the trial with the costs involved to be shared by the parties in such proportions to be agreed between them.

(6) There be liberty to apply for further directions.

Directions for the BPR Action

26. Additionally, there are the following orders and directions for the further conduct of the case :

(1) The parties in the main action (save the 1st defendant) do exchange their lists of documents by 29 August 2003. Inspection of documents to take place within seven days thereafter.

(2) The time for the exchange of lists of documents between the 2nd, 3rd and 5th defendants and the 3rd third party under paragraph 13 of the Order dated 16 December 2002 is extended to 29 August 2003.

(3) The parties in the main action and in the third party proceedings do exchange their witness statements by 3 October 2003.

(4) Leave to the parties in the main action and in the third party proceedings to exchange expert reports on valuation of PEL shares by 24 October 2003.

(5) Leave to the parties in the main action and in the third party proceedings to exchange, if so advised, supplemental expert reports in reply to expert reports exchanged under paragraph (4) above.

(6) The witness statements do stand as evidence-in-chief at the trial, unless otherwise directed.

(7) The plaintiffs do lodge with the court and serve on the defendants the trial bundles that are additional to the trial bundles for HCCW594/1999 and HCA1240/2001, no later than seven days before the commencement of the trial.

(8) The plaintiffs do lodge with the court and serve on the parties their opening submissions no later than three clear days before the commencement of the trial.

(9) Live Notes be arranged for the trial with the costs involved to be shared by the parties in such proportions to be agreed between them.

(10) There be liberty to apply for further directions.