CHARM MASTER INTERPRISES LTD v. GRAND T G GOLD HOLDINGS LTD AND ANOTHER

HCA 397/2011

[2022] HKCFI 1408

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 397 OF 2011

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BETWEEN

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D E C I S I O N

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Introduction

1.  This is the case management conference of an interpleader action between the Plaintiff and D2. There are 3 summonses before me:

(1) The Plaintiff’s summons dated 23 June 2021 for

(a) Leave to cross-examine one Robin Lee at the trial;

(b) An order that D2 shall secure the attendance of Robin Lee at the trial;

(2) D2’s amended summons dated 8 September 2021 for leave to amend its pleading as per the draft re-amended defence and counterclaim of D2 (“DRADCC”); and

(3) D2’s summons dated 25 June 2021 for leave to file and serve the 2^nd supplemental witness statement of Leung.

2.  In respect of the Plaintiff’s summons, D2 takes a neutral stance as to whether Robin Lee should be cross-examined, but objects to any order compelling D2 to secure his attendance at the trial.

3.  In respect of D2’s summonses, the Plaintiff’s only objection is to the parts that refer to a “Separate Agreement” between D2 and D1 (“Listco”).

Background

4.  The action concerns 2 promissory notes issued by Listco for the value of HK$12.5 million (referred to as “Notes D and E” in the pleadings). The Plaintiff is the legal holder of the 2 promissory notes and claims for payment from Listco, pursuant to a repayment agreement.

5.  On the other hand, D2 also seeks payment under Notes D and E. Those 2 Notes in fact originated from some prior promissory notes. It is D2’s case that the Plaintiff was D2’s trustee, in respect of a sum of HK$12 million payable by Listco, after sale of certain shareholding in a company known as SSC Mandarin Mining Investment Limited (which D2 indirectly held through a company known as SSC Mandarin Holdings Ltd (“SSC Holdings”)). The Plaintiff continued to act as trustee, after partial redemption, in respect of Notes D and E that ultimately replaced Note A.

6.  The trust was allegedly recorded in minutes of a meeting of members of SSC Holdings on April 2008, chaired by one Robin Lee. The trust was later confirmed by the Plaintiff’s representative at another meeting with Robin Lee on 2 May 2008. The agreement and/or understanding between the Plaintiff and D2 were recorded in a letter dated 2 May 2008 from SSC Holdings to the Plaintiff (“2/5/2008 Letter”). The relief sought by D2 is HK$12 million.

7.  The trust is hotly disputed. In addition, the Plaintiff disputes the signature on the 2/5/2008 Letter.

8.  Later, Listco confirmed, in 2 separate Letters of Acknowledgement dated 31 March 2016 and 6 March 2017 respectively, that the total debt of HK$12.5 million under the 2 promissory notes was due to D2 and that D2 was the beneficial owner of the same.

9.  By DHCJ Raymond Leung SC’s order dated 26 February 2021, the Plaintiff and D2 were allowed to interplead. Upon full payment of the total sum of HK$12.5 million into Court, Listco was excused from future proceedings in this action.

10.  The core issues turn on the existence of the trust and whether the amount was for HK$12 million or HK$12,500,000; and whether the signature of the Plaintiff’s representative on the 2/5/2008 Letter was authentic.

11.  By now, the parties have filed witness statements. One Mr Robin Lee has prepared a statutory declaration dated 13 March 2019 (“Statutory Declaration”) which was annexed to the witness statement of Leung Hing Ying (“Leung”) filed on behalf of D2.

12.  By the proposed amendments and section E of the proposed supplemental witness statement of Leung, D2 seeks to rely on the Separate Agreement to establish its right to HK$12,500,000 against Listco.

Plaintiff’s summons

13.  D2 has produced, amongst others, the following documents:

(1) The 2/5/2008 Letter which bore only Robin Lee’s signature; this was produced through the letter of D2’s solicitor dated 23 March 2018;

(2) The same 2/5/2008 letter which bore not only Robin Lee’s signature but also purportedly that of the Plaintiff’s representative; this was produced as an annexure to the witness statement of Leung; and

(3) The Statutory Declaration by which Robin Lee confirmed the correctness of the contents of his letter dated 13 March 2019 to Listco (“13/3/2019 Letter”); this is produced as an annexure to the proposed supplemental witness statement of Leung.

14.  The 13/3/2019 Letter purported to narrate the history of how the Plaintiff came to agree to act as trustee in respect of Note A, execute a signed declaration of trust in favour of D2 and pass it to Robin Lee and a copy to Listco’s representative. Due to lapse of time and relocation of office, Robin Lee could not locate the original declaration of trust. Upon receipt of the signed declaration of trust, Robin Lee released Note A to the Plaintiff’s representative, which was under cover of the 2/5/2008 Letter. Robin Lee was the person who approved the Plaintiff’s partial redemption of Notes A and C in 2010.

15.  D2 filed a hearsay notice indicating the intention to rely on the Statutory Declaration and exhibits thereto at the trial. Ms Natalie So, counsel for D2, submits that the application by the Plaintiff is not to exclude hearsay evidence and the Court should not make an order along that line without a proper application.

16.  In civil proceedings, hearsay evidence is admissible by virtue of section 47 of the Evidence Ordinance, Cap 8, unless the opponent objects. It is plain from the Statutory Declaration that Robin Lee is a crucial witness for D2. He was directly involved and had personal knowledge on vital matters, such as the creation of the alleged trust and signing of the declaration of trust. His evidence is hotly disputed. It is not surprising that the Plaintiff objects to D2’s use of hearsay evidence and would like to cross-examine Robin Lee.

17.  In an adversarial system, cross-examination of an opponent’s witness at the trial is a right instead of a matter that requires leave of the Court. The more pertinent question is whether or not an order should be made to compel D2 to secure the attendance of Robin Lee at the trial.

18.  Which witness to call is a matter for the relevant party to decide. The Court cannot compel a party to secure the attendance of a witness, except through specified procedure, eg by way of subpoena or section 48 of the Evidence Ordinance (which allows the Plaintiff, with leave, to call Robin Lee and cross-examine him as if he were called by D2). The Court should not compel D2 to call Robin Lee because if, for some reasons, D2 no longer wants to call him as a witness, D2 may be in breach of a court order.

19.  However, under Order 38, rule 1, the Rules of the High Court, any fact required to be proved at the trial by the evidence of witnesses shall be proved by the examination of the witnesses orally and in open court. It is a common case management direction for the Court to direct that if a witness does not attend for cross-examination, his witness statement shall be excluded from the evidence.

20.  In respect of an affirmation, the Court may, on the application of any party, order the attendance of an affirmant for cross-examination, failing which his affirmation shall not be used as evidence without leave of the Court: Order 38, rule 2(3). A party cannot rely on section 47 of the Evidence Ordinance and the rules as to admission of hearsay evidence to escape from the obligation of producing an affirmant for cross-examination: Cheung Wei Man Vivien v Centaline Property Agency Ltd [2004] 1 HKC 692, §§6 & 8, Lam J (as Lam PJ then was).

21.  The same principle applies to the admission of a statutory declaration: Yes Profit Investment Ltd v Mainly Tone Co Ltd, HCA 2656/2008, 29 April 2013, §9, DHCJ Leung.

22.  Accordingly, if D2 seeks to adduce the Statutory Declaration, the principles in paragraphs 20-22 shall apply.

23.  The Plaintiff relies on agreed proposed directions that in the event that D2 is directed to secure the attendance of Robin Lee, the direction should be for D2 to, “within 42 days, take steps and/or such necessary application as D2 may be so advised, to secure the attendance of Robin Lee at the trial, failing which the [Statutory Declaration] and the [2/5/2008 Letter] should not be admitted as evidence at trial”.

24.  In my view, the 2/5/2008 Letter and the Statutory Declaration should be treated differently.

25.  The 2/5/2008 letter is a “historical document” that purportedly came into existence in 2008 before litigation was contemplated. It is not an out-of-court statement. A party can prove its authenticity in many ways, such as through an eye witness (not necessarily Robin Lee) or handwriting experts. Admissibility of the 2/5/2008 Letter should not be tied to a direction for Robin Lee to attend for cross-examination.

26.  The Statutory Declaration is of a different nature. It was brought into being in 2019 after the pleadings in this case has closed, plainly with a view to supporting D2’s case. It is an out of court statement, similar in nature to an affirmation. A party, cannot, by using the label of a statutory declaration, get round the principles in paragraphs 20-22 above. Robin Lee is contactable and was contacted by Leung as recently as in June 2021. The fact that he has not responded to D2’s request to be a witness or is unwilling to be one, is not a reason to disapply the established principles.

27.  It is also ludicrous to suggest that because the Plaintiff has contacted Robin Lee in the past that the Plaintiff could call Robin Lee as a witness. It is D2 who wishes to rely on the Statutory Declaration. The duty is thus on D2 to adduce it in the proper way by tendering the maker for cross-examination.

28.  Accordingly, in the exercise of my case management powers, I direct that, unless Robin Lee do attend for cross-examination, his Statutory Declaration shall be excluded from the evidence. This direction does not deprive D2 of the right to apply for the necessary subpoena.

D2’s summonses for leave to file the DRADCC and to adduce Leung’s 2^nd supplemental witness statement

29.  The principles governing amendment of pleadings are well-established and are set out in Shenzhen Futaihong Precision Industry Co Ltd v BYD Company Ltd (unrep, HCA 2114/2007, 18 July 2016)[1], §15, Ng J:

“13. … generally speaking, all such amendments ought to be made for the purpose of determining the real question in controversy between the parties to any proceedings or of correcting any defect or error in any proceedings.

14. Leave is readily granted to amend before trial unless it can be shown that the new claim based on the proposed amendment is bound to fail. While the court is entitled to have regard to the merits of the case, it should only do so when the merits are readily apparent, and are so apparent as not to require prolonged investigation.

15. If the proposed amendments are bound to fail, no leave to amend should be granted. In this regard, the court will take the applicant’s proposed pleaded case to the highest.

16. Absent any real prejudice, an application for amendment, albeit late, must be decided upon the general principle that a court of law seeks to adjudicate on the real issues and disputes between the parties and, if possible, technical and procedural rules should not stand in the way of allowing the parties to raise their real claims or defences before the court for adjudication.

17. Where prejudice is claimed, the burden is on the party opposing the amendment to show prejudice. There is no injustice to the opposing party if he can be compensated by appropriate orders as to costs.

18. Lastly, in giving effect to the underlying objectives of the Rules of the High Court, the court shall always recognize that the primary aim in exercising the powers of the court is to “secure the just resolution of disputes in accordance with the substantive rights of the parties”: Order 1A, rule 2(2) of the Rules of the High Court (Cap. 4A) (“RHC”).”

30.  D2’s summonses can be dealt with together. In essence the Plaintiff only objects to those parts that refer to a Separate Agreement (“the Disputed Parts”), ie:

(1) §§28-33, 39A, 40, 51, 54 of the DRADCC;

(2) Prayers (1) and (2) against Listco in the DRADCC;

(3) Prayer (3) against the Plaintiff; and

(4) Part E (ie §§20-34) of Leung’s 2^nd supplemental witness statement.

31.  The alleged Separate Agreement arose out of the 2 Letters of Acknowledgment. In consideration of D2’s forbearance to sue, Listco agreed to pay D2 HK$12.5 million as contained in the 2 promissory notes. D2 did refrain from taking legal action against Listco until around October 2017. Accordingly, D2’s proposed amendments claim the amount of HK$12.5 million in the alternative.

32.  The Court has queried how D2 could have introduced amendments which would require findings of fact and decision on relief against Listco, when Listco was excused from participation in these proceedings.

33.  Subsequent to this hearing, D2 further amended its DRADCC so as to remove prayers (1) and (2) for relief against Listco personally (“Final Draft”).

34.  The Plaintiff’s grounds in opposition can be summarized as follows:

(1) The Separate Agreement was a matter between Listco and D2 and is irrelevant to the dispute between the Plaintiff and D2.

(2) The amendments go against the order of DHCJ Raymond Leung SC which stated that:

(a) The Plaintiff’s claim against Listco and D2’s counterclaim against Listco be stayed and is not to be resurrected without leave of Court or consent of the parties after Listco paid the additional HK$500,000 into Court;

(b) This action shall proceed as between the Plaintiff and D2 based on the pleadings between the Plaintiff and D2. Subject to the issues of interest and costs, Listco be excused from any further proceedings in the action.

(c) Leave be granted to D2 to withdraw its summons seeking leave to amend the amended defence and counterclaim.

(3) It has always been D2’s case that the Plaintiff was holding he Notes on trust for D2 to the extent of HK$12 million. If D2 is successful, the remaining HK$0.5 million should be returned to Listco as stakeholder pending a claim by SSC Holdings. The Plaintiff queries how D2 can use the channel of a Separate Agreement to claim for that HK$0.5 million when the money does not belong to Listco at all.

(4) It is not clear from the DRADCC the basis on which Listco allegedly acknowledged the debt owed to D2 when Listco never admitted D2’s case.

35.  I am mindful of the fact that DHCJ Raymond Leung SC has made clear in his Order that the interpleader is about the issue of the Plaintiff and D2’s entitlement to the total of HK$12.5 million that will have been paid into Court, not just HK$12 million.

36.  The Separate Agreement is a separate basis from the trust to show entitlement of D2 to the full amount. In his Decision, DHCJ Raymond Leung SC acknowledged that even on the original pleadings, D2 has pleaded a separate agreement. See §§29 and 34 of the amended defence and counterclaim. At that early stage, just after giving leave to defend, the learned Deputy Judge could not have intended to bar D2 from amending its claim, if the test in Shenzhen Futong is met.

37.  The Disputed Parts represent D2’s attempt to tidy up the pleadings and to put forth all relevant facts for an alternative case to justify entitlement to the HK$12.5 million.

38.  The Plaintiff’s queries in §35 (3) & (4) are comments on the credibility of D2’s case on the Separate Agreement, which are not grounds for disallowing the amendments.

39.  Insofar as relief is concerned, D2 has confirmed that it does not seek to revive any claims against Listco. D2’s solicitors had twice written to Listco to make clear that the proposed amendments to the DRADCC did not involve any additional or new plea against Listco which were not already in issue and asked to confirm whether Listco had any objection or queries to the proposed amendments. Listco has not responded. There is no more prayer for relief against Listco personally in the Final Draft. Listco can continue to remain out of the picture in this action.

40.  Mr Wong, counsel for the Plaintiff, points out that, to make the order sought by D2, the Court must make findings of fact on whether the Separate Agreement existed or not. He queries how the Court can do so when Listco would not take part in the trial. He further submits that it has never been D2’s case that the funds under the various Notes were “partnership property” between D2 and SSC Holdings.

41.  In my view, the Court can make findings of fact involving a person not being a party to the interpleader proceedings although it cannot make a personal order for relief against that person. Any relief to be granted will be directed at the subject matter of the interpleader. I base these propositions on Peake v Carter [1916] 1 KB 652.

42.  In that case, the parties were both claimants to good seized by the sheriff. Carter was the judgment creditor. Peake relied on a partnership agreement between him and the judgment debtor to try and establish his entitlement to the goods in the interpleader action. The judgment debtor did not take part in the interpleader proceedings but that did not preclude the court from making a finding that the goods seized formed partnership property (ie a finding affecting the judgment debtor). The application of Peake v Carter is not limited to claims involving partnership.

43.  For the reasons given in this section, I am of the view that applying Shenzhen Futong, the Disputed Parts are to enable the Court to determine the real question in controversy between the parties. There is no suggestion that the Disputed Parts are bound to fail so as to justify their being struck out summarily. No prejudice to the Plaintiff is shown. In the premises, I grant leave to amend and to adduce the 2^nd supplemental witness statement of Leung. I give leave, just in case it is necessary, for consequential amendments to the draft 2^nd supplemental witness statement of Leung arising out of the Final Draft.

44.  The arguments on amendment in this case are unusual. On a nisi basis, I make an order that costs of and incidental to the amendments be to the Plaintiff but the costs of this hearing itself be in the cause.

Conclusion

45.  In respect of the Plaintiff’s summons, I direct that unless Robin Lee attends the trial for the purpose of cross-examination, his Statutory Declaration shall be excluded from the evidence. On a nisi basis, costs of this summons shall be borne by D2.

46.  In respect of D2’s summonses,

(1) There be leave to amend as per the Final Draft, which shall be filed and served within 14 days of this Order.

(2) There be leave to D2 to file and serve the 2^nd supplemental witness statement of Leung Heung Ying within 14 days of this Order.

(3) There be leave to the Plaintiff to make consequential amendments to its reply and defence to D2’s Final Draft within 28 days thereafter.

(4) There be leave to the Plaintiff to file and serve further witness statements in reply to the 2^nd supplemental witness statement of Leung Heung Ying within 14 days thereafter.

(5) No further witness statements shall be filed without leave of the Court.

(6) On a nisi basis, costs of and occasioned by the amendments be to the Plaintiff. Costs of the hearing on 19 April 2022 be in the costs.

47.  I expect this would be the last round of amendments to pleadings and witness statements. The parties have not told me what further interlocutory applications are needed. I do not see the need for a further CMC. I therefore direct that:

(1) This case be set down for trial before a judge without a jury within 42 days. A total of 7 days be reserved for trial, the 6^th and 7^th days being at least 2 weekends apart.

(2) There shall be a pre-trial review 12 weeks before the trial.

(3) At least 7 days before the pre-trial review, each party shall file and serve a certificate of estimates of trial time.

(4) At least 7 days before the pre-trial review, the Plaintiff do lodge with Court a set of PTR bundles, with double-sided printing.

(5) At least 7 days before the pre-trial review, the parties shall lodge an agreed list of issues, an agreed set of undisputed facts in narrative form and an agreed list of abbreviations.

(6) Costs of this CMC be in the cause.

48.  I thank counsel for their assistance.