WONG LO KIN AND ANOTHER v. SUN KWONG METAL MANUFACTURER CO LTD

DCCJ 1813/2018

[2021] HKDC 1602

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1813 OF 2018

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DECISION

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1.  The trial of this action is scheduled to commence on 17 January 2022 with 4 more days reserved.

2.  In the Pre-trial Review held on 5 November 2021 (“the PTR”), this court was informed by the defendant that both of its only witnesses were residents outside Hong Kong and it intended to apply in early December 2021 for a direction that their evidence be taken at trial by video conference facilities (“VCF”).

3.  Such lateness in applying was clearly unsatisfactory.  The application should have been made earlier readying it to be heard substantively by the time of the PTR.  The defendant apparently just assumed that the application was only formal and such direction would be readily made.  Unsurprisingly, the plaintiffs indicated in the PTR that it would contest it.  In the circumstance, in the PTR I directed that unless the application be taken out by 19 November 2021, the defendant would be debarred.  I also made prospective directions, in the event the application was to be taken out, laying out a tight timetable for the filing of evidence and submissions, and for the application to be disposed of on papers.

4.  By summons issued on 19 November 2021, the defendant so applied.  I have considered the defendant’s affirmation evidence (the plaintiffs chose not to file any) and the parties’ submissions.  This is my decision.

5.  Both parties are agreed that the applicable and correct principles are summarized by Anthony Chan J in Tsang Woon Ming v Lai Ka Lim & Others [2020] HKCFI 891:-

“(1)  The giving of evidence by video conferencing facilities (“VCF”) is an exception;

(2)  The starting point is that proceedings are conducted in court.  I would add that this is more important when it comes to a trial;

(3)  Sound reason is required to justify a departure from the starting point;

(4)  The solemnity of court proceedings and its atmosphere is highly important in the taking of evidence;

(5)  The court may be more disposed to exercise its discretion to allow evidence by VCF in respect of technical or purely factual evidence which involves no serious issue on credibility or relatively unimportant evidence;

(6)  Where the credibility of the witness is seriously contested, it is important for the witness to be examined under the solemn atmosphere of the court;

(7)  Costs and convenience may be important considerations which the court will have to weigh in the determination of the application;

(8)  Ultimately, it is a matter of judgment of the court choosing the course best calculated to achieve a just result by taking into account all the material considerations, including whether the witness is capable of attending the proceedings, any prejudice to the other party, the Underlying Objectives, any delay to the proceedings and practical considerations like the availability of the facilities (see Practice Direction 29).”

6.  The defendant’s witnesses are :

(a)  Mr Premnath Balakrishnan (“Balakrishnan”), who is a national of USA living in Missouri, and who has been the President of US Ring Binder LP (“USRB”) since 2002.

(b)  Mr Wang Tai Lin (“Wang”), who is a PRC national living in the province of Guangdong, and who had been the factory manager of the defendant since June 2017.

7.  The background and the gist of the parties’ disputes are these:-

(a)  In 1991, the plaintiffs and one US General Binding Corporation (“USGBC”) entered into a joint venture and incorporated the defendant in Hong Kong to carry on the business of manufacturing of ring metals; with the plaintiffs owning 51% of the defendant’s shares and USGBC owning the remaining 49%.  The plaintiffs were the directors of the defendant responsible for its daily operation.

(b)  In around July 1995 and by certain agreement(s) in Chinese (“the Chinese Agreements”), the plaintiffs acquired from Dongguan City Changan Town Xiabian Gufen Economic Cooperation (“the Cooperation”) certain 60-year-duration land use right (“the Land” and “the Land Right” respectively).  On the Land was erected certain factory buildings (“the Factory”).

(c)  By a tenancy agreement dated 5 February 1996 entered between the plaintiffs and the defendant (“1996 Tenancy Agreement”), the defendant was leased the Factory, and according to the plaintiffs, was obligated, among others, (a) under Clause 6.01(b) thereof to pay an annual fee (“the Land Use Fee”) charged by the Cooperation, which fee the plaintiffs were personally and primary liable to the Cooperation, and (b) to pay the plaintiffs a monthly payment (“the Monthly Payment”).

(d)  It is common ground that since then, the defendant has been paying the Land Use Fee and the Monthly Payment.

(e)  In 1998, USGBC sold its 49% share in the defendant to US Ring Binder LP (“USRB”) and Sun Kwong LLC (“SKL”)(together “the USRB Parties”).

(f)  In 2013, the plaintiffs wished to retire and exit from the defendant. By an agreement dated 4 December 2013 made between the plaintiffs and the USRB Parties (“the Settlement Agreement”), the plaintiff sold all their 51% shares in the defendant to the USRB Parties.  It is the plaintiffs’ case that under Clause 1(13) thereof, the defendant and USRB Parties agreed to waive all claims.

(g)  The 1996 Tenancy Agreement was then renewed and replaced by a tenancy agreement dated 4 June 2014 (“2014 Tenancy Agreement”) and then another one dated 21 March 2016 (“2016 Tenancy Agreement”) entered by the plaintiffs and the defendant.  It is common ground that the defendant continued to pay the Land Use Fee and the Monthly Payment.

(h)  On 7 March 2017, the plaintiffs entered into a payment agreement with the USRB Parties and the defendant, whereby certain disputes in the settlement sum payable under the Settlement Agreement were resolved.

(i)  Around August 2017, the defendant first indicated that it disputed the Land Use Fee.  The defendant’s case in a nutshell was that the Land was about 18,687 square meters while the land occupied by the Factory was about 9,016 square meters (“the Factory Land”), and therefore the defendant has been paying the Land Use Fee for the Factory Land and the other 9,671 square meters, and therefore the defendant has been overpaying.

(j)  The defendant therefore now disputes the plaintiffs’ claims and counterclaims for the return of overpaid Land Use Fee, confined to the limitation period of 6 years prior to the issuance of the counterclaim, in the total sum of RMB 906,727.30.

(k)  The plaintiffs’ case, essentially and put simply, is that though the Land Use Fee was connected to a larger area of land but the Land Use Fee was demanded by, and agreed to be paid to, the Cooperation to secure the use of the Factory.  Further and in any case, the Land Use Fee was agreed to be paid by the defendant under the 1996 Tenancy Agreement, the 2014 Tenancy Agreement and the 2016 Tenancy Agreement.

(l)  The plaintiffs also pleaded that the defendant has waived, acquiesced or is estopped from denying its liability to pay the Land Use Fee, and thus cannot maintain its counterclaim.

(m)  The plaintiffs now claim for the Land Use Fee demanded by the Cooperation in December 2017 in the sum of RMB 406,829 and the Monthly Payments for March and April 2018 in the total sum of RMB 211,344.

(n)  There is also in dispute an incident of alleged trespass by an agent of the plaintiffs on 28 May 2018 causing the defendant production loss of US$14,003 and loss of salaries of RMB35,428, for which the defendant also counterclaims.

Discussion re evidence of Balakrishnan taken by VCF

8.  It cannot be disputed that USA is a “Group A” country under the current restrictions and quarantine requirements imposed by the HKSAR Government regarding inbound travel, such that Balakrishnanis restricted from entering Hong Kong due to the pandemic.

9.  The plaintiffs submit that, Balakrishnan could first travel from USA to a “Group B” country, stay there for 14 days, then travel to Hong Kong and undergo compulsory quarantine for 14 days (if he is fully vaccinated) or 21 days (if he is not fully vaccinated) and take all the tests and such.  It is thus only a matter of inconvenience for him to come to Hong Kong to testify.

10.  However, with the latest development of the Omicron variant, the list of “Group A” countries has been rapidly expanding to 62 countries as on 17 December 2021 and more countries are added each day into this group even when this decision is being prepared in these few days, such that the list of “Group B” countries (all places outside China which are not Group A or Group C) is correspondingly, continuously and rapidly shrinking.

11.  In the circumstances, I have no hesitation to agree with the defendant that it is not just inconvenient, but impractical, if not verging on impossible, for Balakrishnan to come to Hong Kong to attend trial.  Though there is delay on the part of the defendant in making the present application, I do not agree with the plaintiffs that this impracticality of travelling to Hong Kong could have been avoided if there were no delay.

12.  Though it is anticipated that there will be some factual disputes over some matters on which Balakrishnan would be giving evidence on and his credibility might remain an issue, I think there is validity in the defendant’s submission that the resolution of the main dispute concerning the Land Use Fee would very much hinge on the interpretation of the many written agreements mentioned above.  In that regard, it is trite that generally “the parol evidence” rule applies; and it is not either party’s case that any of the above-mentioned agreements was partly in writing and partly oral.

13.  The plaintiffs in their written submissions do not mention any particular dispute of factual matters over which Balakrishnan’s evidence would be crucial.  It is merely said that whether he was aware of the alleged excess payment of the Land Use Fee would be explored in his cross-examination.

14.  The plaintiffs express concern that because of the time zone difference Balakrishnan would be giving evidence in late evenings until early hours US time, and that arguments might arise as to whether inconsistencies in his testimony are due to his tiredness or untruthfulness.  I do think the concern is valid.  No doubt, it is up to the defendant and Balakrishnan to make the necessary preparations to cater for the time difference.

15.  It is thus my clear view that the course best calculated to achieve a just result, weighing all the considerations, is to allow Balakrishnan to give evidence by VCF.

Discussion re evidence of Wang taken by VCF

16.  The travelling situation is very different in the case of Wang, who is a national of PRC living in Guangdong.

17.  According to the defendant, the current position is that Wang is required to undergo a compulsory quarantine of 7 days and then self-monitoring for 7 days with tests to be taken and such when he travels into Hong Kong. When he returns to Guangdong, he will be required to undergo another 14 days of quarantine and 7 more days of self-monitoring.

18.  The defendant says it is a heavy burden and is difficult on Mr Wang. The plaintiffs characterize it as a matter of inconvenience.

19.  In his witness statement, it is stated that he “discovered” the over payment, that he had “experience” over the payment of land use fees, that he had visited and talked to someone in the Cooperation.  In the witness statement, he also referred to certain photographs of the Factory and deposed to the land that was occupied by the Factory vis-à-vis the Land (a matter, I would expect, that would not be very contentious).  He also spoke there about the trespass incident.

20.  Considering, as I said above, that the dispute over the Land Use Fee would hinge very much on the interpretation of the above-mentioned written agreements, I do not think that Wang’s evidence would be particularly important, if at all, regarding this aspect.

21.  The more pertinent evidence to be given by Wang would be that which concerns the trespass, which according to the defendant, disrupted the operation of the Factory for merely a day.  The plaintiffs do not dispute that they had engaged one Lee Chi Keung to attend the defendant to recover the Monthly Payment.  They merely said they had not authorized him to use any unlawful means and that they are sure that “[he] was doing what he is [sic] allowed to do in accordance with PRC law” (§38 of the witness statement of the 2^nd plaintiff).  I also note that the plaintiffs have not indicated that they would be calling Lee Chi Keung as a witness so as to contest Wang’s evidence.

22.  The factual dispute regarding the trespass therefore seems to be limited.

23.  In the circumstances, weighing all the factors in the exercise of my discretion, I am disposed to allowing Wang to give his evidence at trial by VCF, and would so order.

Disposal

24.  In the premises, I will make an order in terms of paragraphs 1, 2 and 4(b) of the defendant’s summons.  The defendant is directed to forthwith liaise with my clerk and the court’s technical staff regarding logistical and technical matters.  Subject to parties’ view, this court presently has arranged VCF facilities to be made available on 19 and 20 January 2022.

25.  The defendant is further directed to report to the court by letter, copied to the plaintiffs, within the next 14 days, the venue in which Balakrishnan and Wang will be giving evidence.  For Balakrishnan, since he will be giving evidence in very late hours his time, a quiet and appropriate room in his residence with the requisite technical capabilities should be acceptable.  If such a room is intended to be used, the defendant should enclose with the said letter a video depicting the surroundings of the room satisfying the court and the plaintiffs that the room is appropriate.  For Wang, he may give evidence in the office of a PRC law firm, as suggested by the defendant, provided no one would be present in the same room with him when he is giving evidence.

26.  I would not direct that Balakrishnan or Wang be accompanied and observed by a qualified lawyer or accountant when giving evidence, as proposed by the defendant.  This would incur further expenses and involve complications.  Rather, to ensure that they would not be assisted or affected by any person present in the room when they are giving evidence, the plaintiffs’ counsel would be at liberty, in the course of the evidence, to ask the witness to move the camera around to verify that there is no one present.

27.  I would also direct that on or before 30 December 2021, when the hard copy trial bundles are lodged per my previous directions, that the defendant do convert the same to PDF format and then send the same to Balakrishnan and Wang, and copied to the plaintiffs, for the witnesses’ use during the taking of evidence.

28.  While I accede to the application, it was made so late, such that I think it fair to order costs of this application, with certificate for counsel, to be in the cause.  I so order on a nisi basis, which will become absolute unless any party by letter applies to vary within the next 14 days.

29.  Lastly, I thank counsel for their assistance.