GIANT HARVEST LTD v. NAN HAI CORPORATION LTD AND ANOTHER

HCA 2072/2018, HCA 2560/2018 & HCA 2632/2018

[2025] HKCFI 312

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2072 OF 2018

ACTION NO. 2560 OF 2018 &

ACTION NO. 2632 OF 2018

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D E C I S I O N

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1.  There is before this court the trial of this Consolidated Action commencing on 7 January 2025.

2.  This is a case management decision on the Summons of the NH Parties dated 5 November 2024 (“Summons”), whereby the NH Parties are seeking leave to file a supplemental witness statement of Chen Tao (“Chen” and “Chen 2”), a supplemental witness statement of Yu Xin (“Yu” and “Yu 2”) as well as the supplemental list of documents comprising the exhibits to the two supplemental witness statements (“Proposed Evidence”). The supporting affirmation of Miu Yin Yan Ann is a brief one consisting of merely 7 paragraphs. In particular, it does not address an important issue for this court’s consideration ie an acceptable explanation for these last minute applications. This court will return to this issue later.

3.  Since we are already in the middle of the trial and the parties have opened their respective cases, this court shall skip the background facts and go straight to the arguments.

4.  At the outset, Mr Leong SC for the NH Parties emphasizes the following (“Initial Emphasis”):

a.  First, Both Chen and Yu are existing witnesses of NH Parties who had already filed their respective witness statements and will attend court to give viva voce evidence.

b.  Second, Chen 2 and Yu 2 are basically in response to matters already alluded to by OSGH Parties’ witnesses, giving NH Parties’ side of the story. The battle lines are clearly drawn and OSGH Parties’ witnesses should not be taken by surprise.

c.  Third, the Proposed Evidence should not necessitate new witness to be called or discovery to be made by OSGH Parties.

d.  Fourth, Chen (in December 2023) and Yu (in December 2022) did express their unwillingness to give evidence, which explains why they had not responded to OSGH Parties’ witnesses earlier. Their personal circumstances have since changed which enable them to attend court now.

e.  Fifth, the Proposed Evidence is relevant, admissible and probative, the admission of which can secure the just resolution of disputes in accordance with the substantive rights of the parties.

5.  After reciting some fairly uncontroversial legal principles, Mr Leong SC then submits that Chen 2 is concise, with four pages of contents.

6.  In relation to the issue of Substitute Cinemas, Chen 2 provides a response to certain distinct paragraphs of the statements from OSGH Parties’ witnesses viz Mao and Zhong as identified in paras 8 to 13, the gist of which is that no adequate information about the Substitute Cinemas was disclosed by the OSGH Parties before the SPA was entered into and that all Schedule 5 Conditions must be complied with before they could serve to substitute the value of the MIXC Cinema.

7.  The rest mainly concerns the Shanghai Xinghui & Shenzhen Xinghui Cinemas, again by responding to Mao and Zhong. The gist of the evidence is that the OSGH Parties had recognized that these two cinemas could not achieve the 約定年票房 in Schedule 5 of the SPA, hence their suggestion of certain adjustments/compensation. Chen also adopts the witness statement of Deng Xiaojuan (“Deng”), who said towards the end of 2024 that she was unable to attend court to testify. Deng’s statement mainly concerns the physical constraints / impediments (such as dimension) of the said cinemas.

8.  Mr Leong SC then submits that Yu 2 is even more concise, with only 1.5 pages of contents. The first part mainly concerns the issue of Substitute Cinemas, the role of the 5-month short term lease proposal about the MIXC Cinema upon the expiry of the existing lease and responds to the statements of OSGH’s witnesses viz Mao and Chow. The second part mainly concerns the Shanghai Xinghui & Shenzhen Xinghui and the Beijing Great Wall Cinemas. The gist is that these cinemas did not comply with the Schedule 5 Conditions due to inter alia physical constraints / impediments.

9.  Lastly, Mr Leong SC sums up and reiterates his submissions that:

a.  the Proposed Evidence is factual, of high probative value and relevant to the counterclaims of the NH Parties;

b.  there is no real prejudice to the OSGH Parties which cannot be compensated by costs;

c.  refusing the applications would significantly prejudice the NH Parties and impede the court from fulfilling his “primary duty” of securing the just resolution of the dispute in accordance with the parties’ substantive rights;

d.  whilst delay in making the applications is not in dispute, there is no inflexible rule that a party should be debarred from adducing relevant evidence even if there is delay.

10.  Mr Man SC for the OSGH Parties opposes the Summons on numerous grounds. In the interest of time, it is not necessary to run through all of them. Suffice is for this court to set out the following reasons which this court considers are sufficient to dispose of the Summons.

11.  First, there is unexplained and inordinate delay. Second, such unexplained and inordinate delay is likely to cause prejudice to the OSGH Parties which cannot realistically be compensated by costs. Third, after the CJR, while the just resolution of the dispute in accordance with the parties’ substantive rights is very important, the court must also consider the just resolution of the parties’ dispute procedurally. Fourth, there is insufficient explanation of the so-called high probative value of the Proposed Evidence such that the rejection of it will impede the court from fulfilling its primary duty of securing the just resolution of the dispute in accordance with the parties’ substantive rights.

12.  To start with, the witness statements of the OSGH and NH Parties were exchanged in June 2020. By Order of Master Hui dated 3 August 2021, any further interlocutory applications as may be advised should be taken out within 28 days after the parties had obtained counsel’s advice on the overall merits of the case. By Order of Master Hui dated 3 January 2022, the time for the parties to take out any interlocutory applications was further extended to 21 February 2022.

13.  At the PTR before this court on 15 October 2024, there was no indication from the NH Parties that they intended to adduce Chen 2 and Yu 2, not simply to explain why they might now be persuaded to come forward to testify and adopt their original witness statements in light of DHCJ Andrew Li’s Judgment dated 14 October 2024[1], but additionally, to respond to parts of the witness statements of the OSGH Parties exchanged in 2020.

14.  There is no reason why Chen and Yu could not have responded to the witness statements of Mao, Zhong and Chow, as Chen 2 and Yu 2 purport to do so now, prior to 21 February 2022. As noted earlier, Yu and Chen only indicated their unwillingness to give evidence in December 2022 and 2023 respectively. Thus, their unwillingness to give evidence in itself cannot explain why they had not responded to the statements of OSGH Parties’ witnesses much much earlier. Also, as noted above, there is no real explanation in the supporting affirmation of Miu Yin Yan Ann for these last minute applications.

15.  In Chan Wing Cheung Allan v Ho Shu Yee Susana unrep, CACV 393 of 2004, 10 January 2005 at [9], Ma CJHC (as he then was) made the following points which are highly pertinent to the present discussion and will answer some of the submissions of Mr Leong SC.

“9. In my view, the Judge was correct in his attempt to case manage the trial of this action as best he could in the circumstances. Certainly, in my view, the exercise of his discretion here cannot be faulted. The following points are of note : ‑

While it can be accepted that the Defendant will inevitably be prejudiced by not having witness statements admitted into evidence, the Judge had to balance this prejudice against the prejudice caused to the Plaintiff in allowing them in at this very late stage. The Plaintiff would be prejudiced by having to face an inevitable adjournment of a trial that had been fixed for hearing a very long time ago. This was recognized by the Judge, rightly in my view, as being sufficient to constitute serious prejudice.

The predicament that the Defendant finds herself in is entirely of her own making. …

It is a theme running through Mr Lam’s submissions that the only real prejudice suffered by the Plaintiff was one that could be compensated for in costs. I have real doubts about this submission. Quite apart from the fact that the Defendant is legally aided (so that the benefit of any costs order may be limited), the Defendant suffers the prejudice of not having the trial take place at the scheduled time. This is often overlooked when matters are adjourned.

In any event, where an indulgence is sought from the Court, it would be a rare case indeed that this would be given, even on terms as to costs, without a satisfactory explanation being given to justify the grant of the indulgence…” (emphasis added)

16.  In Converge Design and Construction Co Ltd v Mount Kelly International Ltd [2020] HKCFI 2433 at [2], Mimmie Chan J reiterated several well-known observations as to the court’s case management role after the CJR which this court entirely agrees:

“The courts have emphasized on repeated occasions that CJR is about early preparation for trial, in order to achieve the objectives of the Rules. It needs no further reminder that delay itself is a ground to refuse a late application, either for discovery or for the introduction of new pleadings and evidence, when trial is imminent. The onus is on the applicant to justify its delay and to show good reason for leave to be granted. Whilst delay is to be weighed against the probative value and relevance of the pleadings and the evidence sought to be introduced, it need not be emphasized further that the primary aim in the Court’s exercise of its powers is to secure the just resolution of disputes in accordance with the substantive rights of the parties. Such just resolution of disputes requires due consideration of the time occasioned by last minute applications to introduce amendments to the pleadings and/or evidence on the eve of trial. Prejudice is inevitably caused, in the disruptions in the preparation for trial, the need to consider the new evidence and the need to respond thereto, coupled with the need to locate witnesses at the last minute to consider and if necessary to respond to the new evidence, and the last minute distraction from the proper focus and priority of the due preparation for trial. This is actual prejudice.” (emphasis added)

17.  Lastly, in Chu Hsiao Chiu v Ma Jinrui and anor [2020] HKCFI 942 at [18] – [20], Coleman J emphasized three points which are also germane here.

a.  In the ‘post-CJR era’ that the underlying objectives emphasise not only substantive but also procedural fairness. Therefore, late or last-minute applications trigger the Court’s expectation that the applicant will provide a full account of the lateness of the application, and full justification as to why the application should be entertained at all at such a late stage.

b.  There is no longer room for the notion that delay, even though inordinate and unexplained, will be forgiven as long as there is no prejudice and costs are paid. Courts should take into account that there may be an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Further, the vacation or adjournment of the hearing occasioned by last-minute applications may mean the loss of the hearing day which could have benefited other litigants, and inefficiencies in the use of Court time, which is a public resource. Hence, late applications can be dismissed on the basis of lateness alone.

c.  Whilst the ultimate concern of the court is to achieve a just resolution of the case, it does not mean that a party should be permitted to raise any arguable case at any point in the proceedings, simply on payment of costs. If a party has been afforded a reasonable opportunity to advance its case, the just resolution of the case does not require that he should be allowed a further opportunity in spite of his own inordinate and inexcusable delay. An applicant making a late application is extremely unlikely to be able to rely upon self-induced prejudice.

18.  This court accepts each case turns on its own facts and there should not be an inflexible rule that a party should be debarred from adducing relevant evidence on the ground of inexcusable or unexplained delay: Keiron Peter Arch Rochester v Glory Sky Precious Metals Ltd [2023] HKCFI 2536, Wilson Chan J at [15].

19.  This court has no intention to apply an inflexible rule to dismiss the Summons on the basis of delay alone. This court’s exercise of its discretion is premised on a balancing act, in order to achieve both substantive and procedural fairness to the parties.

20.  Mr Man SC submits that the OSGH Parties will suffer significant prejudice[2] if the Summons were granted. The OSGH Parties would be placed in the position of (i) having to consider the new evidence and the points raised in Chen 2, Yu 2 and the documents in the supplemental list of documents, and (ii) continuing to prepare for trial after it has started.

21.  The notion that Chen 2 and Yu 2 contain new evidence cannot be disputed even though Mr Leong SC seeks to qualify in his oral submission as to what is meant by “new”. In answer to a question from the bench, Mr Leong SC had to accept that they were “new” in the sense that they were not in Chen’s or Yu’s 2020 witness statements, which is stating the obvious.

22.  In para 39 of Mr Man SC’s skeleton, he gives some examples of the new evidence contained in Chen 2 and Yu 2. Suffice it for this court to say this. There is little doubt that at least some of the examples given are new. In Annex 3 to Mr Man SC’s skeleton, those parts are highlighted in green, not just because they were not in Chen’s and Yu’s 2020 witness statements, but also cannot be found in Mr Yu Pun Hoi’s (supplemental) witness statement, as to which leave was sought by a summons from the NH Parties dated 30 January 2024. That application was dismissed by Master Kay Seto on 24 June 2024 and again by DHCJ Andrew Li on 14 October 2024.

23.  During his oral submission, Mr Man SC also points to specific examples of the exhibits to Chen 2 and Yu 2 as creating specific and pronounced prejudice to his clients.

24.  Take the most obvious example of Item 61 of Chen 2’s exhibit which contains a 1-page WeChat conversation between 2 BNP’s representatives (who represented the OSGH Parties at the material time) and the NH Parties (including Chen) dated 20 January 2017. Quite apart from this court’s express concern at the hearing that just by looking at 1 page of the WeChat conversation, this court would not be able to meaningfully gauge the probative value of that line of conversation, Mr Man SC submits correctly that his clients would have to go back to BNP and make enquiries concerning the chat history of that chat group with people who were and are not his clients’ employees. As this court observes, depending on BNP’s willingness and ability to cooperate, and the time taken for such cooperation, if any, to come to fruition, there might be further inquiries to make and additional documents, if any, to consider. That will take time.

25.  Take another example which is Deng’s witness statement and its 40-page exhibits (“Deng 1”). Pursuant to paragraph 1 of the PTR Order, her witness statement stands to be expunged, as she has recently indicated she would not testify at trial, in person or by VCF. Instead, Chen 2 adopts Deng 1 in its entirety on the basis that he says he was the main responsible person in the SPA transaction and most of the emails and plans exhibited to Deng 1 were copied to him. Importantly, Chen does not say he fully understands what they were about. So what is the probative value of Deng 1 becoming part of Chen’s testimony at the trial?

26.  If Chen 2 and Yu 2 contain new evidence, and if the new evidence is as relevant to the issues between the parties regarding say the Substitute Cinemas, as Mr Leong SC submits, a fair opportunity must be given to the OSGH Parties to deal with them. Since the trial has already started, such a fair opportunity, even if it does not necessitate vacation of the trial completely, would necessarily mean an adjournment and hence loss of (yet unascertained) number of days of the period scheduled for this trial. Those days could be usefully employed by the OSGH Parties and this court to prepare for and get on with the trial. Further, those lost days would mean the trial is unlikely to finish as scheduled, resulting in a part-heard situation, when more than 1 ½ days have already been spent dealing with the Summons.

27.  Any experienced counsel would know what a part-heard trial means to the parties and the court’s diary. That in this court’s view is clearly prejudicial to the OSGH Parties as Plaintiff in the Consolidated Action. That is also inimical to the objectives of the CJR by causing inefficiencies in the use of the court’s time, which is a public resource.

28.  Pausing here, in answer to Mr Leong SC’s Initial Emphasis, the 1^st point about Chen and Yu being existing witnesses is neither here nor there and does not assist the NH Parties. Even if they purport to respond to distinct parts of the Witness Statements of the OSGH Parties, there is no acceptable reason why they could not have done so much earlier. This court does not accept the 3^rd point in the Initial Emphasis that the Proposed Evidence should not necessitate new witness to be called or discovery to be made by the OSGH Parties, for reasons already explained. It is up to the legal advisers of the OSGH Parties to advise their clients on that. They need a fair opportunity to come up with their advice after appropriate enquiries. The 4^th point in the Initial Emphasis does not answer OSGH Parties’ complaint about inordinate and unexplained delay. Anyway, Chen’s and Yu’s initial unwillingness to give evidence in 2023 and 2022 and their subsequent change of mind only supplement the 1^st point and does not add anything of assistance to the NH Parties. As for the 5^th point in the Initial Emphasis, the probative value of Chen 2 and Yu 2 has not been sufficiently demonstrated by the NH Parties. This is especially true of the exhibits to Chen 2 and Yu 2 alluded to and further explained below.

29.  As for the alleged high probative value of the Proposed Evidence, this allegation is highly questionable.

30.  Take para 10 of Chen 2 as an example. Chen purports to adopt inter alia paras 51 and 52 of the Re-Re-Amended Consolidated Defence and Counterclaim as true and correct. If one looks at the two paras, what is pleaded are the true and proper construction of Schedule 5 to the SPA as modified by the Confirmation Letter, alternatively, certain implied terms of the SPA to similar effect. These are questions of law for the court, rather than question of fact for a factual witness like Chen. Irrespective of Chen’s subjective understanding of the legal effect of Schedule 5, and irrespective of whatever the parties’ factual witnesses wish to tell this court their subjective understanding of the legal effect of the SPA generally, this court is not persuaded that the para has any probative value, let alone high probative value.

31.  As another example, the same can be said of para 11 of Chen 2 which specifically sets out Chen’s understanding of the meaning of 約定年票房 in Schedule 5.

32.  For yet further examples, items 62 to 64 of the exhibits to Chen 2 consist of 4 pages of WeChat conversations/email exchanges between Chen and Yu, and between Mao and Chen/Yu after the signing of the SPA and in fact after the Closing Date. Mr Leong SC is of course correct in submitting that relevant events could and would happen after a commercial contract has been signed, and even completed. But their relevance has to be explained in an application of the present kind and it has not.

33.  In the course of exchange between Mr Man SC and this court, the notion that what the parties said or did after a contract had been made cannot be used as an aid to its construction, and it is not in dispute that the construction of the SPA is a major issue in this Consolidated Action. This is elementary and the rationale was expressed in the clearest possible term in the speech of Lord Reid in James Miller & Partners Ltd v Withworth Street Estates [1970] AC 583 at 603D-E. If that legal proposition is not disputed by Mr Leong SC, it begs the question as to the probative value of introducing items 62 to 64 of the exhibits to Chen 2 in evidence.

34.  This court has already alluded to the probative value of Chen adopting the contents of Deng 1 as part of his evidence. Deng 1 is highly technical as it concerns the physical constraints / impediments (such as dimension) of the cinemas in question. One would have thought this is an area for expert evidence but an earlier application by the NH Parties for expert directions had been refused. It is quite obvious to this court that Chen cannot and hence does not say he fully understands what Deng 1’s contents are about. So what is the probative value of Deng 1 becoming part of Chen’s testimony at the trial?

35.  Yu 2 does not appear to add anything of value to NH Parties’ case which can assist this court over and above Chen 2. If Chen 2 is problematic, so is Yu 2.

36.  In answer to Mr Leong SC’s summing up:

a.  It has not been demonstrated that the Proposed Evidence is of high probative value.

b.  There is real prejudice to the OSGH Parties which cannot be compensated by costs.

c.  Any prejudice to the NH Parties in refusing the applications is self-induced.

d.  Refusing the applications would not significantly impede the court from fulfilling his primary duty of securing the just resolution of the dispute in accordance with the parties’ substantive rights as the so-called “high probative value” of the Proposed Evidence is not shown.

37.  For these reasons, the Summons is hereby dismissed.

38.  Costs of and occasioned by the Summons dated 5 November 2024 be to the OSGH Parties, to be taxed if not agreed, on a party and party basis, and paid forthwith, certificate for 2 Counsel.