GURDAS SABHAGCHAND CHOITHRAMANI v. THE OFFICIAL RECEIVER AND TRUSTEE IN BANKRUPTCY OF GURDAS SABHAGCHAND CHOITHRAMANI (A DISCHARGED BANKRUPT)

CACV 78/2024, [2025] HKCA 422

On Appeal From [2024] HKCFI 356

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 78 OF 2024

(ON APPEAL FROM HCA NO 1548 OF 2020)

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court):

1.  This is the Plaintiff’s application by summons filed on 25 July 2024 (“the Summons”) seeking leave to adduce various documents referred to in §7 of his Affirmation dated 25 July 2024 (“Plaintiff’s 1^st Affirmation”) and produced as Exhibit “GSC-1” thereto as fresh evidence in support of his appeal against the Order made by Cheng J on 31 January 2024 (“the Order”). By the Order, the Judge dismissed the Plaintiff’s appeal against the order of Master Lai dated 27 April 2023, whereby the Master struck out the Plaintiff’s Amended Statement of Claim dated 26 September 2022 (“ASoC”) on the grounds, inter alia, that it constituted an abuse of the court’s process, and dismissed the Plaintiff’s action against the Defendant.

2.  Having considered the evidence and submissions before us, we consider that it is appropriate to deal with the present application on paper without an oral hearing pursuant to Order 59, rule 14A(1) of the Rules of the High Court, Cap 4A.

BRIEF BACKGROUND

3.  The Plaintiff was formerly a director and shareholder of Esquire (Electronics) Limited (“Esquire Electronics”), the principal company in the Esquire group of companies (“Esquire Group”), which carried on business relating to consumer electronics products. The Esquire Group encountered financial difficulties and underwent restructuring. The Plaintiff provided two personal guarantees to The Hong Kong and Shanghai Banking Corporation (“HSBC”), one dated 14 July 1983 in respect of liabilities owed by Esquire Electronics up to HK$20 million (“the $20M Guarantee”), and the other dated 8 October 1992 in respect of liabilities owed by Esquire Ltd for an unlimited amount (“the Unlimited Guarantee”).

4.  Esquire Electronics subsequently went into liquidation in 1996. The Plaintiff was also adjudged bankrupt on 30 December 1996 in HCB 221/1996 (“the 1996 Bankruptcy”). HSBC was a proving creditor in the 1996 Bankruptcy. The Plaintiff was eventually discharged from his bankruptcy on 30 December 2000.

5.  On 11 September 2020, the Plaintiff commenced the present action by writ against the Defendant. In the ASoC, the Plaintiff claimed against the Defendant for alleged misconduct in the course of administering the estate of the Plaintiff (“the Estate”) as the trustee in bankruptcy between 30 October 1996 and 24 September 2003. He raised 3 causes of action against the Defendant: (i) breach of duty of care, (ii) breach of statutory duty under the Bankruptcy Ordinance, Cap 6, and the Proof of Debt Rules, Cap 6E, and (iii) breach of fiduciary duty arising from section 84(1) of the Bankruptcy Ordinance.

6.  The basis of the Plaintiff’s claims against the Defendant can be summarised as follows:

(1)  On 21 May 1997, HSBC presented its first proof of debt in the amount of approximately HK$258 million (“the 1^st POD”) in the 1996 Bankruptcy based on the Plaintiff’s liabilities as guarantor for (i) Esquire Electronics’ indebtedness in the amount of approximately HK$253 million under the $20M Guarantee, and (ii) Esquire Ltd’s indebtedness in the amount of approximately HK$5 million under the Unlimited Guarantee.

(2)  During an interview on 13 October 1999, the Plaintiff pointed out to the Defendant that his total liability in respect of the indebtedness of Esquire Electronics and Esquire Ltd was limited to his two personal guarantees. After the interview, the Defendant reviewed the 1^st POD and made enquiries with HSBC.

(3)  Upon the Defendant’s request on 28 May 2000, HSBC withdrew the 1^st POD and presented a revised proof of debt (“the 2^nd POD”) for a substantially reduced amount of approximately HK$25 million on 8 June 2000.

(4)  The Plaintiff alleges that the Defendant failed to properly handle the 1^st and 2^nd PODs, causing him loss and damage arising from (i) the Defendant’s wrongful sale of the Plaintiff’s shares (which allegedly took place in September 1985), and (ii) the loss of opportunity to apply for an earlier discharge from his bankruptcy.

(5)  The Plaintiff only learnt of the constituent elements of the 3 causes of action he relied upon as a result of documents obtained by him on or about 14 September 2014 through “his Data Access Request”. The time for him to bring his claims against the Defendant should therefore be extended by Sections 26 and/or 31 of the Limitation Ordinance, Cap 347 (“the Ordinance”).

7.  By a summons dated 16 December 2022, the Defendant applied to strike out the Plaintiff’s claims. On 27 April 2023, Master Lai ordered that the Plaintiff’s ASoC be struck out on the grounds that it disclosed no reasonable cause of action, was frivolous, and/or was an abuse of process of the court, and the Plaintiff’s action against the Defendant be dismissed.

THE DECISION

8.  The Plaintiff was not satisfied with the decision of Master Lai, and appealed to a judge in Chambers on 10 May 2023. On 1 November 2023, the Judge heard the appeal. The Plaintiff was legally represented at that hearing.

9.  On 31 January 2024, the Judge handed down a written decision (“the Decision”) dismissing the Plaintiff’s appeal for the following reasons:

(1)  The Plaintiff’s claims based on the 3 causes of action were clearly time-barred, and his pleaded case did not come within Sections 26 and 31 of the Ordinance.

(2)  The Plaintiff had failed to put forward any necessary plea of concealment on the part of the Defendant to invoke the provision for postponement of limitation period under Section 26:

“22.1 There is no identification of what (if any) are said to be the active steps taken by the Defendant to conceal [its] breach of duty, or the deliberate wrongdoing of the Defendant coupled with a concealment or failure to disclose in circumstances where the wrongdoing is unlikely to be discovered for some time.

22.2 The Plaintiff does not suggest that he could not reasonably have discovered the relevant facts. There is no plea as to what it is that it could not have discovered without the taking of exceptional measures.”

(3)  The Plaintiff’s reliance on Section 31 in respect of his claim against the Defendant in negligence was to no avail in the circumstances of his case. §39 of the ASOC pleaded that “[t]he Plaintiff was only made aware of the constituent elements of the aforesaid causes of action as a result of documents obtained by the plaintiff on or about 14 September 2014 through his Data Access Request”. The Plaintiff put forward no other date on which he supposedly had acquired all the relevant knowledge which would enable him to bring his negligence claim. Based on the plea in §39 of the ASOC, the limitation period would at most be extended to 14 September 2017. However, the Plaintiff did not issue his writ until 11^th September 2020.

10.  The Judge, having found that the Plaintiff’s claims were time-barred, also considered the merits of the Plaintiff’s claims, and held that the ASoC disclosed no reasonable cause of action, for reasons which it is not necessary to set out in this judgment.

THE APPEAL

11.  By a Notice of Appeal filed on 5 March 2024, the Plaintiff appeals the Order to the Court of Appeal. The Plaintiff’s main complaints are:

(1)  In holding that he had failed to establish the applicability of Section 26, the Judge failed to give sufficient regard to the Defendant’s clear failure and/or refusal to provide him with the critical information as pleaded in the ASoC (see §3.3 of the Notice of Appeal).

(2)  The Judge erred in failing to give sufficient regard to the facts and matters contained in the correspondence exchanged between the Defendant and Arun Nigam Associates (“ANA”), the Plaintiff’s former solicitors, in April and May 2017 (“the 2017 Correspondence”). It can be seen from the 2017 Correspondence, inter alia, that the Defendant had concealed from the Plaintiff its failure to follow up with HSBC for lodging a false claim against the Estate under the 1^st POD and subsequently lodging an inaccurate and wrongful claim under the 2^nd POD, and that it was not until 24 April 2017 that the Defendant produced a copy of the 2^nd POD to the Plaintiff (see §3.4 of the Notice of Appeal).

(3)  In holding that the Plaintiff did not suggest in his pleadings that he could not reasonably have discovered the facts relevant to the 3 causes of action, the Judge erred in failing to take into account the 2017 Correspondence and the steps that had to be taken to reveal the relevant facts which the Defendant had failed to disclose (see §3.5 of the Notice of Appeal).

THE PRESENT APPLICATION

12.  By the Summons, the Plaintiff seeks leave to adduce the following documents, copies of which are produced as Exhibit “GSC-1” to the Plaintiff’s 1^st Affirmation, as fresh evidence in support of his appeal:

(1)  the emails exchanged between the Plaintiff and the Defendant between 18 March and 15 April 2016;

(2)  a letter dated 24 April 2017 issued by the Defendant to ANA. A copy of the 2^nd POD was enclosed with that letter; and

(3)  an affirmation of the Plaintiff filed on 24 April 2017 in HCB 221/1996 (“the 2017 Affirmation”) together with two of its exhibits. One exhibit consists of the correspondence exchanged between the Defendant and HSBC from 13 October 1999 to 8 June 2000, and the other relates to a letter dated 12 April 2003 issued to the Defendant by the legal representatives of HSBC at that time.

13.  On 15 August 2024, the Defendant filed an affidavit of Richard Tang (“Mr Tang”), Chief Insolvency Officer, to resist the Plaintiff’s application.

14.  On 10 September 2024, the Plaintiff filed his second affirmation in reply to the affidavit of Mr Tang, repeating the importance of the proposed evidence in showing the concealment on the part of the Defendant.

DISCUSSION

15.  It is well established that generally speaking, the three conditions laid down in Ladd v Marshall [1954] 1 WLR 1489 must be satisfied before fresh evidence may be admitted in an appeal to the Court of Appeal:

(1)  The evidence could not have been obtained with reasonable diligence for use in the court below.

(2)  The evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive.

(3)  The evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible.

16.  In respect of the 1^st Ladd v Marshall condition, the Plaintiff accepts that it is difficult for him to argue that the proposed evidence could not have been obtained with reasonable diligence for use at the hearing below[1]. He says, however, that it has taken him “excessive time and efforts” to find out the relevant facts concealed from him by the Defendant. We do not accept this explanation. The proposed evidence has been in the Plaintiff’s possession for more than 6 years prior to the hearing below. As is evident from the ASoC and the 2017 Affirmation, it has always been the Plaintiff’s complaint that, in presenting the 1^st POD, HSBC had overstated its claim against the Estate without regard to the ceiling under the $20M Guarantee, and in accepting the 1^st POD without verifying the validity of HSBC’s claims, the Defendant was at fault in handling the proofs of debts filed in the 1996 Bankruptcy. The Plaintiff had legal assistance in the 1996 Bankruptcy and the proceedings below. He ought to have presented all evidence which he considered to be relevant to resist the Defendant’s strike out application. We are not convinced that the Plaintiff faced any real difficulty in producing the proposed evidence for use in the proceedings below. The 1^st Ladd v Marshall condition is not satisfied.

17.  The Plaintiff invites this Court to focus on the 2^nd Ladd v Marshall condition in the particular circumstances of his case. He argues that the proposed evidence would have an important impact on the result of his case, in that it shows the serious difficulty that he had in obtaining the relevant information and documents from the Defendant to enable him to bring his claims, and the concealment of important documents by the Defendant, which would justify an extension of the limitation period under Section 26[2].

18.  In our view, the Plaintiff’s argument has no merits. There was no dispute before the Judge that the Plaintiff’s claims were, prima facie, barred by limitation. In order to pursue his claims, the Plaintiff had to show that the relevant limitation periods should be postponed or extended under Sections 26 and 31 of the Ordinance. However, the Judge found that the Plaintiff’s ASoC did not contain the necessary pleas for invoking either Section 26 or Section 31. The proposed evidence now sought to be adduced by the Plaintiff cannot cure this defect in the Plaintiff’s pleading. It follows that the 2^nd Ladd v Marshall condition is not satisfied.

19.  Since the 1^st and 2^nd Ladd v Marshall conditions are both not satisfied in the present case, it is not necessary to consider the 3^rd Ladd v Marshall condition.

20.  Where the Ladd v Marshall conditions are not satisfied, the Court of Appeal still has a residual discretion to permit new evidence to be adduced in exceptional circumstances. The Plaintiff contends that the Court should exercise its residual discretion in his favour to permit the proposed evidence to be adduced due to the elements of “surprise” and “suspicion of deception” in the present case. In this regard, the Plaintiff argues that (i) this is a case of concealment on the part of the Defendant, and (ii) in the two affidavits of Mr Tang filed in the proceedings below, the Defendant failed to include the proposed evidence in the documents produced for the Judge’s full consideration, despite ample opportunities to do so[3].

21.  The Plaintiff’s assertion of surprise or suspicion of deception is a bare allegation. The burden of proving concealment on the part of the Defendant rests on the Plaintiff, not the Defendant. We see no good reason for the Court to exercise its residual discretion to admit the proposed new evidence in the present case.

22.  In all, the Plaintiff’s application for leave to adduce new evidence in support of his appeal is refused.

DISPOSITION

23.  The Summons is dismissed with costs to the Defendant, to be summarily assessed. The costs claimed by the Defendant in its statement of costs filed on 22 October 2024 come to the total of HK$96,190 (instead of HK$83,490[4]), inclusive of senior counsel’s fee only. We summarily assess the Defendant’s costs in the sum of HK$80,000.

24.  The above costs order, including the assessment of costs, is an order nisi, which shall become absolute unless an application is made to vary the same within 14 days from the date of this judgment. In the event that an application is made to vary the order nisi, the application shall be dealt with on paper. The Court will give directions (including the filing of submissions) for the further conduct of the application. No affidavit or submissions may be filed in support of the application without the Court’s leave.