L v. L

HCMC 1/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MATRIMONIAL CAUSES NO. 1 OF 2003

(Transferred from Family Court Matrimonial Cause No. 9860 of 2001)

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R U L I N G

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1.  This is a late application by the Petitioner for leave to issue a subpoena against a bank for a valuation report to be produced as evidence.  The application is made in the course of the closing submissions by leading counsel for the Respondent.  Mr Mostyn QC characterized the Petitioner as engaging in “one of the most unprincipled acts of forensic adventurism”.  The application came about in the following circumstances.

2.  One of the major assets that features in this application for ancillary relief is a development project at Lin He West Road in Guangzhou.  The project is under construction.  It was valued by the Single Joint Expert at RMB368,000,000 at its existing state and at RMB 1,680,000,000 on full completion, adopting 31 December 2004 as its valuation date.

3.  The Respondent obtained a bank loan to finance the project.  The loan documentation contained a condition precedent in the following terms,

“A valuation report of the Project issued not more than 90 days before the Loan Agreement Date by an independent and international recognized appraiser acceptable, and in form and substance satisfactory, to the Lender, certifying the value of the Project in its current and completion stage are at RMB 800 million and RMB 1,950 million respectively.”

4.  Copies of the draft loan documentation were supplied to the Petitioner’s lawyers on or about 15 February 2005.  The Petitioner was involved because the bank required her to sign a Deed of Subordination, the details of which I would not go into here.  There were some disputes between the parties about the terms of the loan and the Deed of Subordination was not signed until early April upon certain undertakings from the Respondent.  This only occurred after counsel had spent some time making submissions before the court.

5.  The condition precedent was relied on by Mr Kotewall SC in cross-examining the Respondent on 4 March 2005 about the valuation report referred therein.  The Respondent testified that the report had been prepared and he thought it was done by the same firm who had been instructed in this case as the Single Joint Expert.  That appeared to be contrary to the understanding of Mr Mostyn.  Counsel tried to clarify this in re-examination but without much success.  He made another attempt when Mr Kan gave evidence.  Mr Kan said the Respondent had confused the matter and the valuation report was obtained by the bank directly from the surveyor.

6.  The matter was left at that and neither side took up the point until closing submissions.  Mr Kotewall did not take further steps to seek any discovery of the bank’s valuation report.  He submitted that the Petitioner was waiting for disclosure by the Respondent.  When the Single Joint Expert gave evidence, no question was asked by Mr Kotewall about this RMB 800 million valuation.  When the forensic accountants testified, both accountants worked on the valuation by the Single Joint Expert.  Although Mr Robinson (expert for the Respondent) had some comments about that valuation, Mr Tam (expert for the Petitioner) accepted the valuation.

7.  In his written closing submissions, Mr Kotewall advanced a calculation based on the RMB800 million valuation and asked the court to accept this in preference to the valuation by the Single Joint Expert.  In effect, the court is invited to reject the evidence of the Single Joint Expert and adopt in its place a valuation the report for which neither the parties nor the court has the opportunity of seeing.  This led to the submission by Mr Mostyn that such move indicates a total desperation on the part of the Petitioner and those advising her.  

8.  Enquiries had been made by the solicitors for the Respondent with the bank’s solicitors.  The bank’s position is that it is unwilling to disclose the valuation report.  The Respondent therefore could not produce such report.  It also transpired that the Single Joint Expert was not the surveyor who did that valuation.  The Respondent was shown to be incorrect in that regard.

9.  In his submissions on 19 April 2005, Mr Mostyn emphasized the role of the Single Joint Expert and referred this court to Daniels v Walker [2000] 1 WLR 1382 and Peet v Mid-Kent Healthcare Trust [2002] 3 All ER 668 as to the proper steps to take when a party wishes to challenge the opinion of a Single Joint Expert.

“If there is disagreement on [the report of the Single Joint Expert], then there would be an issue as to whether to ask questions or whether to get your own expert’s report.  If questions do not resolve the matter and a party, or both parties, obtain their own expert’s reports, then that will result in a decision having to be reached as to what evidence should be called.  That decision should not be taken until there has been a meeting between the experts involved.  It may be that agreement could then be reached; it may be that agreement is reached as a result of asking the appropriate questions.  It is only as a last resort that you accept that it is necessary for oral evidence to be given by the experts before the court.  The expense of cross-examination of expert witnesses at the hearing, even in a substantial case, can be very expensive.” (per Lord Woolf MR, as he then was in Daniels v Walker)

“But the assumption should be that the single joint expert’s report is the evidence.  Any amplification or any cross-examination should be restricted as far as possible.  Equally, where parties agree that there should be a single joint expert, and a single joint expert produces a report, it is possible for the court still to permit a party to instruct his or her own expert and for that expert to be called at the hearing.  However, there must be good reason for that course to be adopted.  Normally, where the issue is of the sort that is covered by non-medical evidence … the court should be slow to allow a second expert to be instructed.” (per Lord Woolf LCJ in Peet v Mid-Kent Healthcare Trust)

10.  Mr Kotewall relied on Coopers Payen v Southampton Container Terminal [2004] 1 Ll Rep 331 and submitted that the evidence of the Single Joint Expert had to be assessed in the light of all other evidence before the court.  At para.41, Clarke LJ accepted the submission that Peet did not establish that the evidence of the single joint expert must be accepted by the court.  The court must take its own view of the expert evidence in the light of the other evidence.  The assessment of the weight to be attached to the evidence of the single joint expert must depend on the circumstances of each case.  In that case, Lightman J said at Para.67 (a passage highlighted by Mr Mostyn),

“Where a single expert gives evidence on an issue of fact on which no direct evidence is called, for example as to valuation, then subject to the need to evaluate his evidence in the light of his answers in cross-examination his evidence is likely to prove compelling, Only in exceptional circumstances may the Judge depart from it and then for a good reason which he must fully explain.  But if his evidence is on an issue of fact on which direct evidence is given, for example the speed at which a vehicle was traveling at a particular time, the situation is somewhat different.  If the evidence of a witness of fact on the issue is credible, the Judge may be faced with what, if they stood alone, may be the compelling evidence of two witnesses in favour of two opposing and conflicting conclusions.  There is no rule of law or practice in such a situation requiring the Judge to favour or accept the evidence of the expert or the evidence of a witness of fact.  The Judge must consider whether he can reconcile the evidence of the expert witness with that of the witness of fact.  If he cannot do so, he must consider whether there may be an explanation for the conflict of evidence or for a possible error by either witness, and in the light of all the circumstances make a considered choice which evidence to accept.  The circumstances may be such as to require the Judge to reach only one conclusion.”

11.  Mr Kotewall stressed that we are not dealing with a case where the Petitioner sought to call her own expert to challenge the opinion of the single joint expert.  The RMB 800 million valuation came from the loan documentation which was placed before the court by the Respondent for another purpose.  Mr Kotewall also emphasized that such valuation must be a reliable one as it was commissioned by the bank to support an arms-length commercial transaction.   

12.  Those are valid points.  However, it would not be right for this court to prefer that RMB 800 million valuation to the opinion of the Single Joint Expert (who has given evidence before the court and was subject to cross-examination by the parties) without even knowing the basis under which the RMB 800 million valuation was arrived at. 

13.  In a sense, the Respondent also invited this court to have regard to the valuation of another valuer when considering the evidence of the Single Joint Expert.  In Paragraph 186 of his Closing Submissions, Mr Mostyn referred to a valuation of Kanghe by a PRC valuer.

14.  I reckon the force of Mr Mostyn’s submissions in Para.80 of his Commentary on the Closing Submissions of the Petitioner.  Mr Kotewall took up the challenge and made the application to subpoena the bank.  The question is whether I should permit this to be done at this late stage.  In other words, it is undeniably a late application, but is it too late?  It is quite plain that if leave were granted, it would disrupt the schedule for the trial.  The evidence would be re-opened and further evidence might have to be led from the Single Joint Expert.  The trial would not be completed within the original schedule.  On the other hand, the difference between the two valuations is quite substantial and it might have a serious impact on the outcome.

15.  Implicit in the application for leave to issue subpoena is an application to re-open the evidence.  Unless leave is granted to the Petitioner to re-open the evidence, it would be futile to grant leave to issue subpoena.  Some guidance can be derived from the judgment of Neuberger J in Charlesworth v Relay RoadsLtd [2000] 1 WLR 230 at p. 238 B to H, albeit in a slightly different context,

“(1) the court has jurisdiction to grant an application to amend the pleadings to raise new points and/or to call fresh evidence and/or to hear fresh argument; (2) the court must clearly exercise its discretion in relation to such an application in a way best designed to achieve justice; (3) the general rules relating to amendment apply so that: (a) while it is no doubt desirable in general that litigants should be permitted to take any reasonably arguable point, it should by no means be assumed that the court will accede to an application merely because the other party can, in financial terms, be compensated in costs; (b) as with any other application for leave to amend, consideration must be given to anxieties and legitimate expectations of the other party, the efficient conduct of litigation, and the inconvenience caused to other litigants; (4) quite apart from, and over and above, those principles, because it is inherently contrary to the public interest and unfair on the other side that an unsuccessful party should be able to raise new points or call fresh evidence after a full and final judgment has been given against him, it would generally require an exceptional case before the court was prepared to accede to an application where the applicant could not satisfy the three requirements in Ladd v. Marshall; (5) almost inevitably, each case will have particular features which the court will think it right to take into account when deciding how to dispose of the application before it; (6) the court should be astute to discourage applications which involve parties seeking to put in late evidence, but cases where new evidence is found after judgment is given and before the order is drawn up will be comparatively rare.”

16.  That was a case where a party sought to re-open the case after judgment but before order is drawn up.  Hence, some considerations identified by His Lordship may not apply with equal force here.  But the overriding objective must be the same, viz. the discretion must be exercised in a way best designed to achieve justice.   

17.  In my judgment, bearing in mind the principles set out in Daniels v Walker and Peet v Kent Healthcare,it is not possible for this court to say at this stage that evidence on the RMB 800 million valuation should not be admitted to challenge the valuation by the Single Joint Expert.  There is no reason to believe that such valuation is not bona fide.  The difference from the opinion of the Single Joint Expert is too large to be discounted away as within the reasonable range of disagreement between experts.  I cannot say the Petitioner’s challenge is fanciful.  I have not heard submissions on whether an expert witness is compellable to give evidence but the question is at least arguable, see Harmony Shipping v Davies [1979] 3 All ER 177, contra. Hsin Chong Construction v Hong Kong & Kowloon Wharf, HCA 341 of 1982, 12 May 1986.

18.  Mr Kotewall reminded this court at this stage, the question is whether the application is an abuse of process by reference to Li Man York Evelyn v Li Wai Tat Walton [1997] 3 HKC 532.  That case concerns an application for leave to issue subpoena.  However, it is not clear from the report at what stage of the trial was the application made.  As I said, before I consider the leave to issue subpoena, I should consider whether leave should be granted to the Petitioner to re-open the evidence.  The relevant principles are those set out above.   

19.  The real objection to the application is its timing.  This was put in Paragraph 81 of Mr Mostyn’s Commentary on the Closing Submissions of the Petitioner.  Counsel suggested that if the application is allowed, it might give rise to the Respondent seeking to adduce his own expert evidence on the value of the property.  He said it would leave the court in “the worst of all possible worlds”.

20.  I must not lose sight that this is an ancillary relief application.  A guiding principle in this sort of proceedings is that the courts must do all in their power to bring these stressful proceedings to a conclusion at the earliest possible date, see Edwards v Edwards [2002] EWCA Civ 1802.

21.  On the other hand, the court plays a quasi-inquisitorial role in ancillary relief proceedings and a family judge is obliged to investigate into issues relevant to the outcome, see Thorpe LJ. In Para v Para [2003] 1 FLR 942 at 949 Para 22.

22.  Ultimately, it is a question of balance.  No doubt if leave is granted to the Petitioner to re-open the evidence at this late stage, it would cause some disruption to the trial.  But I cannot discern any prejudice that might suffer by the Respondent that could not be compensated by an appropriate costs order.  Mr Mostyn justifiably protested strongly against such belated attempt by the Petitioner to put a higher valuation on Lin He West Road.  Mr Kotewall’s explanation for not raising the point in the course of the expert’s evidence is, in my view, somewhat inadequate.  Although counsel had flagged the point in the course of cross-examining the Respondent, those representing the Petitioner should have done more to procure the production of the evidence relating to this RMB 800 million valuation prior to the close of evidence.

23.  However, one important factor to bear in mind is that in any event, it is the joint request of the parties that this court shall not deliver judgment prior to the completion of the special liquidation of Guangzhou Excellence and that would not happen until about June or July.  I have checked my diary and as far as this court is concerned, there are time slots in the latter part of June and early July that could be utilized to deal with the new evidence and submissions thereon.  Thus, with the co-operation of the parties, the disruption could be minimized. 

24.  As I said, this RMB 800 million valuation could have a significant impact on the outcome.  I also bear in mind Mr Kotewall’s submission that as it was a valuation done to support a commercial bank loan, the evidence is prima facie cogent, especially it is a bank loan to which the Respondent is a party.  The total loan amount is HK$550 million.  I do not think the application for leave to issue a subpoena could be castigated as an abuse of process.

25.  Although it is a late application, in the circumstances of the present case, after balancing the prejudice that might cause to the respective parties on the different options and having regard to the overall justice of the matter, I think leave should be granted to the Petitioner to re-open the evidence and to issue subpoena for the purpose of obtaining the evidence as to the RMB 800 million valuation.  I therefore rule accordingly.