RE CHOW KAM FAI DAVID

CACV 295/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 295 OF 2003

(ON APPEAL FROM HCB NO. 1364 OF 2003)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1. This was an appeal from a decision of Deputy High Court Judge To dated 23 September 2003. The matter before the judge was an application by the petitioner, Rambas Marketing Co., LLC ("Rambas"), that the respondent, Mr Chow, should attend the hearing of the bankruptcy petition to be cross-examined on his affidavit dated 17 March 2003 and on his supplemental affidavit dated 23 April 2003. There was a corresponding application, made informally, that should the court order cross-examination of the respondent, he should be permitted to be cross-examined using video conference facilities (VCF).

2. The judge made an order that the respondent should come to Hong Kong to attend the adjourned hearing of the bankruptcy petition and be cross-examined on all his affidavits sworn and filed in relation to the bankruptcy proceedings, failing which all his evidence contained in those affidavits should be excluded and not used as evidence in the bankruptcy proceedings. Implicit in that order was the dismissal of the application on behalf of the respondent that his cross-examination, if ordered, should be by VCF. At the conclusion of the hearing of this appeal, this court dismissed the appeal with costs, with reasons to be given in writing, which we now do.

The background

3. The respondent was born in Hong Kong in 1950. There is no dispute that he lived in Hong Kong until 1971 when he went to the United States. There is, likewise, no dispute that since 1981 he has lived in Macau, where he now has a wife and children. He has a Macanese residence card and he is also a legislator in Macau. The respondent claims to have extensive business interests in Macau. Part of those interests lie in the gaming and leisure industry.

4. In August 1995 the respondent went to Las Vegas. Whether or not that was connected with his interests in Macau matters not. It was said that he obtained a credit line from those operating The Desert Inn. It is said that in obtaining the credit line, the respondent presented his Hong Kong identity card and gave his address as a Hong Kong address. In connection with the credit line he signed 3 "markers" which enabled him to obtain US$5 million worth of gambling chips. A "marker" appears to be a form of cheque. It is marked "Negotiable check". Many of the details seem to be left blank, including in particular the name of the bank and details of the drawer's bank account. At the bottom of the document is a legend which indicates that the person signing gives the payee authority to complete the document in any manner he sees fit, in particular to insert details of the drawer's bank account, including any bank account he may have in the future. It is said that the respondent made a part payment of US$232,000 in April 1996. Eventually a claim was made by Rambas. For the purposes of these proceedings it is unnecessary to consider the route by which it is claimed that Rambas was entitled to the balance of the US$4,768,000. It suffices to say that an action was commenced in Hong Kong in November 2000 against the respondent.

5. The respondent, who was the defendant in that action, applied to stay the proceedings on the basis that Hong Kong was not the forum conveniens. That application was heard in April 2001 before Mr Recorder Ma, as he then was. The application was dismissed in a judgment handed down in May that year. In July of the same year the plaintiff's application for summary judgment came before Chung J. The respondent instructed his lawyers to apply for an adjournment pending an appeal from the May order. When an adjournment was refused counsel and solicitors for the respondent left the court and the judge proceeded to hear the application for summary judgment. Judgment was accordingly given in the sum of US$4,768,000. That judgment was not the subject of an appeal, although there was an appeal by Mr Chow in respect of the decision not to stay the proceedings. That appeal was dismissed on 12 March 2002. There was a further application for leave to appeal to the Court of Final Appeal but leave to appeal was refused both by the Court of Appeal and by the Court of Final Appeal.

6. In August 2001 an order was made that the respondent should attend court for examination under the provisions of Order 49B rule 1 of the Rules of the High Court. On 1 November 2001 a warrant for the arrest of the respondent was issued by the Registrar for the purpose of enforcing the order for examination. When enquiries were made in June 2002 as to whether the respondent would be available for examination in court as to his financial position, his solicitors replied that he had indicated that he would prefer to await the outcome of his application for leave to appeal to the Court of Final Appeal before submitting to the jurisdiction for the purposes of any examination order. As noted above, leave was referred but the examination has yet to take place.

7. The petition in the present bankruptcy proceedings was presented on 21 January 2003. The respondent filed a notice of intention to oppose the petition on 14 March 2003. That was supported by the respondent's first affidavit. Amongst other matters raised in the respondent's first affidavit, issue was taken with the allegation that the respondent was domiciled in Hong Kong. He said that he had left Hong Kong for the United States in 1971 and that he had re-emigrated to Macau in 1981, where he had been resident and had set up home there ever since. He stated quite categorically that his domicile of choice over the last 22 years had been Macau and he said that was "supported" by his "actions and deeds". A supplemental affidavit of the respondent was filed on 23 April 2003. On 29 May 2003, the petitioner gave notice to require the respondent to attend the hearing of the petition for cross-examination on his affidavit and supplemental affidavit pursuant to Order 38 rule 2(3) of the Rules of the High Court. On the following day, solicitors acting for the respondent wrote to the petitioner's solicitors:

"As you well know, our client is presently subject of a warrant for arrest in H.C. Action No. A 10190 of 2000 consequent upon his failure to attend the hearing on his proposed examination as a judgment debtor pursuant to the Order of Mr Registrar C. Chan of 4th October 2001. In the event our client attends for purposes of cross examination for determination of the factual issues you allege are now in dispute, there is a very real risk that he will be arrested, which, given his public appointments, would be extremely embarrassing for him. This, obviously, is something our client would prefer did not occur.

In electing as to whether the Court will exercise its discretion to admit our client's evidence for use at the hearing on the 7th and 8th July 2003, it is clear that the Court will need to be appraised of all circumstances of this case and its predecessor. To this end, we reserve the right to file further evidence in support of our client's application challenging jurisdiction, and in opposition and answer to the Notice for Cross-Examination of Deponent that has been filed.

Save as aforesaid, our client has every intention of assisting the Court in whatever way possible. To this end, we will also enquire of Macanese lawyers as to whether or not a video conference could be set up to facilitate the taking of evidence from our client in the special circumstances that exist in this action. Kindly let us know whether your client would consider such facility to be a sufficient means for making our client available for cross examination for determination of those factual issues your client is not prepared to accept as accurate. In the event that this is considered acceptable, we would propose that the hearing set for 7th and 8th July 2003 be transferred to the Technology Court.

Finally, please note that we reserve the right to recover the costs of the video conference from your client in due course."

8. The petitioner's solicitors' response on 3 June 2003 was that the proposed form of cross-examination by VCF was not acceptable and that, in the circumstances, in order to avoid further argument and to save time and costs of both parties, their then Senior Counsel would proceed at the hearing on 7 July 2003 on the basis of the evidence that had been filed by the parties to date. In mid-June 2003 the petitioner's solicitors wrote to the respondent's solicitors informing them that they had become aware that the respondent had recently donated HK$1 million to a charity in Hong Kong to combat SARS. However, it was not until 4 July 2003 that notice was given that Senior Counsel, whom we are informed was not the original Senior Counsel, would apply to cross-examine the respondent. It would appear from that letter that one of the reasons for the change in intention as to whether to cross-examine or not was that the respondent had made a second supplemental affidavit. This second supplemental affidavit has never been filed or used.

9. The July hearing of the petition was adjourned and the matter was eventually heard before the judge below. He identified 4 issues that he considered were raised on the matter before him. They were as follows:

"(1) Whether the court has power to order the Debtor to attend court for cross-examination under Order 38 rule 2;

(2) If yes, whether the court should order the Debtor to attend court from cross-examination;

(3) If yes, whether the court should accede to the Debtor's application for cross-examination via video link; and

(4) If no, whether the court should exclude the Debtor's affidavit at the hearing of the petition if the Debtor fails to attend."

The judge answered the first, second and fourth questions in the affirmative and the third question in the negative.

10. The judge dealt with the first question quite simply. He held that Order 38 rule 2(3) was applicable to the proceedings because Section 99(1) of the Bankruptcy Ordinance provided that the rules and practice of the High Court should apply to bankruptcy proceedings except in so far as they were in conflict with specific rules made under the Bankruptcy Ordinance. Whereas it is clear that affidavit evidence is permissible under the Bankruptcy Ordinance, it seems to me that it must follow that the Rules of the High Court must apply to any such affidavit. Since Order 38 rule 2(3) specifically provides that the Court may order the attendance for cross-examination of a person making an affidavit used in a petition, I see no grounds from suggesting that the court cannot make an order for the cross-examination of the respondent on the affidavits which have been filed by him.

11. The judge approached the question as to whether the court should make an order for cross-examination on the basis that an applicant was not entitled to cross-examine a deponent on his affidavit as of right. He said in paragraph 13 of the judgment:

"He has to establish that in all the circumstances of the case it is necessary for the disposal of the issue in dispute and in the interests of justice that a deponent's evidence by affidavit should be tested by cross-examination."

12. Two issues appear to be relevant when the court comes to deal with the opposition to the bankruptcy notice. The first is as to whether the respondent was domiciled in Hong Kong and the second is as to whether he had a place of residence in Hong Kong at any time in the period of three years ending with the day on which the petition had been presented. As the judge pointed out, the question of domicile is one which involves the determination of the subjective intention of the person involved. Determining that question is a difficult matter. If the court has to do it on the basis of affidavit evidence alone without the benefit of seeing that evidence tested by cross-examination, it places the court at a disadvantage in determining the facts. The judge went through various factors that might be relevant in considering the question of the respondent's domicile and whether he had changed his domicile of origin from Hong Kong and acquired a new domicile. The suggestion was made that in referring to those various factors the judge made any error. The judge came to the conclusion that there was sufficient to warrant cross-examination and he held that there was a need for the respondent to attend court for that purpose so that the truth of his affidavit evidence could be tested.

13. I do not see that the judge can be faulted in this conclusion. Whatever might be said of the strengths or weaknesses of the various points which are made both for and against the conclusion as to whether the respondent had acquired a domicile of choice, clearly there was material for cross-examination. Looking at it from the point of view of the petitioner, it appears to me that it would have been clearly wrong to have refused cross-examination. Given the fact that subjective intention is a highly important ingredient in the question as to whether a domicile of choice has been acquired, and in this case forms the major issue in this regard, if the petitioner were put in the position of having to accept the respondent's assertions made on affidavit without the possibility of cross-examination, it would be put at an unfair disadvantage, to say the least.

14. The judge also considered that the question as to whether the respondent had a place of residence in Hong Kong was a matter on which cross-examination was warranted. Given that it was stated in the annual return in respect of Firstgrade Industries Ltd that, as at November 2001, the respondent was a shareholder and had an address in Sai Kung and that the annual return of Amigo Travel (H. K.) Ltd, filed in the Companies Registry in April 2002, showed the defendant as being a director and having an address in the New Territories, again, it seems to me that the judge was justified in coming to the conclusion that the respondent should explain in person how it came about that he permitted these documents to be filed making those assertions.

15. In my view, the judge cannot be faulted in coming to the conclusion that this was an appropriate case in which to order the cross-examination. Once it is decided that there should be cross-examination on affidavit, if the person in question fails to attend for cross-examination then the usual order is that his affidavits cannot be used without leave of the court.

Whether the respondent should be permitted to use VCF?

16. The next question addressed by the judge was as to whether the cross-examination could be conducted whilst the respondent was in Macau using VCF. The judge approached this question on the basis that the giving of evidence by VCF was an exception rather than the rule and that it would be a matter of privilege accorded to the respondent and not a matter of right for him to be allowed to do so.

17. In my view the judge was quite correct in this approach. The starting point must be that proceedings are conducted in court. Mr Kat, who appeared on behalf of the respondent, took issue with the approach of the judge where it was said in paragraph 28 of the judgment that "On the other hand, witnesses are obliged by law, the solemnity of the court atmosphere and the threat of immediate sanction to give evidence on oath or under affirmation and to tell the truth."

18. Whether or not the threat of immediate sanction is something that weighs heavily on witnesses is, perhaps, a matter of conjecture. Nevertheless, I have no doubt that the atmosphere of a court is highly important as regards the taking of evidence. The solemnity of court proceedings and its atmosphere is something which, I have no doubt, plays an important role in the way justice is administered.

19. There is no doubt that VCF is a highly useful tool. It must be a question of judgment in each case as to whether VCF should be used for the taking of evidence. No doubt, on those occasions when the witness is giving evidence that is technical or purely factual, without important issues as to credibility, a court may be more disposed to allow evidence to be given by the use VCF. Questions of cost and convenience are no doubt also important considerations that the court will have to weigh in deciding whether to allow evidence to be given using VCF. But, first and foremost, it seems to me that the judge was correct in his approach that a party wishing to give evidence using VCF should establish a sound reason why that privilege should be accorded.

20. In this case, the first reason put forward on behalf of the respondent as justifying the use of VCF was that the respondent might be subject to arrest in Hong Kong for failure to observe the earlier order requiring his attendance for examination under Order 49B. The judge below clearly took a very severe view of the respondent's failure to attend in answer to the earlier order and of the respondent's use of the jeopardy into which he had put himself as a reason for the court to exercise its indulgence in permitting him to use VCF and not to come to Hong Kong. Whereas there was a certain amount of repetition in the judgment, that does not detract from the point that it was the respondent who raised his own self-inflicted jeopardy as a reason for not coming to Hong Kong and not the petitioner.

21. Mr Kat tried to argue on the basis that the petitioner was seeking an unfair advantage by using the opportunity to request cross-examination as a means of forcing the respondent to come to Hong Kong and thus being put in a position where he was likely to be arrested. The history of the case, as I have already outlined it, shows that the petitioner was, until a late stage, disposed to proceed on the basis of the affidavit evidence. In view of the importance of subjective intent and the difficulty that the court faces in disbelieving a witness on affidavit, that course appears to me to be one that was fraught with difficulties. In the circumstances, the request to cross-examine was not only understandable, but, probably, inevitable.

22. Mr Kat sought to derive assistance from the case of Polanski v CondéNast Publications Ltd [2004] 1 WLR 387. That was a case in which the Court of Appeal reversed the decision of the judge who had made an order permitting a plaintiff in a libel case to give evidence using VCF. The basis of the judge's decision had been that if the plaintiff in that case came to the United Kingdom he was liable to be arrested and extradited to the United States because he had pleaded guilty to a serious criminal charge in California but had fled from the United States before sentence was passed. Insofar as principles can be derived from that decision, as opposed to an illustration of how the discretion was exercised in a particular case, it seems to me that two matters emerge. The first is that the court accepted the submissions that VCF evidence was less than ideal. In so saying however it is clear that the court did not put that as the first or most important consideration in that case. The second point to note was that it was said the court should have regard to all the circumstances in deciding whether it was appropriate to make the VCF order specifically to enable a witness to evade the ordinary process of the law under which he might lose his liberty.

The honesty of the respondent

23. Mr Kat took exception to various passages in the judgment which he considered cast unwarranted aspersions on the integrity of the respondent. He submitted that it was unwarranted to refer to the respondent as a "fugitive from justice". That was an expression that Mr Justice Waung had reportedly used in respect of the respondent and which the judge adopted. It was submitted that there was no cause for the judge to say as he did in paragraph 39:

"His credibility and his subjective intention are central to the cross-examination. He had a history of wilful disobedience to the court's order. For two years, he has wilfully refused to be examined. If he is to give evidence via video link beyond the reach of the court, without the threat of immediate sanction and the solemnity of the court atmosphere, he may refuse to answer questions if the questions put to him are not to his liking. He may even switch the system off and put an end to the cross-examination at his will as he would be the master of his own studio."

24. In saying that, however, the judge clearly had in mind his own approach to the matter and in particular to what he had said in paragraph 28, namely that the solemnity of the court atmosphere was particularly important where questions of credibility were in issue.

25. Whether or not the respondent might have refused to answer questions put to him or have switched the system off is, of course, a matter of conjecture. Nevertheless, as the judge correctly pointed out, the respondent had demonstrated, very clearly, that he had no wish to be examined under Order 49B. Moreover, I agree with the judge that the solemnity of the court atmosphere may well be very important in this case. I might not use the epithet "fugitive from justice" in respect of the respondent. But clearly his avoidance of his contractual and legal obligations show the defendant in less than a favorable light. The respondent had not shown, in the past, that his word outside the court could be relied upon. He had obtained the credit line and signed the "markers" in 1995. In doing so he was undertaking to be responsible to repay the money he obtained as a result. The evidence filed in the High Court action, included evidence from a Vice President Customer Development of the petitioner's parent company that the respondent had lost US$4,903,000 on 13 August 1995 in the course of a little under 7 hours. He has been held liable under the "markers" and has not appealed the judgment. He has not paid what the Hong Kong court has said he owes. In short, he has not honoured his word to repay the money he borrowed.

26. Moreover, when the respondent applied to The Desert Inn to be granted the credit facility he used his Hong Kong Identity Card and gave a Hong Kong address. His explanation for doing so in his supplemental affidavit was that at the time he was using his "BDTC" passport. His explanation for the use of Hong Kong address in the annual returns of the two companies filed at the Companies Registry was that those documents were completed by others and that he was not consulted in respect thereof. It might be said that that showed a singularly casual approach on the part of a director of a company to the obligation to make the annual return. That casual approach was matched only by that of his elder sister who swore an affidavit to say that when she signed the annual return of Firstgrade Industries Ltd she "was not bothered about the addresses stated" in the return. His explanations for the use of the Hong Kong addresses can justifiably be used as a basis for questioning to test his honesty, quite apart from the relevance as to the other issues in the case.

27. In summary, therefore, I have no hesitation in saying that cross-examination of the respondent using VCF would be inappropriate in this case. This is quite apart from the fact that the decision of the judge in this respect was clearly an exercise of his discretion. Even if I were to have reached a different view as to how I would have exercised the discretion, I do not see that grounds for interfering with the exercise of the judge's discretion have been shown. This is all the more so in this instance since the matter is not only a question of the exercise of the judge's discretion but it is a case management decision. This court is very reluctant to interfere with case management decisions. If this court were interfere in this instance, that would be a direct meddling with the way in which the judge were to go about his primary task of deciding the issues of fact.

Whether the court should exclude the debtor's affidavits at the hearing of the petition of the debtor if he fails to attend?

28. The judge posed as the final question, the question as to whether the respondent's affidavits should be excluded at the hearing of the petition if the petitioner failed to attend. In my view this comes, probably, as part of the second question. I have no hesitation in saying that the judge, in any event, came to the correct conclusion. As explained in paragraph 24 of the judgment of Simon Brown LJ in the Polanski case, although it may seem a draconian result that an affidavit should be excluded, it would be highly undesirable that if the respondent refused to attend the cross-examination his affidavits could be used and read in court. Clearly, it must be appreciated that the making of the order for cross-examination and the refusal of the permission to use VCF for that purpose might ultimately result in the failure of the respondent's challenge to the petition. But, in the circumstances of this case, I do not see that that makes it unjust to make the order. The respondent has chosen to defy the judgment in the High Court action, in circumstances where there is no reason to doubt that he has the financial means to honour it. He has deliberately refused to comply with an order directed to enforcing that money claim. As a result he has put himself in a position where his assets may be taken from him for the purpose of distribution amongst his creditors. That is a course he has deliberately chosen.

29. Mr Kat suggested that the effect of precluding use of the respondent's affidavits would be to prevent the respondent from being heard. That is not correct. He can still be heard through his counsel. What he cannot do is to have the petition against him struck out on the basis of his untested allegations.

Hon Le Pichon JA:

30. I agree.