YEUNG GA WAI v. LAU MING SHUM

HCA 798/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 798 OF 2004

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REASONS FOR DECISION

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The Application

1.  The defendant has taken out a summons for leave to adduce expert evidence of Professor Zhang Xianchu as an expert at trial pursuant to Order 38 rule 36 of the Rules of High Court.  The plaintiff opposes this application.

2.  This summons was mentioned at the Case Management Conference on 4 July 2012, about two weeks ago.  Since this is the only outstanding interlocutory application before trial, I ordered it to be heard before me today.  I had also given leave to the plaintiff to set down the matter for trial at the last Case Management Conference.

Practice Direction 5.2, paragraph 20

3.  To start with this application, it is clear that the application has not complied with paragraph 20 (1) of Practice Direction 5.2:

“20. Regarding expert evidence:

(1) the Court will not give permission for a party to adduce expert

evidence unless that party has:

(a) identified the expert by name and field;

(b) identified the issue to which the expert evidence will relate

(a mere reference to adducing expert evidence "limited to the issue of liability" or "limited to the issue of quantum" is not sufficient); and

(c) considered the appropriateness of appointing a single joint

expert in the case.”

4.  The summons has not set out the field on which expert evidence is required, the issue to which the expert evidence will relate or whether a single joint expert is appropriate.  Mr. Yim, Counsel for the defendant explains that although these were not stated in the summons, they were stated in the affirmation in support of this application.  In my view, those conditions should be clearly stated in the summons, or even in the parties’ correspondence before the application so as to save argument or misunderstanding.

5.  This application can be dealt with summarily under paragraph 20 of Practice Direction 5.2.  However, this technical disposal will undoubtedly lead to another similar application had I not dealt with it on the merits of the application, which I venture to do now.

6.  The Court calls for cooperation of the profession that they should observe the Practice Directions when they make applications thereunder.  Even if I granted the application, I would take this into consideration when I come to the question of costs.

The legal principles

7.  The relevant legal principles for admissibility of expert evidence can be seen from the judgment of the Hon. Madam Justice Chu in Wong Hoi Fung v American International Assurance Company (Bermuda) Limited & Shrila Chan HCA 4576/2001 at:

“The relevant principles

11. Modern judicial authorities recognize that the court has inherent power to rule on the admissibility of expert evidence at a pre­‑trial stage : Woodford and Ackroyd v. Burgess [2000] CP report 79, Ko Chi Keung v. Lee Ping Yan Andrew [2001] 2 HKC 63 and Annabell Kin Yee Lee & Others v. Lee Wing Kim (May Lee) & Anor (unreported), HCA9522/1997. Where the proposed expert evidence is plainly inadmissible or irrelevant, the court ought to exercise its discretion to refuse the admission of such evidence. But where the court cannot form a clear view on the relevance of the proposed expert evidence or where it considers that the proposed evidence is clearly relevant, then it should grant leave for the evidence to be adduced at the trial : Ko Chi Keung v. Lee Ping Yan Andrew (supra), at p.67 and Annabell Kin Yee Lee & Others v. Lee Wing Kim (May Lee) & Anor (supra), at p.15.

12. In deciding whether certain proposed expert evidence should be received, the relevant test has been stated to be a two‑stage one. Firstly, the evidence has to be admissible as “expert evidence” for the purpose of section 58 of the Evidence Ordinance, Cap.8. Secondly, the evidence must be relevant, in the sense that it is helpful to the court in arriving at its decision on one or more of the issues to be resolved : Barings plc (in Liquidation) & Anor v. Coopers and Lybrand & Ors, Lexis Transcript, 9 February 2001, Evans‑Lombe J at paras.44‑45.”

8.  Section 58 of the Evidence Ordinance provides:

(1) Subject to any rules, where a person is called as a witness in any civil proceedings, his opinion on any relevant matter on which he is qualified to give expert evidence shall be admissible in evidence. (Amended 65 of 1980 s. 6)

(2) Where a person is called as a witness in any civil proceedings a statement of opinion by him on any relevant matter on which he is not qualified to give expert evidence, if made as a way of conveying relevant facts personally perceived by him, is admissible as evidence of what he perceived.

(3) In this section, "relevant matter" (有關聯的事宜) includes an issue in the proceedings in question.

9.  Therefore it can be seen that the expert is only entitled to give his opinion on any relevant matter.  He is not entitled to give evidence on the fact of the matter.

10.  Whether the expert evidence as proposed is relevant to the issue in the proceedings in question determines this application.

The facts

11.  Relevant to this application, the facts of the matter are that the plaintiff claims against the defendant for return of his money for the sum of HK$1.8 million, which he had paid to the defendant for the purchase of 10% of the shareholding of a hotel operation in the Mainland pursuant to an oral agreement between him and the defendant.  The plaintiff said that the defendant was in breach of the oral agreement and he had not applied the money for the acquisition of the shareholding of the hotel operation and he did not have the shareholding of the hotel operation.  See paragraph 9 of the Re-Amended Statement of claim.

12.  The defendant admitted having received HK$1.8 million from the plaintiff, but the money was for the investment in the hotel operation.  See paragraph 7 of the Re-Re-Amended Defence and Counterclaim.  The defendant denied breach of the agreement and said that the plaintiff was not entitled to have the money to be returned to him.  See paragraphs 10A(a)(1) and (2) and paragraph 12 of the Re-Re-Amended Defence and Counterclaim.

13.  The defendant further said that the hotel operation was at a loss and had ceased business and had been sold for RMB9.6 million.  The shareholder’s fund was depleted and the proceeds of the disposal of assets were, according to the mainland’s insolvency law and practice, first used to retire the current liabilities and then shareholders or shareholders’ loan. See paragraphs 14A and 14B of the Re-Re-amended Defence and Counterclaim.

Discussion

14.  Mr. Yim, in his written submission, submits that the need for expert evidence arises from paragraph 14B of the Re-Re-Amended Defence and Counterclaim, which said that the proceeds of the disposal of the hotel operation were, according to the mainland’s insolvency law and practice, first used to retire the current liabilities and then shareholders or shareholders’ loans.  The defendant in his affirmation in support of this application said that the expert evidence was required to prove that the money received should be regarded as shareholders’ loan under the relevant PRC law and if it can be so regarded, to show the order of priority for distribution of the Company’s assets upon their eventual disposal.

15.  Mr. Yim submits that these two issues are not issues of fact, but issues of PRC law.

16.  He has called in aid of four cases:

a.  HKSAR v Tam Hung, CACV127/2010, 27 July 2011;

b.  HKSAR v Tam Hung FAMC 43/2011, 1 June 2012;

c.  Lammas Global Corp. v Barclays Bank & others  HCA2411/2009, 13 April 2011;

d.  Shenzhen Development Bank Co. Ltd v New Century International (Holdings) Ltd., HCA2976/2001, 31 July 2002

The first and second on the list dealt with the same issue of the necessity of expert evidence on legality of gambling in Myanmar in order to prove the guilt of the defendant in a criminal case.  This case has its special features in itself. It is a criminal case where the prosecution bears the burden to prove the criminal elements in an offence beyond reasonable doubt in order to establish the defendant’s guilt.  PW2 in that case had given evidence on gambling.  But his evidence was not satisfactory to the Court. The gambling activities were open to the public and the operators had to pay tax for the operation in Myanmar.  This is prima facie doubtful for an illegal activity.  The Court, under those circumstances, must be assisted by an expert on the law of Myanmar on gambling.  The facts of this matter are different.  Mr. Yim relies upon the third case on the proposition that if there is a difference between the parties on the foreign law, the court must resolve the difference if it can.  See para.16.  There is no dispute on this general proposition, which must be right.  However, the dispute between the parties is not on the foreign law, but the purpose on which the payment was made by the plaintiff. This case does not assist Mr. Yim’s argument.  The 4^th case illustrates that the court can rely upon expert evidence to consider judgments of the Mainland Court and the proper approach for so doing.  See paragraphs 25 & 26.  But it is not necessary to refer to any judgment of the Mainland Court for this matter.  I find that this case does not assist me for this application.

17.  Here, the parties dispute over the way the money was given to the defendant. The plaintiff alleged that it was given to the defendant for acquisition of the 10% shareholding of the hotel operation. But the defendant had, without consent of the plaintiff, converted the money for his own use and in fact, he did not have the shareholding of the hotel operation.  The defendant said that the money was given to him for the investment in the hotel operation as if it were a joint venture between the plaintiff and the other shareholders.  This is very much a matter of fact to be found by the court after hearing the evidence of the witnesses.  The evidence will probably shed light under what circumstances, in particular, on what terms or understanding was the money paid by the plaintiff to the defendant.  The expert simply has no part to play in the factual issues.

18.  This morning, this court has been assisted by Mr. Yim in relation to the corporate structure of the hotel business, which was a subsidiary of the management company (The Treasure Spot (Changsha) Hotel Management Company Limited).  Mr. Yim submits that the hotel operation was part of the business of the management company.  He submits that it is the defendant’s case that the money was invested in the hotel operation, not in the shareholding of the management company.  This will beg the question why it is necessary for the court to consider the law on liquidation since the plaintiff is claiming against the defendant, whom he relied upon to invest in the shareholding of the hotel operation. The priority of distribution of the assets of the management company, which the defendant says has been in liquidation though this fact has not been clearly pleaded in the pleadings, is only available to the management company, not to the defendant.

19.  The defence of the order of priority of distribution of the company’s asset upon liquidation is only available to the liquidator, who is in charge of liquidation of the company.  The defendant is not a liquidator of the hotel operation or the management company even if it were in liquidation.  As such, the issue of priority of distribution of the asset of a liquidated company in the mainland is not relevant for the trial.

Conclusion

20.  For those reasons above, I consider that the expert evidence as proposed by the defendant is not relevant for the issues for the trial.  This application has failed to pass the test in Wong Hoi Fung’s case and is dismissed.

21.  The costs for this application, including all costs reserved, be to the plaintiff, to be summarily assessed by way a schedule of costs to be filed and served within 3 days from the date hereof and the defendant be at liberty to oppose by way of a list of objections within 7 days thereafter.  The summary assessment shall be either on paper or to be heard on a date to be notified by this court and the time estimate is 30 minutes.

Order

22.  I shall now make an order in terms of the following:

a. The defendant’s summons be dismissed;

b. The costs of this application and costs reserved be assessed as per paragraph 21.