KWAN KWOK KI v. WONG TUNG HUNG AND OTHERS

HCA 1343/2014

[2023] HKCFI 150

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1343 OF 2014

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REASONS  FOR  DECISION

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Introduction

1.  Mr Gordon Lam (“Lam”) is a witness who the defendants (“Ds”) intend to call during the trial scheduled to take place in April 2024 (the “Trial”). By Summons of 14 June 2022 (the “Summons”), Ds seeks leave pursuant to Order 39 rule 1(1) to examine Lam within jurisdiction prior to the Trial. The principal basis of the application is the risk that, given Lam’s advanced age and the threat posed by the COVID-19 pandemic, Lam may not be able to attend the Trial and testify.

2.  This is the substantive hearing of the Summons. Mr John Yan SC leading Ms Shannon Leung appear for Ds. Mr CY Li SC leading Mr Avery Chan appear for the plaintiff (“P”).

3.  Having heard parties, I at the conclusion of the hearing allowed Ds’ application that Lam be examined before trial by one of the examiners of the court, but on the condition, along the line as provided by Order 38 rule 9(1)(b), that the depositions of Lam taken pursuant to my Order shall only be received in evidence at the Trial upon proof by Ds that Lam is dead or unable from sickness or other infirmity to attend the Trial. I am keen to give my Decision as soon as possible so that parties can obtain a date for Lam’s examination without further waiting. I also granted parties expedition in seeking dates. I informed parties that I will hand down my reasons, which I now do.

The background facts

4.  The claim arises from the sale and purchase of a building known as K.K. Centre at Nos. 46, 48, 50, 52 and 54 of Temple Street, Kowloon (the “Property”). The provisional sale and purchase agreement was dated 6 June 2012 (the “P S/P”). The consideration was HK$347,000,000. The P S/P was a tripartite agreement. The vendor was Katella Company Limited (“Katella”). Katella has been owned and controlled by Lam. The purchaser was Orient Key Limited (“Orient Key”) as P’s agent. Orient Key has been owned and controlled by P. The 3^rd defendant (“D3”) was the estate agent. It operated 2 other companies of which the 1^st and 2^nd defendant (“D1” and “D2” respectively) were each the Associate or Deputy Associate Director.

5.  P’s case is that he entered into the P S/P as a result of certain fraudulent or negligent misrepresentations (the “Misrepresentations”) made to him by D1 and D2. In particular, P says that a forged provisional sale and purchase agreement (not the P S/P) in relation to the price and potential competing purchasers of the Property had been shown to him. He says that the assessed market value of the Property as at the date of the P S/P was only HK$250,000,000. He claims against Ds the difference of HK$97,000,000.

6.  Ds deny having made the Misrepresentations. They also deny that the value of the Property as at the date of the P S/P was only HK$250,000,000 (the “No Misrepresentation Defence”).

7.  For the purpose of resolving the Summons, there is no need for this Court to go into details of the Misrepresentations. P’s pleaded position is that despite discovery of their falsity prior to completion of the sale, P had to proceed with the purchase as there was nothing to implicate Katella in relation to the Misrepresentations[1]. Lam’s evidence hence has little relevance in so far as the No Misrepresentation Defence is concerned.

8.  Lam’s evidence is however relevant to a further limb of Ds’ defence, which I will for ease of reference call the No Loss Defence. At §§48(a) to (c) of Ds’ Defence and Counterclaim, Ds plead that:

“(a) The value of the Property as at 6 June 2012 was around $350,000,000 as this was the price at which the owner of the Property had, from at least February 2012, indicated he was prepared to sell it.

(b) In any event, the minimum price at which the owner of the Property was prepared to sell the Property was $347,000,000.

(c) In the premises, [P] had not suffered any loss whether as alleged or at all.”

9.  For the purpose of the present proceedings, Lam has made a witness statement. It is dated 26 August 2015. His evidence goes primarily to the No Loss Defence, to the following effects:

(a)  In about February 2012, Lam increased the asking price of the Property to HK$350,000,000;

(b)  After the increase, there had been various offers to purchase at around HK$320,000,000, which Lam had rejected;

(c)  In around February or March 2012, Lam had dinner with inter alios P and his daughter. P at that time offered HK$250,000,000. Lam rejected the offer. He told him that he would not sell for less than HK$350,000,000. He also told him that if he (P) did not accept the offer within the following two months, the offer would lapse and the price would be substantially higher;

(d)  P did not respond within the following two months;

(e)  On 4 June 2012, Lam agreed to appoint D3 as the sole agency for the sale of the Property for one week with the asking price of HK$350,000,000 exclusively for D2’s clients. He told D2 that he (Lam) would raise the price to HK$400,000,000 or even more after a week if D2 could not conclude a deal within the week;

(f)  On 6 June 2012, another prospect made through D2 an offer of HK$340,000,000. Lam rejected the same, and said that he would only sell at HK$350,000,000;

(g)  After further negotiations, and upon D1’s and D2’s continuous persuasion, Lam finally accepted the offer price of HK$347,000,000 from P;

(h)  After execution of the P S/P, Lam found out that P was actually the purchaser. He says that had he known about that beforehand, he would have insisted on a price above HK$350,000,000, as he had previously told P that if P did not accept the offer at that price within 2 weeks, the price would even be higher;

(i)  On around 9 June 2012, D2 told Lam about P’s complaint against Ds. Lam told D2 that if the purchaser believed he had overpaid, he (Lam) would be happy to cancel the transaction and refund the initial deposit to P, as the Property was worth more than HK$347,000,000.

10.  Ds intend to call Lam as a witness during the Trial in support of the No Loss Defence.

11.  Lam was born in August 1945. By the time of the scheduled trial, he would be nearly 79 years of age.

The applicable law

12.  The general rule is that “any fact required to be proved at the trial of any action begun by writ by the evidence of witnesses shall be proved by the examination of the witnesses orally and in open court” – Order 38 rule 1.

13.  Order 39 rule 1(1) provides that:

“The Court may, in any cause or matter where it appears necessary for the purposes of justice, make an order … for the examination on oath before a judge, an officer or examiner of the Court or some other person, at any place, of any person.”

14.  Order 39 rule 1(1) confers upon the Court a discretion to depart from the general rule and order examination of a witness before the trial.

15.  Beyond the requirement of “necessary for the purposes of justice”, the rule does not set down any guidance or criteria that need be satisfied before such examination may be ordered.

16.  In Delco Participation B.V. v HWH Holdings Ltd [2021] HKCFI 249, Coleman J observed at §25 that that requirement identifies one requirement of necessity, tied to the purposes of justice, but not two separate ones of necessity and in the interests of justice. I respectfully agree.

17.  In considering that requirement of necessity and how the discretion under Order 39 rule 1(1) is to be exercised, the Court should naturally be guided by the underlying objectives, with the recognition that the primary aim in exercising the powers of the Court is to secure the just resolution of disputes in accordance with the substantive rights of the parties – see Order 1A rules 1 and 2, and if necessary also Eloise Mukami Kimathi & James Karanja Nyoro & Ors v Foreign and Commonweath Office [2015] EWHC 3116 (QB), per Stewart J at §21.

18.  When considering the facts of each case, the relevant issues in dispute should first be identified, so that the materiality (or lack of it) of the evidence of the witness sought to be examined may be considered[2]. Any prejudice which the opposing party may suffer should also be considered, in terms for examples of the costs and inconvenience of having a truncated trial, and the possibility of the applying party enjoying any advantage of having a rehearsal of the witness’ evidence so that any inadequacies may be discovered and patched up pre-trial.

19.  Mr Li refers and relies on the observations of Coleman J at §27 in Delco, that:

“If the evidence is such that a full-fledged examination (including cross-examination) is appropriate, such as where it concerns disputed versions of what an individual has said, that would weigh against the making of an order.”

20.  To the extent that that is a relevant consideration, I entirely agree. On the other hand, I do not believe Coleman J meant to suggest that pre-trial examination is only appropriate for evidence that is non-controversial in nature. How the discretion is to be exercised involves a balancing exercise. The fact that a full-fledged examination is appropriate might in fact be a reflection of the materiality of the evidence concerned, hence all the more reason for the applying party to have the evidence received pre-trial if there is any likelihood of the witness not being able to attend the trial. From the perspective of the applying party, understandably different from that of the opposing party, that would in fact weigh in favour of the making of an order.

21.  I do not accept that the discretion under Order 39 rule 1(1) is fettered to the extent that it should only be exercised in those cases when attendance by the witness during the trial is impossible:

(a)  Mr Li refers to the observation by Jessel MR in Warner v Mosses (1880) 16 Ch. D. 100 at 103 to the effect that there must be evidence that the witness cannot attend the trial. However, the learned Master of the Rolls’ observation has to be read in its full context, that:

“I do not intend to cut down the generality of its terms, but it is confined to cases in which it appears ‘necessary for the purposes of justice.’ Now it cannot be necessary for the purposes of justice to examine witnesses before the trial who can attend at the trial, and accordingly this rule of the Order has been used in the cases mentioned in Mr. Wilson’s book, where witnesses are going abroad, or who from age or illness or other infirmity are likely to be unable to attend the trial, and then they are examined de bene esse in the usual way; but to have such an order you must have evidence that the witness cannot attend the trial. I do not wish to confine the effect of this rule to the cases I have mentioned. It does extend, no doubt, as it says, to all cases where it shall appear ‘necessary for the purposes of justice.’ ”

(b)  Hence, Jessel MR did not ignore the generality of the power, and in fact observed that it is applicable to cases where witnesses who from age are likely to be unable to attend the trial;

(c)  I note also Practice Note (Chancery: Deposition) [1981] 1 WLR 1560. In that case, the witness involved was in his eighties. At 1560C-D, Sir Robert Megarry, V.C. observed that it was “entirely proper for the parties to take the precaution of obtaining an order for the examination of the witness in advance of the hearing”;

(d)  Mr Li has made reference to Barratt v Shaw & Ashton [2001] EWCA Civ 137 wherein Mance LJ observed at §13 (with emphasis added) that the “primary purpose [of CPR 34.8[3]] is and remains the taking of evidence on deposition and introducing it in that form at the trial from a witness whom it would be impossible to bring to court for trial.”[4] That observation was in fact made in an entirely different factual context. There, the application was made not because of any doubt or problem about the witness’ availability at the trial. It was because the witness was un-cooperative, and that the applicant wished to take the witness’ evidence on deposition in advance so as to know what he might say – and see also the observations of Stewart J in Eloise Mukami Kimathi at §22 where the learned Judge did not “place too much reliance on the terminology in paragraph 13 of the Barratt case”. In the course of the hearing, Mr Li made it clear that it is not P’s position that the Court’s discretion should be so fettered, though the threshold which the applying party will have to meet in order to depart from the general rule remains a high one[5].

Discussion

22.  For the following reasons, I allow Ds’ application to the extent I have indicated above:

(a)  The No Loss Defence has been pleaded and is in issue;

(b)  The No Loss Defence is factually disputed by P;

(c)  Lam is the most important witness in relation to the No Loss Defence. He is the only witness who can give direct evidence on the facts pleaded at §§48(a) to (b) of Ds’ Defence and Counterclaim;

(d)  The quantum involved is very substantial;

(e)  Mr Li submits that Lam’s evidence “is hotly contested and there is bound to be full fledged examination”[6];

(f)  I have discussed above the need to conduct a balancing exercise. The materiality of Lam’s evidence – hence why Mr Li says there is bound to be full-fledged examination – supports from Ds’ perspective the need to preserve the same;

(g)  By saying the above, I do not mean to ignore any prejudice which P says he may suffer as a result. Considerations relevant to that will separately be considered;

(h)  Lam is of advanced age. He will be almost 79 by the time of the scheduled trial;

(i)  Mr Li submits that that there is no evidence to suggest that Lam is not in good health, or is suffering from any short or long-term illness that may render him unable to attend the Trial. He submits further that the Omicron variant of the virus has shown a lower mortality rate;

(j)  However, given Lam’s age, the pandemic, the unpredictability of the same, and the quantum of the claim, I am persuaded that it is appropriate and proper for Ds to take the precaution of receiving Lam’s evidence pre-trial;

(k)  Mr Li, with reference to the time when the pandemic first started, criticizes the timing of the application. In my view, the criticism is unfair. The pandemic has been unprecedented, at least in modern history. It would have been impossible for Ds to plot ahead of time at the early stage of its development;

(l)  Mr Li submits that allowing the Summons would prejudice P in two ways. The first limb of prejudice, Mr Li submits, is that P would have no chance to further cross-examine Lam or to ask questions to clarify any matter in respect of his evidence with reference to matters that may arise from the oral testimony of P or other witnesses of Ds at trial;

(m)  In that regard, I accept Mr Yan’s submissions[7] that in the event that P does intend to adduce new testimony during the Trial upon which Lam has not already been cross-examined, P may still apply to do so if, by the time of the Trial, Lam is still alive and capable of attending the same;

(n)  Having heard parties, I have decided to go one step further and impose the condition, in line with Order 38 rule 9(1)(b), that the depositions of Mr Lam taken pursuant to my Order shall only be received in evidence at the Trial upon proof by Ds that Lam is dead or unable from sickness or other infirmity to attend the Trial;

(o)  The considerations immediately above are also relevant to the balancing exercise which I have mentioned above. From Ds’ perspective, Lam’s evidence is preserved as a matter of precaution. But the depositions will only be received at the Trial upon proof of Lam’s death or inability through sickness or other infirmity to attend. The pre-trial examination is also without prejudice to any further cross-examination which P may have during the Trial, so that the perceived prejudice against P can to a large extent be ameliorated;

(p)  The second limb of prejudice which Mr Li has complained about relates to the concern that granting the application would allow Ds to test the quality of Lam’s testimony, and may enable Ds to prepare further evidence to supplement or cure any defects exposed. Mr Li relies on Nam Ching Wan v Tsun Un Pawn Shop and others (HCA 2151/2008, 7 October 2014);

(q)  This limb of prejudice in my view verges on being speculative. There are also mechanisms within the trial process (objection to any production of further evidence, cross-examination, etc) which may be deployed to address the perceived prejudice;

(r)  I note Mr Li’s submissions that the provisions in Order 38 rule 9(1) are part of the built-in safeguards, and they should not be taken as having the effect by themselves of justifying any departure from the general rule;

(s)  I am not saying that they by themselves do. In my view, the overall facts of the present case considered in the round, together with the built-in safeguards, are sufficient to warrant my exercise of discretion in favour of the Summons. I note previous examples, Nam Ching Wan being one[8], of the Court, when ordering examination under Order 39 rule 1(1), directing at the same time that any deposition so taken will be admissible at trial without further proof. On the facts of this case, I am not prepared to so order, but will leave the safeguards under Order 38 rule 9(1) remain in place;

(t)  In so far as the cost-effectiveness of any pre-trial examination of Lam is concerned, I note the substantial size of the claim. Further, after the pre-trial examination, the length of the trial would, at least to a large extent, be cut down by the time that would otherwise be spent on the examination of Lam;

(u)  I note that this is an application for examination within jurisdiction. No letter of request is involved;

(v)  Bearing in mind the substantial size of the claim, I am also of the view that allowing the Summons to the extent explained above promotes a sense of reasonable proportion, and ensures fairness between the parties. Doing so also enhance the just resolution of the parties’ disputes in accordance with their substantive rights;

(w)  In all the circumstances, having balanced all factors, I am of the view that this is a case where it is necessary for the purposes of justice to order the pre-trial within jurisdiction examination of Lam in the ways as directed.

Disposition

23.  For the reasons set out above, I allow the Summons to the extent as set out above. Having heard parties, and noting that it is Ds who are seeking the Court’s indulgence, I ordered that the costs of the Summons be P’s costs in the cause of the Trial, with certificate for one counsel.