HINGONE INVESTMENT CO LTD v. LEUNG TUNG HOI AND ANOTHER

HCA 1119/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1119 OF 2011

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DECISION
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1. There are two summonses before the court taken out by the defendants: one summons is for an order that this action be heard sequentially before the same judge with HCA 1997/2011; the second summons is for the defendants to file further witness statements.

Delay

2. These two summonses were taken out after the PTR held on 1 September 2015. 

3. I was informed that there had been no indication at the PTR that these applications would be made.  Granting the two summonses will have the effect of postponing the milestone date which is an eight-day trial set down for hearing six weeks away. 

4. The defendants lay the blame of the delay on the late handing down of the decision in HCMP 2054/2012, and the recent reversal of that decision by the Court of Appeal with reasons yet to be handed down in June 2015.  I note, however, that HCMP 2054/2012, which is an application for leave for derivative action, is not the subject matter of any of the two summonses before me.

5. On the ground of delay alone, the two summonses should be dismissed.  I will, nevertheless, consider the merits of each summons.

The summons for sequential trial

6. Firstly, there are a number of procedural errors with this summons:

(a) This summons asks for sequential hearing of two actions, and yet the supporting affirmation of D1, Leung Tung-hoi, and the written submission of defence counsel, keep describing this as an application for consolidation.  The summons itself made no reference to consolidation and the proposed directions upon consolidation.

(b) There has been no similar summons issued in HCA 1997/2011.  I have been informed by Mr Cheung, counsel for the defendants, that an attempt has been made to file a similar summons in HCA 1997/2011, but that was rejected.  It was rightly rejected because that action had gone to sleep for two years since the filing of the reply in October 2013.  No notice of intention to proceed after a year’s delay has been filed in that action and, clearly, there has not been a lapse of one month if that notice has been filed. 

7. Since the application is not properly constituted, this court should not grant the relief sought in the summons. 

8. Secondly, the application under this summons is premature insofar as HCA 1997/2011 is concerned.  That case has only reached the stage of close of pleadings, and trial is far far beyond. 

9. As I have said, the present summons is not one for consolidation in the sense of, for example, filing a consolidated set of pleadings with one trial.  There is no reason why the present action cannot be tried first, and HCA 1997/2011 later.

10. Thirdly, it appears that the issues in the present case and HCA 1997/2011 are different. 

11. In the present case the plaintiff is seeking possession of property occupied by the defendants who were its former shareholders and directors.  The basis is that their licence to occupy has been revoked by notice.  The defence relies on collateral agreement and misrepresentation by one Michael Yap which caused the defendants to enter into that restructuring scheme and signed documents in blank.  Michael Yap and Win Talent subsequently wrongly filled in the blank documents which had the effect of transferring the shares in the plaintiff Hingone to them.

12. There is also an issue as to whether or not the consideration provided for the transfer (ie, $1) was bona fide consideration.

13. In HCA 1997/2011, a third party, Rich Concept, is claiming against one Lee Cheuk‑kwon for a director’s loan owed by Lee Cheuk‑kwon to a company, which loan has been assigned to Rich Concept.  It appears from the defence that the loan has been repaid. 

14. It is apparent that the parties, the subject matter and issues in both actions are different.  The fact that there may be common historical background, a dominant entity called Lai Yip and common witnesses, do not justify the order for consolidation or a sequential trial sought.

15. Fourthly, Ms Tsau has indicated in her latest set of submissions that the defendant’s concern of irreconcilable decisions if the two actions are not consolidated, can be solved by the parties’ undertaking to be bound by the court’s findings in respect of the common factual dispute.

16. Mr Cheung says he remains neutral.

17. But I see difficulties with this suggestion. One apparent difficulty is that the parties in HCA 1997/2011 are not before the court.  The second difficulty is that what the common issues are, are not even defined.

18. Fifthly, there cannot be savings in terms of expert evidence as suggested by the defendants.  It may be that forensic accountant expert evidence is required for HCA 1997/2011.  But in the present case, no directions for expert evidence has been given, even if the issue of whether there had been bona fide consideration for the transfer requires expert evidence.  That, at best, would be evidence on value of the property or the shares, not forensic accounting evidence.

19. Sixthly, the defendants’ reliance on the prior statement of Master Kwang in proceedings in HCA 1997/2011 is misconceived. 

20. In those proceedings, Master Kwang was dealing with an application to set aside the default judgment. Allegedly, the learned master stated that the costs-saving factor should be borne in mind when considering whether other pending proceedings ought to be dealt with separately.  That statement of the learned master was made in May 2013. The defendants only take follow-on action 2½ years after that statement.  It is too late.

21. Seventhly, D1 explains that he had received advice from a more senior junior counsel who conducted an appeal in a related case in CACV 54/2015 and that led to the present summons. 

22. Late advice from counsel is not a ground for granting the application, especially since I am told the same counsel who handled the appeal had also handled the hearing before Master Kwang.

23. This application has no merit.  

24. There can be alternatives, where the parties can think about adducing evidence of transcripts by the proper channel. It is not appropriate for the court to give directions in relation to HCA 1997/2011 which is not before it.

25. The summons is therefore dismissed. 

The summons for filing further witness statements

26. The defendants seek to file a second supplemental witness statement of D2, Lee Yuet-wah, and put in a new witness statement from her brother, Mr Lee Cheuk‑kwon.

27. In respect of the supplemental witness statement of Lee Yuet‑wah, she seeks to put in a new version that contradicts her previous averment that her brother had not made the representations:

“其實當時李卓群（譯音）並沒有如我之前的證人陳述書般向我作出如此仔細的陳述.”

28. She appears to put the blame on the solicitors who drafted her previous witness statement. 

29. In my view, it is no defence for her for laying the blame on her solicitors.  She signed a statement of truth for a different version in the previous witness statement.  It is no defence for lay clients to argue that the untruthful documents verified by them are legal documents drafted by specialist lawyers and therefore not understood by them to be true: Hong Kong Civil Procedure 2016, Vol 1, 41A-91.

30. The second witness statement is from a new witness, Lee Cheuk‑kwon.  This witness has all along been available because he was engaged in another litigation with D1.

31. In her supplemental witness statement mentioned in the preceding paragraph, it was upon legal advice that D2 realised the importance of having Lee Cheuk‑kwon as a witness.  She seeks now to adduce his witness statement.

32. D2 did not state when the legal advice was given.  If it was the late legal advice from that senior junior counsel, that is not a ground for putting in new evidence from a witness all along available at such a late stage.  In addition, at the PTR it has been confirmed by the defendants that they would not call this witness.  They should not be permitted to resile from that confirmation. 

33. This application lacks merit and I dismiss it. 

(Submissions re application for leave to appeal)

34. The application for leave to appeal is refused.  The reasons given by Mr Cheung for seeking leave to appeal merely asks the court to reconsider the exercise of discretion on the ground that all material evidence relevant to credibility should be put before the trial judge for the purpose of disposal of justice. 

35. Relevance of the contents of the witness statements are not in issue.  It was on the ground of the lateness and the lack of indication of this application, and the confirmation at the PTR that Lee Cheuk‑kwon will not be called as witness that I dismissed the application.  No error of law has been shown. 

(Discussion as to costs)

36. As I have indicated, the summons for a so-called consolidation or a sequential hearing was badly constituted.  It was late.  The two summonses were taken out after PTR.  The summons in relation to the filing of witness statement of Lee Cheuk‑kwon was even to resile from a prior confirmation to the court at the PTR that he will not be called as a witness. They are all the hallmarks of bad preparation for litigation. 

37. Costs should be to the plaintiff on an indemnity basis.

38. Costs statement of the plaintiff should come in by 4 pm.  Grounds in opposition by the defendant by 4 pm on Monday, 12 October.  Both summonses will be costs on an indemnity basis.