RE CHINA FISHERY GROUP LTD AND ANOTHER

CACV 515/2018

[2020] HKCA 169

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 515 OF 2018

(ON APPEAL FROM HCMP 134 of 2018)

_______________

_______________

_______________

D E C I S I O N

_______________

Hon Au JA (giving the decision of the court):

A.  INTRODUCTION

1.  This is an application by the Hongkong and Shanghai Banking Corporation Limited (“HSBC”) (the respondent) under Order 59, rule 10(2) of the Rules of the High Court[1] seeking leave to adduce and rely on the 2^nd affirmation of Adam Bramble Clark dated 29 July 2019 (“Clark (2)”) as further evidence for the purpose of the pending appeal (“the Appeal”) brought by the applicant (“the Trustee”).

2.  By way of the Appeal, the Trustee seeks to appeal against the order of Harris J dated 17 September 2018 (“the September 2018 Order”) made after the hearing on 11 September 2018 (“the September 2018 Hearing”).  Harris J (“the Judge”) handed down his reasons for decision (“the Reasoned Decision”) on 14 January 2019.

3.  This application is premised solely on the basis that the further evidence relates to events occurring after the September 2018 Hearing.

4.  Having considered the documents filed and lodged by the parties, we are of the view that the present application should be determined on paper without an oral hearing pursuant to Order 59, rule 2A(5) of the Rules of the High Court.  We now give our decision on the application.

B.  BACKGROUND

5.  To understand the parties’ contentions raised herein, it is necessary to set out the relevant background first.  This is not in any material dispute and can be summarized as follows[2].

6.  In 2015, under HCCW 367 & 368/2015 (“Winding Up Proceedings”), HSBC had applied for the appointment of joint provisional liquidators (“JPLs”) to China Fisheries Group Limited and China Fisheries International Limited (together, “the Companies”).  The Judge granted HSBC’s application in Hong Kong on an ex parte basis on 25 November 2015 and JPLs were also appointed in the Cayman Islands inter partes on 8 December 2015.

7.  After an inter partes hearing, by way of his order dated 5 January 2016, Deputy High Court Judge Kenneth Kwok discharged the JPLs.  He handed down his written reasons on 17 March 2016.  The written reasons were labelled “Not open to the public” and “No search, inspection or publication without the leave of the court” (“the Non-Disclosure Directions”).  For convenience, DHCJ Kwok’s order and the written reasons are referred to herein collectively as “the Kwok Decision”.

8.  HSBC filed an appeal against the Kwok Decision on 8 January 2016 (“HK Appeal”).  However, HSBC later withdrew the HK Appeal pursuant to a settlement agreement set forth in a Deed of Undertaking dated 20 January 2016, in which the Companies agreed, inter alia, to repay the amounts due under the Club Facility Agreement and the US$300 million 9.75% senior notes due 2019 issued by CFG Investment SAC in full by 20 July 2016.  This Deed of Undertaking was given the effect of a court order and constituted an undertaking, not just to HSBC, but also to the court.  In reliance on this Deed of Undertaking, HSBC agreed to withdraw all proceedings including the HK Appeal and HSBC agreed to support the discontinuance of the Cayman JPL’s appointment.

9.  On 30 June 2016, various debtor companies, including the Companies, filed voluntary petitions in the United States Bankruptcy Court Southern District of New York (“US Bankruptcy Court”) for relief under Chapter 11 of Title 11 of the United States Code.  The US Bankruptcy Court appointed the applicant as the trustee for CFG Peru Investments Ptd Ltd (Singapore) (“CFG Peru”) under the Chapter 11 proceedings.

10.  The Chapter 11 proceedings had the effect of preventing HSBC from taking any steps to enforce its rights contained in the Deed of Undertaking.

11.  On 30 August 2016, the Companies had tried to apply for leave by summons in the Winding Up Proceedings before the Judge to disclose and use the Kwok Decision in the proceedings before the US Bankruptcy Court.  However, they withdrew their application shortly before the substantive hearing.  On 23 May 2017, the Judge ordered the Companies to bear costs of the withdrawn application on an indemnity basis.  He also specifically directed that:

“the parties whether themselves or through their agents ... must not without order of [the Judge] or such other judge as he directs provide to any person any of the documents or copies thereof referred to in the Disclosure Summons”.

12.  Then, on June 2018, the Trustee applied by the Originating Summons dated 7 June 2018 in HCMP 134/2018 (“the O/S”) for leave to take a copy of and use the Kwok Decision.

13.  Prior to the substantive hearing of the O/S at first instance, the Trustee informed HSBC and the Judge that it had inadvertently discovered a copy of the Kwok Decision from the papers of the Companies.  By Order dated 6 June 2018 (“the Judge’s June 2018 Order”), the Judge reiterated his order of 23 May 2017 made in the Winding Up Proceedings mentioned above and prevented the disclosure of the Kwok Decision:

“The [Trustee] whether himself or through his agents ... must not without order of the Honourable Mr Justice Harris or such other judge as he directs, disclose or provide copies thereof to any person any of the documents or copies thereof [including the Kwok Decision], save where the documents have been lawfully obtained...”.

14.  Eventually, after the September 2018 Hearing, the Judge dismissed the application under the O/S by the September 2018 Order.  The Trustee lodged the Appeal on 12 October 2018.

C.   THE REASONS FOR MAKING THE SEPTEMBER 2018 ORDER AND THE APPEAL

15.  For the purpose of this application, it is not necessary for us to set out in detail the Judge’s reasons in making the September 2018 Order and the grounds of appeal raised by the Trustee.  Suffice for us to briefly mention them as follows.

16.  The Judge’s reasons for dismissing the O/S can be summarized thus:

(1)  At the time of entering into the Deed of Undertaking, the Companies had no intention of honouring it and appeared to have entered into it only to avoid a Winding Up Order being made in Hong Kong and to facilitate the appointment of the applicant as Trustee.  The Chapter 11 proceedings were commenced in order to prevent enforcement by HSBC of the Deed, which contained undertakings to the Companies Court in Hong Kong.  Such conduct by the Companies was unconscionable and an abuse.  See: [16] of the Reasoned Decision[3].

(2)  Given the special circumstances which had led to the discovery application before him, notwithstanding the open justice principles (which would have normally justified the Trustee’s application), the appropriate starting point in determining the Trustee’s application is to consider the status of the Trustee and the reasons why he seeks to lift the restriction to decide whether the court should assist him.  See [22] of the Reasoned Decision.

(3)  For that question, the court’s jurisdiction is based on the common law power to recognise and provide judicial assistance to foreign insolvency proceedings and persons appointed to conduct them.  After analysis of various authorities, the Judge concluded that in Hong Kong, the court should consider various factors (which he has set out in a non-exhaustive list of five factors) to determine whether it should exercise its jurisdiction to recognise and assist a foreign office holder.  See [3], [23] - [28] of the Reasoned Decision.

(4)  The Judge concluded that the Trustee could never have satisfied at least the criterion that the foreign jurisdiction in which the office holder has been appointed and the company have a relevant connection.  This is so as CFG Peru has no relevant connection with the US Bankruptcy Court or any other court in the United States.  See [29] - [30] of the Reasoned Decision.

(5)  Further and in any event, even if the Trustee had been able to satisfy all the criteria as listed, the court would have declined to provide assistance in the form of order sought in the application as to do so would be contrary to public policy.  This is so as the Chapter 11 proceedings and the appointment of the Trustee is the consequence of “what appears to be a conscious fraud on the part of the Ng family on HSBC and this Court”.  It is objectionable and an affront to the court for the Companies, having submitted to this jurisdiction by signing the Deed, to commence proceedings in another jurisdiction with a view of hindering enforcement of the Deed.  These public policy considerations well outweighed the more general public policy reasons that underpin the open justice principle, which might normally justify making the order that is sought by the Trustee.  See [32] - [34] of the Reasoned Decision.

17.  For the Appeal, broadly, the Trustee has raised the following grounds of appeal in the Amended Notice of Appeal (“the ANOA”):

(1)  After properly identifying the open justice principle, the Judge erred and wrongly adopted the starting point of considering the Trustee’s status and the reasons why he seeks to lift the restrictions.  He ought to have placed the burden on HSBC to rebut the presumption of open justice by clear and cogent reasons.  He also erred in holding that the public policy considerations outweighed the policy underpinning the open justice principle[4].

(2)  The Judge took into account irrelevant factors and failed to consider material factors.  For example, the Judge erred in considering that the Group or the Ng family might benefit from the Trustee’s application or the US Bankruptcy Proceedings but he failed to consider matters such as the Trustee’s mandate as a trustee and HSBC’s conduct[5].

18.  HSBC has also filed a Respondent’s Notice[6] in the Appeal, and seeks to affirm the Decision on these additional grounds:

(1)  The Trustee originally filed the leave application for use of the Kwok Decision for the purpose “to determine whether the debtors may have any claims against HSBC and investigate whether HSBC’s conducts might give rise to defense by the debtors”.  However, prior to the hearing of this leave application, the Trustee already filed a complaint against HSBC in New York alleging that HSBC “exceeded the confines of permissible conduct and the damage it caused”.  Thus, the basis of the Trustee’s leave application fell away and it should be dismissed.

(2)  The Trustee changed stance as to the purpose of the use of the Kwok Decision.  However, the Trustee failed to provide a basis for the new stance.

(3)  The new purported reason for the use of the Kwok Decision is without substance.

D.   THIS APPLICATION

D1.   The further evidence

19.  The material further evidence contained in Clark (2) relates to matters described at [20] - [24] below which HSBC says have occurred after the September 2018 Hearing.

20.  After the issuance of the O/S but before the September 2018 Hearing, on 29 June 2018 the Trustee filed claims against HSBC in the US Bankruptcy Court, inter alia, seeking damages allegedly suffered by CFG Peru as a result of the appointment of the JPLs.  See Clark (2), at [14].

21.  The Trustee’s claims against HSBC were then amended on 7 March 2019 (“the First Amended Complaint”) (ie, after the September 2018 Hearing and Order).  In the First Amended Complaint, the Trustee stated at paragraph 91:

“91. the Hong Kong Court found that the Hong Kong JPLs never should have been appointed over [the Companies] to begin with and that HSBC failed to present credible evidence justifying the appointment of the JPLs in the first place.” (Clark (2) at [15])[7]

22.  HSBC filed a motion to dismiss the First Amended Complaint (Clark (2) at [16]) in response to which the Trustee filed the Opposition opposing the Motion to Dismiss on 31 May 2019 (“the Opposition”) (Clark (2) at [17]). In that Opposition it was stated respectively at paragraphs 6 and 32:

“6. ... The Trustee has been able to glean the substance of the proceedings and the ruling from independent sources which suggest that the Hong Kong Court admonished HSBC, believing it was misled when appointing the JPLs by the selective record HSBC had presented. ...

32. ... On January 5, 2016, the Hong Kong Court found that the Hong Kong JPLs never should have been appointed in the first place and dismissed them.” (emphasis added)

23.  These Statements in the Opposition and the First Amended Complaint are referred to as the “Trustee’s Statements”.

24.  By solicitors’ correspondence, HSBC asked for the Trustee’s Statements to be retracted on the grounds that they are made in breach of the September 2018 Order, but the requests were all denied by the Trustees (Clark (2) at [19]).

25.  The material further evidence that HSBC now seeks to adduce in the Appeal is thus in gist this:

(1)  A statement at paragraph 91 of the First Amended Complaint made by the Trustee to the US Bankruptcy Court saying that the Hong Kong Court found that the provisional liquidator should never have been appointed and the HSBC failed to present credible evidence to justify the appointment (“Trustee’s Statement 1”).

(2)  The Trustee’s statement at paragraphs 6 and 32 of the Opposition, making reference to the findings of Hong Kong court that the provisional liquidator should not be appointed (respectively, “Trustee’s Statement 2” and “Trustee’s Statement 3”).

(3)  The Trustee’s refusal to cease making statements in relation to the Kwok Decision on 11 June 2019.

D2.   The relevant principles

26.  As submitted by Mr Manzoni (together with Ms Elizabeth Cheung) for HSBC, this application is premised solely on the basis that the further evidence relates to events occurring after the September 2018 Hearing.  In the premises, the applicable principles are those governing “evidence as to matter which have occurred after the date of the trial or hearing” under Order 59, rule 10(2) of the Rules of the High Court (but not the Ladd v Marshall conditions). These principles can be summarized as follows[8]:

(1)  The Court of Appeal has a wide discretion in relation to admitting such fresh evidence but it should always be exercised sparingly with due regard to the need for finality in litigation: Hughes v Singh, The Times, 21 April 1989.

(2)  It is impossible to produce an exhaustive list of considerations relevant to the exercise of that discretion, but the following factors will always be material:

(a)  the extent to which the fresh evidence may affect the award of damage; the greater the extent the more likely and ready the Court of Appeal should be to admit the evidence;

(b)  the time element; it is not necessary that the fresh evidence should emerge before the case would ordinarily reach the Court of Appeal, but the closer to the date of trial the more likely it is that the evidence will be admitted; and

(c)  the conduct of the parties: any inequitable conduct on the part of a litigant will plainly be relevant, and other conduct may also be relevant.

(3)  The evidence should be admitted in all cases where it would be an affront to one’s sense of fairness not to admit it.  In applying that test the court takes into account all the circumstances, before, during and after trial: Hughes v Singh.

(4)  The new evidence must substantially affect a basic assumption made at the trial: the matter is one of degree.

D3.   Discussion

27.  Mr Manzoni submits that the further evidence satisfies the above requirements to be admitted for the Appeal.  This is so as:

(1)  The evidence relates clearly to matters that have occurred after the September 2018 Hearing.

(2)  It affects the basic assumptions at the September 2018 Hearing that, for the purpose of the hearing of the Trustee’s application before the Judge:

(a)  it must be assumed that the Trustee recognised that he needed an order from the Judge permitting him to use and take a copy of the Kwok Decision.

(b)  It must also be assumed that the Trustee would abide by any ruling of the court and follow any decision pronounced by the Judge.

(3)  Further, if in the event that the Court of Appeal in the appeal accepts that the Judge is wrong (as contended by the Trustee) in his approach to the Trustee’s application for the use of the Kwok Decision, it would be required to exercise the discretion afresh to decide whether or not to allow the Trustee’s use of the Kwok Decision.  In that case, it would be an affront to fairness if the Court of Appeal was required to exercise its own discretion without knowledge of how the Trustee has behaved notwithstanding the September 2018 Order.

28.  For the Trustee, Mr Kwok (together with Mr Jun Lee) in opposing the application raises a number of contentions.  Relevantly, they are in summary these:

(1)  The further evidence in fact does not relate to matters occurring after the September 2018 Hearing.  This is so as (a) Trustee’s Statement 1 (ie, paragraph 91 of the First Amended Complaint) is identical to paragraph 76 of the Complaint (dated 29 June 2018); (b) Trustee’s Statement 2 (ie, paragraph 6 of the Opposition) is a statement of opinion drawn in substantially similar terms to multiple parts of the Complaint; and (c) Trustee’s Statement 3 (paragraph 32 of the Opposition) is nearly identical to language in also paragraph 76 of the Complaint.

(2)  HSBC is abusing the court process by litigating near-identical issues before this court and the Judge.  This is so as HSBC has taken out a summons (“the Injunction and Declaration Summons”) before the Judge seeking, among other things, a declaration that the Trustee is in breach of the Non-Disclosure Directions and the Judge’s June 2018 Order by reason of the making use of, and reliance on, the statements made in the First Amended Complaint and the Opposition.  The summons is yet to be heard by the Judge.  However, by seeking to adduce and rely on the further evidence in this present application, HSBC is effectively seeking to show and ask the court of appeal to determine the same issues raised by the HSBC under the summons.  This is an abuse of process.

(3)  The evidence does not demonstrate that the Trustee has been or is in breach of the September 2018 Order, and in any event, the determination of this issue is pending before the Judge.

29.  We agree with Mr Manzoni that the further evidence should be admitted.  We will explain why.

30.  First, we accept that the further evidence relates to matters that have occurred after the September 2018 Hearing.  Even if the subject references in the Trustee’s Statements are a repeat of what the Trustee had previously made in various paragraphs of the Complaint as submitted by Mr Kwok, they show that even after the September 2018 Order, the Trustee has actively continued or repeated the use or reference to the Kwok Decision by incorporating them again in the First Amended Complaint and the Opposition.  As submitted by Mr Manzoni, this relates to the Trustee’s relevant conduct and behaviour concerning the use of the Kwok Decision after the Judge has by way of the September 2018 Order refused the Trustee’s application for leave permitting him to do so.

31.  Second, we also agree that this evidence affects the basic assumptions at the September 2018 Hearing for the reasons as submitted by Mr Manzoni above.

32.  Third, the Trustee’s complaint that HSBC’s present application is an abuse of process is without merit.

33.  As rightly submitted by Mr Manzoni, where the Trustee’s own conduct, and the effect of the Trustee’s Statements, can give rise to various different consequences and relevant in different contexts, HSBC is entitled to seek redress, each in the appropriate venue.

34.  In any event, the premise of this application is that the Trustee’s Statements show that, notwithstanding and after the September 2018 Order, the Trustee has acted or behaved in such a way that is inconsistent with the effect of that order (ie, there is no leave granted to the Trustee to take copy and use the Kwok Decision).  The Injunction and Declaration Summons concerns HSBC’s complaints about the Trustee’s conduct and behaviour before the September 2018 Order.  For the purpose of the Appeal (which challenges the September 2018 Order), it must be legitimately open to HSBC (and thus not an abuse of process) for it to bring to the attention of this court relevant matters that have occurred after the September 2018 Order (subject to the applicable principles summarized above at [26]).

35.  Finally, for the same reason, Mr Kwok’s complaint that the issue of whether the Trustee is in breach of the September 2018 Order is an issue already before the Judge (under the Injunction and Declaration Summons) is not correct.  As to whether the Trustee’s Statements do establish that the Trustee is in breach of the September 2018 Order, this court does not need to determine this conclusively at this stage.  For the present purpose, to decide whether the evidence should be admitted, it is sufficient that it is arguable that it may do so (which we accept it may so do).  Whether, when it becomes necessary to resort to this at the Appeal, HSBC can at the hearing of the Appeal convince the court that this is the case by reference to this evidence is a question to be determined then.

E.   CONCLUSION

36.  For all the above reasons, we are satisfied Clark (2) should be admitted for the purpose of the Appeal being evidence as to matters which have occurred after the September 2018 Hearing.

37.  As the opposition to this application is entirely without merit, pursuant to the power under Order 59, rule 2A(8), we further order that no party may under rule 2A(7) request this determination to be reconsidered at an oral hearing inter partes.

38.  There is no reason why costs should not follow the events.  The Trustee therefore should pay HSBC the costs of this application, with certificate for two counsel[9].  In its statement of costs, HSBC has asked for a total sum of $442,170 ($275,470 for solicitors’ professional works and $166,700 as counsel’s fees).  Given the relatively simple nature of this application, we find this sum to be plainly too high.  We will summarily assess the costs to be $260,000[10].