INCU GLOBAL LTD AND ANOTHER v. D' AGUILAR CAPITAL MANGEMENT LTD AND ANOTHER

HCA 853/2018

[2022] HKCFI 2633

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 853 OF 2018

________________________

________________________

____________________

REASONS FOR DECISION

____________________

I.   Introduction and Background

1.  There were two summonses before the Court, both pertaining to the admission of a draft affirmation of one Anthony Hogest D’Silva (“Mr D’Silva’s 4^th Affirmation”) on behalf of the 1^st and 2^nd plaintiffs (collectively, “Incu”) for the purposes of opposing a summary judgment application by the 1^st defendant (“D’Aguilar”) on its counterclaim dated 11 January 2022. The summary judgement application had been fixed for paper disposal by DHCJ H. Au-Yeung on 21 July 2022 (the “SJ Application”). The summonses were:

(1)  D’Aguilar’s summons dated 26 May 2022 to strike out Mr D’Silva’s 4^th Affirmation (the “Striking Out Summons”);

(2)  Incu’s summons dated 27 June 2022 (the “Leave Summons”) for leave to use and file Mr D’Silva’s 4^th Affirmation for the SJ Application.

2.  After hearing Mr Howard Wong, counsel for Incu, and Ms Carmen Ng of Deacons, solicitors for D’Aguilar, I dismissed the Striking Out Summons, allowed the Leave Summons and ordered that Incu’s costs of both summonses be in the cause of the SJ Application. I gave brief oral reasons and indicated that I would reduce them into writing in due course, which I now do.

3.  The factual and procedural background, insofar as relevant to the present summonses, was not seriously disputed. I therefore take the following background from Mr Wong’s skeleton argument with minor additions and modifications:

(1)  The 1^st plaintiff (“Incu Global”) is the representative of an investment fund known as Backbone Asia Fund SA (the “Fund”), and the 2^nd plaintiff (“Incu Capital”) is the investment manager of Incu Global. Incu in turn employed D’Aguilar and the 2^nd defendant (“Skybound”) as the Fund’s investment advisors.

(2)  It is Incu’s case that D’Aguilar and Skybound, as investment advisors, traded the Fund’s assets negligently (the “Negligence Claim”). Hence, in 2018, Incu commenced the present action against them claiming damages of some US$6.8 million.

(3)  D’Aguilar and Skybound denied Incu’s claims and counterclaimed against Incu for service fees said to be outstanding. In response, Incu pleaded, inter alia, a defence of set-off against D’Aguilar and Skybound’s counterclaims (the “Set-Off Defence”).

(4)  D’Aguilar then issued the SJ Application on its counterclaim. In its affirmation in support, D’Aguilar did not assert that the Negligence Claim was unarguable, but rather, its case was that whatever the merits of the Negligence Claim, the proper defendant was Skybound and not D’Aguilar. D’Aguilar did not carry out any trades for the Fund and therefore could not be liable under the Negligence Claim. Rather, all the trades were conducted by or on behalf of Skybound and the work that D’Aguilar did for the Fund was solely research in nature. That being the case, D’Aguilar contended that there was no merit to the Set-Off Defence as between Incu and D’Aguilar.

(5)  Incu filed evidence in opposition to the SJ Application and disputed D’Aguilar’s allegations. Incu maintained that D’Aguilar did carry out trades for the Fund and pointed out that D’Aguilar’s case was inconsistent with Skybound’s pleaded counterclaim, and thus summary judgment would be inappropriate.

(6)  In the meantime, Skybound sought to intervene in the SJ Application and adduce a draft (signed, but yet unsworn) affirmation of one Qi Shou (“Mr Shou’s Draft 1^st Affirmation”) on the basis that it disagreed with D’Aguilar’s position relating to the Set-Off Defence. The intervention application came before Master D To on 25 April 2022. The learned Master disallowed the intervention application but ordered that, inter alia:

“Leave be given to [Incu Global] to file and serve a further affirmation in opposition within 14 days limited to the Affirmation of Qi Shou as per draft annexed to the letter of the Solicitors for [Skybound] dated 20 April 2022.

No further affidavit to be filed and served without the leave of the Court.”

(“Master To’s Order”)

(7)  On 24 May 2022, pursuant to the Master To Order, Incu filed a 2^nd affidavit of Duncan Watt, a partner of Eversheds Sutherland, Incu’s solicitors, exhibiting a signed (but yet unsworn) draft of Mr D’Silva’s 4^th Affirmation, who was out of the jurisdiction at the time. Mr D’Silva’s 4^th Affirmation consisted of two elements: (a) referring to and exhibiting a copy of Mr Shou’s Draft 1^st Affirmation; and (b) a few additional paragraphs, said to be clarificatory of Incu’s position regarding the Set-Off Defence (this was disputed by Ms Ng, who contended that the paragraphs were not properly evidence but submissions) (the “Clarification Paragraphs”).

(8)  D’Aguilar did not file any evidence in reply to Mr D’Silva’s 4^th Affirmation but rather issued the Striking Out Summons to expunge the same.

4.  The initial ground of the Striking Out Summons relied upon by Ms Ng was that the plaintiffs did not have leave to file and serve Mr D’Silva’s 4^th Affirmation (nor Mr Watt’s 2^nd Affidavit exhibiting the same). She submitted that the affirmations were non-compliant with Master To’s Order, properly construed, and were therefore “inadmissible and susceptible to being struck out and/or expunged and removed from the court file”. Incu Global was required, Ms Ng submitted, to procure Mr Shou to make a duly affirmed affirmation and to file and serve the same on Incu Global’s behalf, which it failed to do.

5.  Mr Wong disagreed. He submitted that Mr Shou’s Draft 1^st Affirmation was produced on behalf of Skybound, of which Mr Shou was an officer. Incu had no control over Mr Shou or Skybound (a matter that was not seriously disputed by Ms Ng). Hence, Mr Wong submitted that the proper interpretation of Master To’s Order was that Incu Global had leave to file an affirmation exhibiting and thus formally bringing into evidence Mr Shou’s Draft 1^st Affirmation, which Incu Global did through Mr D’Silva’s 4^th Affirmation.

6.  Mr Wong further submitted that Incu Global was merely exhibiting Mr Shou’s draft 1^st Affirmation as hearsay evidence, being a document that had come into Incu’s possession through Skybound’s solicitors in these proceedings and that hearsay evidence was allowed for the purposes of the SJ Application.

7.  In her reply submissions, Ms Ng raised a more fundamental objection to Mr D’Silva’s draft 4^th Affirmation, namely, that (1) Mr Shou’s Draft 1^st Affirmation was defective in that was unsworn (and presumably, Incu Global was unable to give an undertaking that it will be sworn as soon as practicable); and (2) Mr D’Silva did not adopt the contents of Mr Shou’s Draft 1^st Affirmation as his own personal knowledge and belief. To the contrary, in paragraph 6 of his affirmation, Mr D’Silva expressly stated that Mr Shou’s Draft 1^st Affirmation “may not reflect the Plaintiffs’ position”.

II.    Discussion

8.  In my view, Master To’s Order is not entirely clear on its face whether it was to allow Incu Global to exhibit Mr Shou’s 1^st Draft Affirmation in an affirmation or whether it required Incu Global to file a fresh affirmation to be made by Mr Shou on their behalf. However, it is unlikely to have escaped the learned Master’s notice the undisputed fact that Mr Shou was an officer of Skybound rather than Incu, and there was no suggestion (and it is inherently unlikely) that Incu Global would have been able to procure Mr Shou to swear and file an affirmation on its behalf, given that they are on opposing sides of the action. For that reason, as a matter of common sense, I prefer Mr Wong’s interpretation of the order.

9.  Ms Ng invited me to consider certain verbal remarks made by the Master at the hearing on 25 April 2022 that although Skybound could not take part in the SJ Application as a party, “[Incu Global] could ask [Skybound] to make an affirmation in opposition for [Incu Global].” First, I do not consider it helpful to conduct a forensic analysis of oral remarks that may have fallen from the Master in the course of the hearing which did not form part of any formal reasons for his decision. In any event, even if the Master had taken the view now suggested by Ms Ng, such a view would have been somewhat unrealistic for the reasons I have already given above.

10.  In any event, in the light of the Leave Application before me, the precise construction of Master To’s Order was of limited importance as there was no dispute that I had the power to exercise my discretion afresh to allow the filing of Mr D’Silva’s Draft 4^th Affirmation, subject to the objections as to admissibility raised by Ms Ng.

11.  In support of her arguments on the inadmissibility of Mr Shou’s Draft 4^th Affirmation, Ms Ng placed heavy reliance upon the decision of To J in Cheng Eric Tak Kwong v Emagist Group Ltd & Ors (unreported) HCCW 306/2012, 16 May 2013.  Emagist concerned an application by the respondents to a winding up petition to strike out the petition. In opposition to the striking out application, the petitioner made an affirmation which, inter alia, referred and exhibited an earlier affirmation made by one Ryan Ip in a related but separate High Court action, in which Mr Ip was the petitioner’s co-defendant. The petitioner did not ask Mr Ip to make a new affirmation but indicated that he had obtained Mr Ip’s consent for the use of his affirmation for the winding up proceedings.  Counsel for the petitioner accepted that, “… the Petitioner was being lazy in not getting Ryan Ip to make another affirmation but that caused no prejudice to the Respondents” (para 13) but submitted that any irregularity would be “purely technical” and there would be no prejudice.

12.  Counsel for the respondents objected to the use of Mr Ip’s affirmation on the ground that the evidence adduced in one case was not admissible in another and that Mr Ip’s affirmation did not conform to the rules of evidence.  In introducing Mr Ip’s affirmation, the petitioner did not say he adopted what was said in the affirmation or that he agreed with the evidence of Mr Ip.  The petitioner did not in any event have the requisite knowledge to support the contents of Mr Ip’s affirmation.

13.  To J noted that the starting point was RHC Order 41 and observed:

“15. Affidavits to be used in a hearing have to comply with Order 41. Rule 1 sets out the form of affidavit and requires, among other things, that the cause or matter be stated and that the affidavit must be expressed in the first person. Rule 5 requires that an affidavit may contain only such facts as the deponent is able of his own knowledge to prove, though an affidavit sworn for the purpose of being used in interlocutory proceedings may contain statements of information or belief with the sources and grounds thereof. These rules are made for a purpose. The purpose is to enable interlocutory and summary proceedings may be disposed of efficiently by affidavit evidence without the need for time and expenses in calling live witnesses. For that end, affidavits must comply with the rules. This is because affidavits complying with the rules carry with them the appropriate and necessary safeguards. These safeguards include, among other things, that the affidavit shall be sufficient to state the matter or cause and the parties to which the affidavit relates, that the affidavit must be made on oath and may only contain such facts which the deponent is able of his own knowledge to prove. A deponent will face certain sanctions if he gave false evidence on oath. The requirements under Order 41 are the basis on which affidavit evidence is permitted to be used. They should not be lightly disregarded as being technical.”

14.  Pausing here, I respectfully agree with the learned Judge’s observations on the purpose of RHC Order 41 and the need for compliance with the same. However, the circumstances of that case were far removed from the present. As the Judge held at para 17:

“… there is no reason why Ryan Ip was not called upon to give another affirmation. The Petitioner has plenty of time since 22 October 2012, when he made his affirmation, to arrange for Ryan Ip to give another affirmation for the purpose of this proceeding. He has been alerted of [the Respondents’] objection. Adverse inference may be drawn for his failure to produce a proper affirmation. Laziness is not a good reason for departing from the rules, still less should the court condone the laziness of a party by admitting an irregular affirmation or admitting part of his affirmation which contains assertions of facts which he cannot speak to out of his own knowledge or belief. It is futile for counsel to argue that the assurance lies in the possibility that the Petitioner will fail if he cannot prove those facts at trial. If the Petitioner cannot prove those facts now by affidavit evidence, the case should go no further on the basis of the facts alleged in that affirmation. For these reasons, I disallow the use of Ryan Ip’s affirmation.” (emphasis added)

15.  First, there was no difficulty for the petitioner in Emagist to ask Mr Ip file an affirmation in the winding up proceedings, and indeed, Mr Ip consented to his affirmation being used. As the petitioner’s counsel accepted, the failure to have Mr Ip make and file an affirmation to support the petitioner’s case was due primarily, if not solely, to the petitioner’s “laziness”. In contrast, there is no suggestion (and as I have noted above, it is inherently unlikely) in the present case that Mr Shou would have been willing to make and file a new affirmation on behalf of Incu to resist the SJ Application. There is no question of any non-compliance with RHC Order 41 due to “laziness” on the part of Incu Global.

16.  Second, Emagist was concerned with an affirmation filed by a friendly party in another action, whereas Mr Shou’s Draft 1^st Affirmation was produced by Skybound in the same action and in relation to the same subject matter, namely, the SJ Application, albeit its attempt to intervene in the application was unsuccessful.

17.  Third and more fundamentally, Mr Shou’s Draft 1^st Affirmation was in my judgment plainly admissible as hearsay evidence under RHC Order 41 r.5(2). The rule provides that,

“An affidavit sworn for the purpose of being used in interlocutory proceedings may contain statements of information or belief with the sources and grounds thereof.”

18.  Ms Ng submitted that as Mr D’Souza declined to adopt the contents of Mr Shou’s Draft 1^st Affirmation as his own evidence or depose that such contents were a statement of his own information or belief, Mr Shou’s Draft 1^st Affirmation as exhibited to his Affirmation could not meet the requirements of rule 5(2).

19.  With respect to Ms Ng, her submissions miss the point. As Mr Wong submitted, the point that Incu was seeking to make in exhibiting Mr Shou’s Draft 1^st Affirmation was that D’Aguilar’s co-defendant, Skybound, had sought to adduce evidence inconsistent with D’Aguilar’s case, and this was a matter that the Court can and should take into account in determining whether there was a triable issue. There is no dispute that, although Mr Shou’s Draft 1^st Affirmation was unsworn, it was sent to the Court and the other parties to the action under cover of a letter from Skybound’s solicitors dated 20 April 2022.  Mr D’Aguilar’s evidence or statement of information and belief, therefore, was merely that Incu had received Mr Shou’s Draft 1^st Affirmation from Skybound’s solicitors which contained matters upon that Incu wished to refer and rely upon.

20.  As I raised with Ms Ng at the course of the hearing, I see no difference in principle between the present case and a case where Skybound’s position had simply been set out in a letter or some other document (not being in the form of an affirmation) that had come into Incu’s possession and which Incu wished to rely upon by exhibiting the same in its affirmation evidence. Incu does not, and need not, adopt the contents of such document as being the truth or its own version of events before it was entitled to exhibit it but is merely pointing out that the document represented Skybound’s position, the significance of which will be a matter for the judge hearing the SJ Application. Similarly, the fact that Mr Shou’s Draft 1^st Affirmation was unsworn (which was not a matter within Incu’s control) goes not to admissibility but merely to weight.

21.  For completeness, I should mention that I do not think my view here is inconsistent with To J’s observations in para 16 of Emagist, where he said:

“By referring to or relying on somebody else’s affidavit in another proceeding, without requiring that deponent to make an affidavit, the assurance or safeguard under the Order will be lost… He will not subject to any sanction for giving false evidence. On the other hand, the user could circumvent the restriction to depose only to facts which he is able of his own knowledge to prove. He will be subject to no sanction, if the deponent of the affidavit was not telling the truth.”

22.  The paragraph above must be read in the context of the circumstances before the Judge as I have described above. I do not understand Emagist to be authority for an absolute bar to referring or relying on someone else’s affidavit in another proceeding, particularly, where the affirmation is made by an opposing or at least unfriendly party. Each case must be considered on its own facts to see what is the purpose of referring to such an affirmation and whether there is any abuse or intention to circumvent the safeguards of RHC Order 41.

23.  As to striking out the Clarification Paragraphs, I did not understand Ms Ng to have pressed this point at the hearing. In my view, the paragraphs, whilst of questionable evidentiary value, were short and it would be disproportionate to strike them out. Rather, it will be a matter of weight, if any, for the judge hearing the SJ Application.

24.  For the reasons above, I made the orders summarised in paragraph 2 above, and gave consequential directions for the filing of reply evidence and the further conduct of the SJ Application.

25.  Last but not least, I thank the legal representatives of both parties for their assistance.