SUNRICH TRADERS LTD AND ANOTHER v. KUMAR VASWANI AND OTHERS

HCA 139 / 2022

[2024] HKCFI 3033

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 139 OF 2022

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BETWEEN

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DECISION

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1.  This is an appeal brought by Kumar Vaswani (“D1” [or “Kumar”]), New Success Asia Pacific Limited (“D2”) and KNV Limited (“D3”) (collectively, “the Defendants”) against the decision of Master MK Liu dated 30 May 2024 dismissing the Defendants’ summons dated 15 December 2023 for adducing expert evidence (“the Summons”).

Relevant background

2.  Sunrich Traders Limited (“P1”) and Finemaster International Traders Limited (“P2”) (collectively, “the Plaintiffs”) are companies used by the Gidwani family headed by Mr Jairam Gidwani to carry on a family trading business. Jairam’s son, Dinesh Gidwani (“Dino”), and D1 were close friends.

3.  D1 was the sole proprietor of 2 jewellery businesses he established in 1996 (KV Jewellery) and in 2006 (using the tradename “Italian Steel Company” (“ISC”)) respectively.

4.  D2 is owned by D1’s wife (“Reyna Vaswani[1]”). It is a special purpose vehicle used to hold 3 properties in Hong Kong.

5.  Since about 2008, the Gidwani family and D1 collaborated in their businesses and entered into a Business Arrangement comprising the “Italian Steel Agreement” and the “Goods Sales Agreement”. However, the parties differ as to the nature of the Business Arrangement. According to the Plaintiffs, ISC was conducting trading activities on its own account, financed by the Plaintiffs. According to the Defendants, ISC was a service provider and, in return, ISC would receive a service charge or commission.

6.  The Plaintiffs claim that as of 31 March 2016, the amounts advanced to the Defendants under the Italian Steel Agreement and the Goods Sales Agreement respectively were $5,802,236.97 and $1,349,782.08, the total outstanding thereunder being $7,152,019.05.

7.  The Plaintiffs rely on a deed of guarantee and indemnity (“the Guarantee”) dated 31 March 2016 made between D2 as “Guarantor”, D1 and ISC as “Principal Debtor” and P1 as “Lender”. D2 executed the Guarantee, thereby guaranteeing the debts owed by D1 to the Plaintiffs and, accordingly, is liable to the Plaintiffs for those debts.

8.  The Defendants’ case is that the Guarantee is a forgery and D2 never executed it.

Procedural history

9.  Following a demand letter (which enclosed a copy of the Guarantee) from the Plaintiffs’ solicitors sent to D2 on 24 September 2021 demanding D2 to pay all sums owed to the Plaintiffs by D1 pursuant to the Guarantee and D2’s subsequent refusal to do so, on 31 January 2022, the Plaintiffs commenced this action against the Defendants.

10.  On 1 March 2022, the Defendants filed a Notice disputing the authenticity of the Guarantee.

11.  On 18 January 2023, the Defendants conducted a physical inspection of the two originals of the Guarantee.

12.  On 15 December 2023, the Defendants filed the Summons, seeking leave to adduce expert evidence in respect of the List of Issues (“the List”) set out in the Schedule to the Summons. The List raises 6 issues or questions in relation to the Guarantee:

(1) whether the font styles used in the Guarantee were in existence on 31 March 2016;

(2) whether the font style used in the execution page is the same as that used for the body of the same document;

(3) whether the type of paper used in the execution page is the same as that used for the body of the same document;

(4) whether the same printer was used to print all the pages of the two originals of the Guarantee;

(5) whether the same type of printing method was used for the execution page and for the body of the same document; and

(6) whether the lay down is the same on each page of Guarantee.

13.  On the same day, the Defendants also filed their timetabling questionnaire, indicating that they do not intend to amend their pleadings

14.  The Plaintiffs filed their timetabling questionnaire on 12 January 2024 indicating an intention to adduce handwriting expert evidence after the exchange of witness statements.

15.  On 29 December 2023, the Court directed the Defendants to explain by letter at least 3 days prior to the hearing of the Summons before Master A Ho on 17 January 2024 how the expert issues framed by the Defendants are related to the Defendants’ pleaded case.

16.  At the hearing, the Summons was adjourned for the Defendants to amend the same, issue a fresh Summons and/or amend pleadings.

17.  On 25 March 2024, the Defendants filed their Re-Amended Defence, adding the following subparagraphs (which concern issues 2 and 3 of the List) to §9 of the Amended Defence:

“9.5 the typographical font used in the body of the purported Guarantee and Indemnity is substantially different from the typographical font used in the undated execution page of the same document …”

“9.6 … in respect of one or both of the two originals, a different type of paper was used for the undated execution page of the purported Guarantee and Indemnity than the type of paper used for the body of the same document…”

18.  The Plaintiffs’ filed their Re-Amended Reply on 2 May 2024, admitting to matters raised in issues 2 and 3 of the List.

19.  That leaves issues 1, 4, 5 and 6. For convenience, issue 1 will hereafter be referred to as “the font issue” and issues 4-6, “the printer issue”, (collectively “the font and printer issues”).

20.  On 30 May 2024, Master MK Liu dismissed the Summons.

21.  The Defendants filed their notice of appeal on 13 June 2024.

Legal principles

22.  The applicable principles stem from the Court of Appeal’s judgment in Shenzhen Futaihong Precision Industry Co Limited & Os v BYD Co Ltd & Ors [2019] 2 HKC 175 (“the Shenzhen case”) which set out the substantive conditions for the admissibility of expert evidence identified in the Final Report on Civil Justice Reform (§596), namely,

(a) The subject matter of the opinion must fall within an area in which expert evidence may properly be given (“subject matter condition”);

(b) The witness must be qualified as an expert to give the evidence of the type in question (“expertise condition”);

(c) His evidence must be relevant to the issues being litigated (“relevance condition”);

(collectively, “substantive conditions”).

23.  The Court of Appeal (“CA”) noted that post-CJR, courts could take account of the probative value of an expert report in exercising case management powers and the giving of expert directions is very much a matter of case management. Further, its use is subject to procedural requirements[2].

24.  Subsequent CA cases such as Taching Petroleum Company, Limited v Meyer Aluminium Limited [2020] HKC 1005 at §13 and The Incorporated Owners of Hung Wai Building v Sunny Elegant Limited & Ors [2023] HKCA 930 §§19-20 have endorsed that approach[3].

25.  In particular, in the Taching case, Lam VP (as he then was) considered the approach adopted by Au Yeung J below, sitting as the Deputy President of the Competition Tribunal. He observed (at §13) that it was based on the pre-CJR authority of Wong Hoi Fung v American International Assurance Co (Bermuda) Limited & Another [2002] 3 HKLRD 507 which was more relaxed towards admission of expert evidence compared with the CA’s more stringent approach in the Shenzhen case at §§12, 40 and 51. It is abundantly clear from §12 of the Shenzhen case that

“the court will not give directions for expert evidence to be used (carrying with it the incidence of substantial costs being incurred on its preparation and court time spent on the same) simply on the basis that the court cannot rule out a possibility of such evidence being relevant and helpful in the sense discussed above. If the applicant for expert directions fails to persuade the court on relevance and necessity of such evidence, the application should be dismissed.”

26.  Further, as regards the relevance condition, evidence meeting the subject matter condition may still be excluded if the Court considers that calling it will not be helpful to the Court in resolving any issue in the case justly; and expert evidence will not be helpful where the issue to be decided is one which the Court is able to come to a fully informed decision without the expert evidence: the Shenzhen case at §6 and the Hung Wai Building case at §20.

Application of the substantive conditions

(A) The subject matter condition

27.  In the Shenzhen case (at §5), the CA cited a judgment of King CJ in R v Bonyton (1984) 38 SASR 45 that explained the subject matter condition in, inter alia, the following terms:

“… (b) whether the subject matter of the opinion forms part of a body of knowledge or experience which is sufficiently organized or recognised to be accepted as a reliable body of knowledge or experience, a special acquaintance with which by the witness would render his opinion of assistance to the court[4].”

28.  In the present case, the Defendants have not filed any evidence nor exhibited any intended expert report to explain the nature of the font and printer issues. Where the area in which expert evidence is sought to be adduced is unconventional or more controversial, it is incumbent on the party seeking expert directions to persuade the court that expert evidence is helpful and appropriate[5].

29.  Mr José D’Almada Remedios, counsel for the Defendants, submitted that expert evidence on the font and printer issues the Defendants are seeking “is a type of forensic analysis, a field of expertise to which an expert in forensic document examination can provide evidence over”. The discipline it falls within is that of forensic document examination.

30.  Mr Remedios submitted that the font and printer analysis the Defendants are seeking is fundamentally a similar exercise to an ink-and-handwriting analysis save and except for the fact that the manner in which the words are affixed to the document in question is done by mechanical means as opposed to, by analogue, human means.

31.  While superficially attractive, I do not consider that a particular font used can be equated with handwriting. The particular font chosen is fixed and uniform and, unlike handwriting, is not susceptible to variations or differences that can occur.

32.  Typically, forensic document examination relates to handwriting, the ink and paper used et cetera. It is unclear, to say the least, in what respects font and printer issues fall within that discipline in the absence of any evidence explaining what they involve.

33.  The font issue was first raised in the letter from the Defendants’ solicitors dated 21 October 2022, referring to the Defendants having “acquired preliminary evidence” that the fonts used in the Guarantee had not been created and did not exist as at the date when the Guarantee was signed.

34.  On 18 November 2022, the Plaintiffs’ solicitors invited the Defendants’ solicitors to explain

“1. what this “preliminary evidence” constitutes;

2. what you mean by “acquired”;

3. which font(s) you claim were used in the Guarantee …: and

4. the date(s) on which these alleged font(s) were created.”

35.  The Defendants’ further correspondence did not address those matters. It would be surprising if the Defendants’ letter was written in the absence of some form of preliminary advice or draft report.

36.  Be that as it may, Mr Lau Ka Kin, counsel for the Plaintiffs, submitted that to satisfy the subject matter condition, the Defendants must show that the font and printer issues either (i) satisfy the test explained in Bonyton; or (ii) are “a recognised expertise governed by recognised standards and rules of conduct”[6]; or (iii) “must be in a recognised discipline”[7].

37.  It was submitted that without “any solid evidence basis”, bare submissions cannot form a proper ground for blanket directions to be given for such expert evidence to be adduced[8].

38.  There is no draft intended report from the expert and no evidence to explain the relevant discipline engaged. Mr Remedios’ further submission that the need for expert evidence is heightened by the Plaintiffs’ confirmation that they are unable to locate the meta data regarding the creation of the Guarantee do not take matters further in the absence of evidence to explain the relevance of meta data in that context.

39.  In short, to assert, without more, that it falls within the discipline of forensic document examination is not sufficient. In the circumstances, I am not persuaded that the expert evidence the Defendants seek satisfies the subject matter condition.

(B) The expertise condition

40.  Where the Court is satisfied that the subject matter condition is not satisfied, it is unnecessary to consider the expertise condition: see Lei Shing Hong at §55.

(C) The relevance condition

41.  §22 of the ASOC pleads that D1 and Mrs Vaswani as directors executed the Guarantee for and on behalf of D2 on 31 March 2016.

42.  The Defendants plead in §§9 and 19 of the Re-Amended Defence that the Guarantee “was never executed by any of the Defendants”. They allege that the Guarantee is a forgery and plead particulars of forgery in §§9.1 to 9.6 which are summarized below:

9.1 - 9.3: D1 and Mrs Reyna Vaswani deny signing the Guarantee, and D2 denies affixing its company chop on the Guarantee;

9.4: This concerns Mrs Vaswani’s legal name at the time of the signing of the Guarantee;

9.5 - 9.6: They concern the new pleas[9] that different fonts and types of paper were used in the execution page of the Guarantee.

43.  There are established legal principles for pleading forgery. As stated in HKCP 2024 at §18/12/18:

“An allegation of fraud must be pleaded distinctly and with the utmost particularity[10], and it is not allowable to leave fraud to be inferred from the facts[11].”

44.  Thus, “the Court always requires allegations of fraud and/or forgery to be properly asserted with clear and proper particulars[12]”, and “the Court will not infer dishonesty from facts which have not been pleaded, or from facts which have been pleaded that are consistent with innocence[13]”.

45.  The Court’s pre-hearing directions given to the Defendants on 29 December 2023[14] were no doubt prompted by those principles. At that stage (which was before the Defendants made their amendments to the Amended Defence in March 2024), the Defendants’ case was simply that they did not execute the Guarantee. That is evident from the summary of the particulars of forgery given in §§9.1 - 9.4 and set out in §42 above.

46.  The features of forgery relied on are the new pleas contained in §§9.5 - 9.6 set out in §17 above.

47.  In response to §9.5, the Plaintiffs admit that the signature page of the Guarantee bears a different font to that of the rest of the Guarantee[15].

48.  As to §9.6, the Plaintiffs removed any ambiguity arising from §7.3 of the Re-Amended Reply by admitting in their solicitors’ letter of 20 May 2024 to the use of a different type of paper for the signature page of the Guarantee.

49.  There are no other particulars of forgery arising from the Defendants’ pleading. The only issue left is whether they executed the Guarantee.

50.  The test for granting leave to admit expert evidence is whether such evidence is relevant to the issues in dispute as disclosed on the pleadings. In certain cases, a party who bears the burden of persuading the Court that expert evidence is helpful and appropriate, an intended expert report that explains the nature of such evidence (particularly where it concerns an unconventional area), and demonstrates its necessity could be useful[16]

51.  The font issue is “whether the font styles used in the two originals and a copy of the Guarantee were in existence on or about 31 March 2016”.

52.  A copy of the Guarantee was provided to the Defendants on 24 September 2021[17], several months prior to the commencement of these proceedings in January 2022.

53.  The Defendants did not plead any issue with font styles, let alone non-existence of font styles.

54.  It cannot be gainsaid that the Defendants did not have any opportunity to do so given (a) the Court’s pre-hearing directions of 29 December 2023; (b) the Defendants’ re-amendments made in March 2024; and (c) the hearing before Master MK Liu on 30 May 2024.

55.  The Defendants submitted that because the defence of forgery necessarily impinges on the authenticity of the Guarantee, the relevance condition is satisfied. If so, one might ask, rhetorically, why the new pleas concerning use of different font types and different types of paper are considered “irregularities”[18] that require new pleas but that the non-existence of the font types of 31 March 2016 does not.

56.  The Defendants further submitted that they never had an opportunity or the ability to conduct any forensic analysis so as to be able to plead particulars of the font issue.

57.  Where the original document exists which is the possession of a plaintiff, the only opportunity to conduct a forensic analysis is following the giving of expert directions. But for such directions to be given, the applicant has to discharge the burden which is on him to establish relevance unequivocally.

58.  On the font issue, I would have thought that a clear copy of the original would enable the expert to identify the type of font used and to comment on whether or not it was in existence on a particular date. In the absence of any explanation of why that is not the case, I am unable to grasp the nature of the forensic analysis required.

59.  Moreover, as earlier noted, the Defendants were able to raise the font issue in October 2022. Yet, for reasons unexplained, they remain unable to plead the same.

60.  The Defendants’ approach runs contrary to the well-established principles in pleading forgery considered above.

61.  The Plaintiffs submitted that expert evidence has to be relevant to the well-defined issues arising out of properly particularised pleadings and an allegation of forgery does not give a party a free ticket to ask for expert directions to “investigate the possible unexplained irregularities”.

62.  In this regard, Au-Yeung J’s observations in the Taching case[19] that “[i]t is not permissible use of expert evidence to fish for evidence in order to formulate a case” are apposite.

63.  In those circumstances, I accept the Plaintiffs’ submission that non-existence of font types used is plainly not at issue.

64.  The printer issue is in no better position as it also is not pleaded nor does it arise from the evidence filed in these proceedings.

65.  Further, the Defendants did not elaborate on the significance of using different printers for different pages of a document. It is not evident how the printer question answered one way or another would affect the outcome.

66.  It follows from the discussion in §§ 27-65 above that this appeal must fail since the Defendants are unable to show that the substantive conditions for leave to adduce expert evidence are satisfied.

Order

67.  The Defendants’ appeal is dismissed. There is to be an order nisi of costs in favour of the Plaintiffs, with certificate for counsel, such costs to be summarily assessed and payable forthwith.

68.  The Plaintiffs are directed to lodge their statement of costs within 14 days of this Decision, the Defendants to lodge their objections (if any) in bullet form and limited to 2 pages within 14 days thereafter and the Plaintiffs to lodge their Reply (if any) in bullet form and limited to one page within 7 days thereafter.