LI NGAN KWAN v. GAO LI HUI AND ANOTHER

HCA 276/2007

[2021] HKCFI 1946

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 276 OF 2007

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D E C I S I O N

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Introduction

1.  This is the hearing of the application of the Plaintiff (“Li”) for trial de novo by summons dated 24 November 2020 (the “Trial de novo Summons”) and for case management conference. 

2.  Prior to 16 February 2004, the Plaintiff was at all material times the sole shareholder and director of the 2^nd Defendant, Billion Houses International Holdings Limited (“Billion Holdings”), which is the 100% owner of Billion Houses Investments (Properties) Limited (“Billion (P)”) and Billion Houses Investments (HK) Limited (“Billion (HK)”).  Billion (P) and Billion (HK) own respectively 1% and 99% of Billion House Properties Limited (“Billion Properties”).  These four companies are collectively referred to as the “Billion Group”.  Billion Properties in turn wholly owns a Mainland company known as Grand View Hotel (Shenzhen) Co Ltd, which wholly owns the Grand View Hotel in Shenzhen (the “Hotel”).

3.  The Plaintiff’s case is that by various forged documents purportedly executed by the Plaintiff (the “Alleged Forged Documents”) on or after 16 February 2004, the 1^st Defendant (“Gao”) effected:

(1)  the transfer of the Plaintiff’s only shares in Billion Holdings to herself;

(2)  the allotment of 9 shares in Billion Holdings to her;

(3)  the Plaintiff’s resignation from directorship of Billion Holdings, Billion (P), Billion (HK) and Billion Properties; and

(4)  the appointment of Gao and one Wang Li as directors of Billion Holdings, Billion (P) and Billion (HK). 

Two of these Alleged Forged Documents are:

(1)  a purported minutes of a board meeting on 16 February 2004 purporting to approve the transfer and allotment of shares in Billion Holdings; and

(2)  a Chinese document dated 29 February 2004 stating, inter alia, that the Plaintiff relinquishes his rights and interests in the Billion Group.

4.  Gao denies that the Alleged Forged Documents are forged.  Her case is that since 1999 she developed a romantic relationship with the Plaintiff.  She never undertook to act for and on behalf of the Plaintiff and the Plaintiff never allowed her to exercise any judgment or discretion on his behalf.  The transactions under the Alleged Forged Documents were validly effected on 16 February 2004 pursuant to the Plaintiff’s agreement to transfer to her the legal title to all his shares in Billion Holdings with 60% thereof to be held on trust for him and 40% as an absolute gift to her; and she accepted such gift out of her love and affection for the Plaintiff.   On 29 February 2004, the Plaintiff relinquished and/or transferred to her his beneficial interest in 60% of Billion Holdings and the other three members of the Billion Group, which she accepted out of love and affection.  In addition, the Plaintiff is estopped from purporting to rescind or otherwise deny the validity of the transactions effected under the Alleged Forged Documents.

The procedural history

5.  The trial of this action commenced on 2 July 2008 for 21 days.  On 29 July 2008, the trial was adjourned part-heard for the summer vacation (the “part heard-trial”).  Shortly before the adjournment, in view of his health conditions, the Plaintiff had taken out a summons dated 25 July 2008 for an order that he be examined viva voce on oath before a master of the High Court during the adjournment in order to preserve his evidence in case his illness prevented him from testifying at the resumed trial.  That examination never took place because the Plaintiff’s health condition deteriorated. 

6.  Neither party took steps to restore the hearing until 26 July 2018 when the Plaintiff filed a Notice of Intention to Proceed.  On 26 October 2020, Gao filed a Notice to Act in Person giving a Mainland address.  That made it necessary for the Plaintiff to take out a summons to compel Gao to provide a valid address for service in Hong Kong.  Eventually, Messrs. K.B. Chau & Co came on the record as Gao’s solicitors on 30 October 2019.  Then the Plaintiff, now represented by Messrs. Li & Partners, took out a summons for leave to amend the Amended Statement of Claim on 27 May 2020 (the “Amendment Summons”) and the Trial de novo Summons on 24 November 2020.  The Amendment Summons was disposed of before Linda Chan J.  The Trial de novo Summons was adjourned to this Court for argument.

Applicable principles in ordering a trial de novo

7.  There are no strict rules as to when a trial de novo would be ordered.  It is essentially a matter of case management depending on the circumstances and needs of each case.  A trial de novo will necessitate extra costs, inconvenience and may have adverse effect on the trial of the action.  It may affect the performance of witnesses and the court’s assessment of their credibility.  Unless the original trial judge is no longer available or his continued conduct of the trial becomes inappropriate, trial de novo should always be avoided.  The paramount consideration is what would best promote the fair disposal of the action under the circumstances and the underlying objectives under Order 1A of the Rules of the High Court: see Hong Kong Civil Procedure 2021 at §33/4/1.  A trial de novo has been ordered where: (i) the trial judge retired during the trial; (ii) there was a long and unexplained delay coupled with the fact that the original trial judge had dealt with settlement discussions between the parties; (iii) original the trial judge passed away during the adjournment of the trial; and (iv) the original trial judge had to recuse himself for apparent bias.  I retired almost five years before Li sought to resume the trial of this action.  While I am still available to sit as a deputy judge of the High Court, my continued conduct of the trial is not entirely without logistical problems.   

8.  Mr Mak, counsel for the 1^st Defendant, referred me to The Forest Lake[1] for guidance as to the considerations to be taken into account in deciding whether a trial de novo should be ordered.  With respect, I do not think The Forest Lake could provide such guidance.  In that case, the original trial judge fell ill and the hearing was adjourned.  The judge had since retired and one of the witnesses who had given evidence had since died.  A trial de novo was ordered.  The question before the court on the trial de novo was whether the evidence already given in the original trial should be used.  That is why the discussion revolved around the parties’ agreement, difficulties in assessing credibility of witnesses on the basis of transcript, and availability of recording to verify the accuracy of the transcript, etc.

9.  An inevitable result of a trial de novo is that costs of the original trial will have to be thrown away.  In D’Amico v Wiemken[2], it was held that while the court has discretion in its award of costs at the conclusion of a re-trial to mitigate the cost consequences of a re-trial, it only tempers the impact and then only for the victor.  I do not think this is an invariable rule in respect of costs thrown away, as costs is always a matter of discretion.  In exercising its discretion, the court may consider all relevant circumstances, including, in particular, which party is responsible for causing the re-trial; the state and nature of the evidence given in the part-heard trial and the nature of the outstanding evidence to be given to complete the re-trial. 

The state of the evidence at the part-heard trial

10.  At the part heard-trial, the Plaintiff was represented by Mr Anthony Neoh SC, Mr KM Chong and Ms Emma Wong instructed by Messrs Shea & Co; while the Defendants were represented by Mr Dennis Chang SC, Mr Andrew Mak and Mr Newman Lam instructed by Messrs Chiu, Szeto & Cheng.  Now, the Plaintiff is represented by Ms Sara Tong and Ms Natalie So. The 1^st Defendant had the benefit of being represented by Mr Andrew Mak who is the only counsel who had participated in the part-heard trial and Mr Jeff Yau.

11.  There were to be 13 factual witnesses for Li and 9 for Gao respectively; and three experts for each of Li and Gao on handwriting, Li’s medical condition and the financial position of Billion Holdings.  

12.  On Day 1 of the trial, ie 2 July 2008, two subpoenaed witnesses for Gao testified.  They were Senior Inspector Ng of Hong Kong Police Force and Loong Ping Kwan (“Loong”), a solicitor of Messrs Loong & Yeung who prepared the Alleged Forged Documents which were signed at the office of his firm.  They produced documents and confirmed that they were copies of originals.  The evidence they gave at that stage is not controversial.  Credibility of these two witnesses at least insofar as the evidence they gave at the part-heard trial is concerned is not an issue.  But neither of them had completed their evidence and they had not been discharged from their subpoena.  They may have to be called at a later stage.   That Loong will be required to give further evidence is almost an absolute certainly. Leave was given to the parties to examine the documents produced by Senior Inspector Ng and for the experts to examine the Alleged Forged Documents produced by Loong.  It is expected that the important and controversial part of Loong’s evidence was yet to come after the experts had completed their examination and when he is re-called into the witness box.

13.  On Day 9, a Plaintiff’s witness Lu Hong Wu, testified.  He is a mainlander.  He adopted his witness statement and gave further evidence in chief for two hours.  He was cross-examined for an hour and half.  His evidence was concluded that day.  The significance of his evidence was yet to be considered.  Even if he will not be available for the re-trial, his evidence was relatively short and is recoverable from the transcript.

14.  The rest of the 19 days of the part heard-trial was taken up by oral submissions of the parties’ counsel and oral testimony of the parties’ handwriting experts, namely Mr Paul Westwood for Gao and Mr Daniel In-Jea Wong for Li.  Neither experts had completed their evidence as of 29 July 2008 when the trial was adjourned.  They have yet to exchange their opinion about the purported signatures of the Plaintiff in the Alleged Forged Documents produced by Loong and to testify at the resumed trial.  It is anticipated that their opinion on the purported signatures of the Plaintiff in the Alleged Forged Documents to be given at the resumed trial will be of critical importance.

15.  A stock taking of the evidence given at the part heard-trial is that the majority of the factual witnesses have not even started their evidence and the handwriting experts have not completed their expert evidence.  The most significant part of their evidence is yet to come.   None of the other two experts has given evidence.  The most important witnesses, namely, Li and Gao had not yet started testifying.  At the time, it was estimated that Li alone would take another eight days.  In other words, despite a passage of 21 days, very little ground was covered.  This fact does not weigh heavily against a trial de novo.  For reasons as already explained, credibility of the factual witnesses who had given evidence at the part-heard trial also has little bearing against a trial de novo.

The handwriting experts’ evidence

16.  The most important evidence covered during the 21 days’ part-heard trial was the handwriting experts’ evidence.  Thirteen years lapsed since the adjournment.  The evidence was given by way of presentation and slide slows during which the similarities and dis-similarities were identified and discussed.  It is difficult to re-capture the impact given by such presentation by reading the transcripts.  Speaking as an audience, it is difficult to recall the provisional view formed of the weight to be given to the evidence of the two experts, especially when, as I have already indicated, the crucial part of their testimony on the Alleged Forged Documents was yet to be given after their examination of the documents produced by Loong on Day 1 of the part-heard trial.  In addition, credibility of a witness has to be determined by looking at his evidence as a whole and not by segments.  As submitted by Ms Tong, it is unrealistic to expect this Court, let alone a new judge, to be able to pick up from where the trial left off 13 years ago by simply reading the transcript.  One does not know against which party the prejudice strikes.  A trial de novo would allow the court to hear and consider the witness’ evidence afresh.

17.  Mr Mak expressed concern that the 1^st Defendant had incurred $2.4 million on expert evidence.  He submits that what the court needs is just three days to refresh its memory by reading the transcript.  I respectfully disagree.  Apart from the reasons given in the preceding paragraphs, there are two other objections.  First, the obvious objection is that a lot is at stake.  Second, in my view, it would take even longer to read the transcript than hearing the evidence afresh.  Besides, the court may not have the benefit of the slides and sample signatures referred to by the experts during their testimonies.  Any mis-match of the sample signatures would create prejudice which is sufficient to outweigh the costs saved.  In any event, provisions could be made for the costs thrown away. 

Prejudice to Gao

18.  In her affirmation filed in opposition to Li’s application for trial de novo, Gao asserted that she would be prejudiced by such an order because Loong had stated that he is unable to recollect most of the facts in this action.  Loong had not yet completed his evidence at the part heard-trial.  He would be expected to continue his evidence at the resumed trial in any event.  This Court had expressly told him that he may have to be called later on and had not released him from the subpoena.  He would suffer the same loss of memory whether in the resumed trial or trial de novo. His loss of memory was unavoidable and caused by the objective fact of lapse of time and not an order for trial de novo.  As set out in Phipson on Evidence, in a trial de novo, the case must be re-proved de novo. Prejudice includes non-availability of witnesses and loss of memory as a result, costs wasted and whether such costs could be recoverable.  However, as the rule against hearsay has been substantially abolished for civil proceedings, such prejudice may be mitigated by the fact that evidence given at the former trial will generally be admissible in the subsequent trial.  In a trial de novo, Gao would be entitled to apply for leave to have Loong’s evidence given in the part heard-trial to stand as evidence in the new trial: see To Kan Chi & Ors v Pui Man Yau & Ors[3].

19.  Gao also claimed prejudice because substantial costs have been incurred on the part heard-trial and it was caused by Li’s delay.  These are matters which should be dealt with at the conclusion of the trial de novo if one is ordered.  She also alleged that she suffered prejudice as a result of the dissolution of the three British Virgin Islands (“BVI”) members of the Billion Group.  It is unclear why this is prejudice occasioned by a trial de novo.  In any event, as Ms Tong indicated, Li is prepared to make necessary applications to restore the BVI companies before the trial and has given undertaking before Linda Chan J not to obstruct Gao from restoring the companies.  There is no prejudice for this reason.

Latest developments

20.  There are some recent developments sparked off by the Plaintiff’s Re-amended Statement of Claim.  In her Re-amended Defence and Counterclaim, Gao raised new factual allegations including Li’s alleged sale of the Hotel in around 2012 and that his signature was unnecessary for the management of the Hotel.  She also pleaded estoppel including the allegation that Li had affirmed the purported gift and that Gao had allegedly changed her position to her detriment.  All these new allegations may require filing of additional evidence and interlocutory proceedings.  There will be supplemental witness statements, discovery relating to the Mainland proceedings taken by Li and, as foreseen by Mr Mak, possibly legal expert evidence on BVI laws.

21.  One obvious consequence is that the resumed trial will take longer.   Mr Mak estimates that the resumed trial may take no more than 15 days.  Ms Tong suggests four weeks for the re-trial de novo. Previously, it was estimated that Li’s evidence alone would take at least 8 days.  Having regard to the new issues raised, I would not be as optimist as Mr Mak.  Apart from having to allow for more time for trial, allowance will have to be made for possible additional interlocutory proceedings.  There is no certainty when this case will be ready whether for a resumed hearing or for trial de novo.  As this Court only sits on an ad hoc and temporary basis and does not know until when, there is no certainty as to whether it is possible to fix any resumed trial as well as any interlocutory matters which may arise prior to such resumption in any way to coincide this this Court’s availability.   In the interest of certainty, it would be prudent for the parties to have a trial de novo before another court.

Conclusion on trial de novo

22.  Very little ground was covered by way of evidence given at the part heard-trial by the three factual witnesses.  The evidence of Gao’s two factual witnesses who testified are not in dispute.   The evidence of at least one of them which is yet to be given is controversial and that witness will have to be re-called to testify, whether a trial de novo is ordered or not.  The evidence of Li’s factual witness, Lu Hong Wu, who testified is not of critical importance.  His evidence could be reproduced and used.  In respect of their evidence, there is nothing to be gained and little costs to be saved for this Court to continue with the conduct of this trial.

23.  The evidence of the handwriting experts has not been concluded.  They will have to produce further reports on the new documents examined.  They have to testify and be cross-examined.  I do not agree with Mr Mak that I can in three days usefully refresh myself of the 19 days’ evidence. For reasons as already canvassed, given the long lapse of time, it is desirable in the interest of justice that their evidence should be repeated and considered afresh in one go, whether by this Court or a new one on a trial de novo.  In the interest of justice, the costs wasted are inevitable.

24.  Practically, the factual witnesses have not even started their evidence and the handwriting experts have not completed their expert evidence.  The most significant part of their evidence is yet to come.  None of the other two experts has given evidence.  The most important witnesses, namely, Li and Gao have not testified.  At the time, it was estimated that Li alone would take another eight days.  In other words, despite a passage of 21 days, very little ground had been covered.  For reasons as already explained, credibility of the factual witnesses who had given evidence at the part-heard trial also has little bearing against a trial de novo.  These facts and circumstances do not weigh heavily against a trial de novo. 

25.  As a result of the latest development, it now appears that there are going to be further interlocutory proceedings arising from amendments of the pleadings.  It is uncertain when the trial can actually resume.  It is uncertain how much longer I would be able to sit as a deputy judge.  Given my own travel commitment, the Covid-19 and quarantine requirements, there will be logistical difficulties and uncertainties in fixing hearing dates for a long trial which would be suitable to all three parties.  The costs saved by this Court continuing to have conduct of the trial is not worth the risk; the benefit to be gained would be minimal.

26.  Neither parties will suffer any prejudice or enjoy any advantage over the other party whether this Court is to continue to have the conduct of this trial or if a trial de novo is ordered.  Having considered all the circumstances of this case, particularly the state and nature of the evidence given in the part-heard trial and the nature of the outstanding evidence to be given, I consider that interest of justice would be best served and the fair disposal of the action would be best promoted by having a trial de novo before a regular court with a full-time judge than one sitting on an ad hoc basis by a retired deputy judge. 

Disposition

27.  For the above reasons, I make an order that there be a trial de novo of the action herein to be fixed before a new judge with a costs order nisi that the costs of the Plaintiff’s Trial de novo Summons and the costs thrown away be reserved to the trial judge hearing the trial de novo.  The usual directions for the further conduct of the trial including costs order were given.