ANDREW WYLES WATERS v. MALAHON CREDIT CO LTD

CACV 44/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 44 OF 2003

(ON APPEAL FROM HCSD 24/2001)

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REASONS FOR JUDGMENT

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Hon. Rogers VP:

1. I agree with the reasons given by Kwan J. I would only emphasise that once the court has reached the conclusion that the debt is disputed on substantial grounds, that is the end of the matter. Proceedings to set aside a statutory demand are not the proper forum for deciding disputed questions of fact.

Hon. Kwan J:

2. This is an appeal from the decision of Deputy Judge To made on 21 February 2003 in which he dismissed the appellant's application for leave to cross-examine the deponent of an affirmation filed by the respondent in opposition to the appellant's application to set aside a statutory demand under O. 38 r. 2(3) of the Rules of the High Court and for leave to issue a writ of subpoena to compel a witness to attend court to give evidence on his behalf under O. 32 r. 7. The appeal was dismissed with costs at the end of the hearing and these are the reasons for dismissal.

3. The statutory demand was served on the appellant in September 2001 for a debt due under an alleged loan agreement in sum of HK$1.7 million odd. The appellant has applied to set aside the statutory demand on the ground that the debt is disputed on substantial grounds and he has a counterclaim or set-off equal to or exceeding the debt in the statutory demand.

4. It is unnecessary to go into details of the evidence filed on both sides in the application to set aside the statutory demand. In summary, the appellant alleges that he had made various verbal agreements with one Mr Chew Ming Teck, also known as Mr Y T Chou, acting on behalf of the respondent and other entities, that the loan agreements he signed with the respondent were only a means to facilitate payment to him of his salary and out of pocket expenses for his services rendered to the First Euro Asia group of companies and that he is not liable to repay any debt to the respondent as alleged or at all.

5. It is not apparent why the application to set aside the statutory demand was only scheduled to be heard in February 2003, more than a year after the application was taken out, even with the rounds of affidavits put in on both sides. A month before the hearing of that application, the appellant issued his summons seeking leave to cross-examine Mr Chew on his affirmation and to issue a subpoena for another witness, which is the subject of this appeal. The hearing to set aside the statutory demand was adjourned pending the determination of that summons and of this appeal.

6. The reasons why the appellant has sought leave to cross-examine and to subpoena a witness would appear to be as follows.

7. Mr Chew had suffered a stroke in January 2001. According to Mr Chew, this was but a minor stroke and after a long period of rehabilitation, he was close to a full recovery when he made his affirmation for the respondent in July 2002. This is disputed by the appellant who alleges that Mr Chew's illness was not minor. He wishes to cross-examine Mr Chew so that the court can decide whether or not Mr Chew's mental faculties have been impaired by illness and is unable to make his affirmation or provide information to another deponent who has made two affirmations on behalf of the respondent.

8. The appellant wishes to subpoena one Mr Gordon Chan to give evidence on the alleged agreements the appellant had made with Mr Chew and on the state of health of Mr Chew. Mr Chan has refused to provide an affirmation so the appellant has to resort to issuing a subpoena to compel Mr Chan to give evidence.

9. The Judge refused the application, having been taken to the relevant legal principles.

10. On the exercise of his discretion in permitting cross-examination on an affidavit, he has considered the approach in Wendy Wenta Seng Yuen v Philip Pak-yiu Yuen [1984] HKLR 431, which may be stated as follows:

(1)	the court has an unfettered discretion to permit cross-examination but an applicant is not entitled to this right as of course;
(2)	the applicant has to establish that in all the circumstances there is "good and sufficient" reason for the application;
(3)	where the evidence on the affidavits will result in a "final order", it may not be difficult to establish "good and sufficient" reason for the application; where the evidence is for use in an interlocutory matter, it may be more difficult, in view of the expense and delay involved, for the court to be satisfied that the discretion should be exercised in favour of permitting cross-examination;
(4)	what is essential is for the applicant to establish that the proposed cross-examination might be productive of a "useful result" at the stage that the application is made.

11. On the exercise of the discretion whether to authorise the issue of a writ of subpoena for proceedings in chambers, the Judge has considered the approach in Li Man York Evelyn v Li Wai Tat Walton [1997] 3 HKC 532, which may be stated as follows:

(1)	the court has the duty of filtering an application for a subpoena;
(2)	in the filtering exercise, the questions for the court are these: Are the proceedings of such a nature as one would expect evidence to be called? Is this a cause or matter being heard in chambers in which oral evidence is appropriate? Is the application for a subpoena an abuse of process?
(3)	in providing a preliminary filter in this way, the court should not and cannot take upon itself to decide issues relating to the relevance of any evidence that may be given and its usefulness.

12. It is not suggested that the Judge has applied wrong principles of law.

13. At the forefront of his decision, the Judge considered the nature of the proceedings before him, which is an application to set aside a statutory demand. He rightly observed that statutory demands are meant for clear cases and the court would not undertake a trial in this summary procedure. The burden on the applicant is to adduce sufficiently precise factual evidence to satisfy the court that the debt is disputed on substantial ground. He did not think the application to set aside the statutory demand would result in a "final order" as the applicant would still be at liberty to show cause on the hearing of the petition that there is a bona fide dispute of the petitioning debt. Even if he were wrong about that, there are no good and sufficient reasons for cross-examination as the court could have determined the issue whether the appellant has raised a substantial dispute of the debt on the affirmations without the need of cross-examination. "To allow the deponents to be cross-examined is to take an inquiry to a depth which is unnecessary and would only add to unnecessary costs". For similar considerations with regard to the nature of an application to set aside a statutory demand, the Judge answered the first two questions in the filtering exercise for issue of a subpoena in the negative and the third question in the affirmative.

14. I am unable to see any ground on which the exercise of the discretion of the Judge could be challenged. For this particular inquiry whether the debt is disputed on substantial grounds, it would neither be useful or necessary for Mr Chew to be cross-examined or for an additional witness to be called to corroborate the appellant's case.