THE BANK OF NEW YORK MELLON v. SUN JIANGRONG

CACV 166/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 166 OF 2015

(ON APPEAL FROM HCMP 887 OF 2013)

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REASONS FOR JUDGMENT

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Hon Poon JA (giving the Reasons for Judgment of the Court) :

A. INTRODUCTION

1.  By a summons dated 31 August 2015, Ms Yuan Ping (“Ms Yuan”), the intended intervener in the proceedings below (HCMP 887/2013), sought to adduce fresh evidence for the purpose of her appeal against the decision of Deputy High Court Judge Seagroatt dated 17 June 2015 (“the 1^st Summons”).  By another summons dated 4 November 2015, Ms Yuan applied to amend the 1^st Summons to deal with what she described as a technical mistake therein (“the 2^nd Summons”).

2.  After hearing the parties on 11 November 2015, we dismissed both Summonses.  We now hand down the reasons for our judgment.

B. PROCEEDINGS AGAINST MR SUN

3.  On 20 August 2007, Mr Sun Jiangrong (“Mr Sun”), Ms Yuan’s husband, purchased Flat A, 20/F, Block 1 and Carparking Space No 8 on Basement 1, The Arch, No 1 Austin Road West, Kowloon (“the Property”) for HK$20,936,000.00.  He was registered as the sole owner in the land search record.  The Property was subject to a legal charge in favour of the Bank of East Asia (“BEA”) dated 20 September 2007 and registered on 9 October 2007.

4.  On 28 September 2011, the Bank of New York Mellon (“the Bank”) obtained an interim payment order against Mr Sun in HCA 1244/2009.  On 25 November 2011, based on the debt due and owing under the interim payment order in the sum of HK$20,000,000.00, the Bank obtained a charging order nisi over the Property.  On 30 December 2011, the charging order nisi was made absolute.  The total amount outstanding under the charging order was HK$20,007,000.00 with the additional HK$7,000.00 as costs of the application for the charging order.

5.  Mr Sun’s appeal against the interim payment order was dismissed on 4 July 2012. To date, he has not settled the outstanding sum.

6.  By an originating summons dated 25 April 2013, the Bank commenced HCMP 887/2013 to enforce the charging order by applying for an order for sale of the Property pursuant to Order 50, rule 9A and Order 88, rule 5A of the Rules of the High Court, Cap 4A.  Because of BEA’s interest in the Property by virtue of the legal charge, the Bank engaged in correspondence with BEA to sort out the matter, which took some time.  Having done so, the Bank filed a notice to proceed on 4 September 2014.  The originating summons was then scheduled to be heard by a master on 13 January 2015.

7.  One day before the scheduled hearing before the master, Mr Sun filed a summons to seek a stay of the proceedings or in the alternative leave to file evidence in opposition to the Bank’s application.  In the end, the master adjourned the matter to 27 January 2015.

8.  On 23 January 2015, Mr Sun’s solicitors informed the Bank’s solicitors that he would no longer oppose the Bank’s application.

C. MS YUAN’S APPLICATION TO INTERVENE

9.  Also on 23 January 2015, Ms Yuan filed a summons to seek to intervene in the proceedings.  In her first affirmation in support filed on 23 January 2015, she asserted that she held a 50% beneficial interest in the Property.  She alleged that in 2007 she and Mr Sun had reached an oral agreement that they should purchase a residential unit in the Western Kowloon Area of Hong Kong for investment purposes; that each of them would contribute half of what would be needed to purchase the unit; and that each of them should own half of that unit to be purchased.  It was pursuant to that oral agreement that the Property was purchased.  She said that most of the purchase price of the Property, which is HK$6,000,000.00, (by which she must have meant the deposit) came from her accounts and assets in the Mainland.

10.  At the adjourned hearing on 27 January 2015, the master gave directions for filing of further evidence and adjourned the matter to a judge in chambers.  Pursuant to the master’s order, Ms Yuan filed her 2^nd affirmation on 18 March 2015.  There, she said that she had paid Mr Sun at least RMB$1,025,824.00, comprising of four sums between January and September 2007, for paying the deposit of the Property.

11.  At the hearing before the learned Judge on 17 June 2015, Ms Mok, solicitor acting for Ms Yuan, applied for an adjournment on the ground that counsel originally engaged to appear on Ms Yuan’s behalf could not do so because of some miscommunication.  The Judge refused the application.

12.  Turning to Ms Yuan’s application, the Judge, for the reasons that he gave, found that it was unmeritorious.  He thus dismissed it with costs.

13.  Ms Yuan then appealed.

D. THE TWO SUMMONSES

14.  By the 1^st Summons, Ms Yuan wanted to adduce by way of fresh evidence a copy certificate issued by the China Merchants Bank (“CMB”) printed on 28 August 2015 certifying that Mr Sun was the holder of the account 5240116004039999 (“the 1^st Certificate”) and a copy statement of the CMB showing that a sum of RMB$3,000,000.00 was transferred into the account 5240115915529999 on 27 July 2007 (“the Statement”).  As recorded in the Statement, a remark was entered against the said transfer reading “汇入汇款 元萍 现金购房款”.

15.  In her 1^st affirmation filed on 1 September 2015 in support of the 1^st Summons, Ms Yuan reiterated that she had contributed half of the purchase price and owned half of the Property.  She said that on or around 27 July 2007, which was a week before the signing of the memorandum for sale and purchase of the Property on 8 August 2007, she paid RMB$3,000,000.00 to Mr Sun as contribution to the purchase of the Property.  That sum was transmitted to Mr Sun’s account 5240115915529999 at CMB.  She then exhibited the 1^st Certificate and the Statement as documentary evidence in support.

16.  There is a marked disparity between the account number in the 1^st Certificate and the one in the Statement, the same which was said to be Mr Sun’s account with CMB in Ms Yuan’s affirmation.  After that disparity was pointed out in the opposing affirmation of Mr John Howard Batchelor filed on behalf of the Bank on 7 October 2015, Ms Yuan took out the 2^nd Summons.  Effectively, she wanted to produce what purported to be the correct certificate issued by the CMB dated 12 October 2015 (“the 2^nd Certificate”), certifying that Mr Sun is the holder of account 5240115915529999, so as to remove the disparity of the account numbers.

E. DISCUSSION

17.  It is apparent that the 1^st and 2^nd Summonses stand or fall together.  We will deal with them together.

18.  It is trite that the test in Ladd v Marshall [1954] 1 WLR 1489 applies to an application to adduce fresh evidence on appeal.  In gist, the applicant must satisfy three conditions :

(1) that the evidence could not have been obtained with reasonable diligence for use at the hearing below;

(2) that the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and

(3) that the evidence must be such as is presumably to be believed or its must be apparently credible, though it need not to be incontrovertible.

19.  However, in light of counsel’s submissions on how to apply the test to the present case, we need to dwell on this topic further.

E1. How to apply the Ladd v Marshall test

20.  Ms Wong, counsel for Ms Yuan, submitted that the Ladd v Marshall test should be relaxed insofar as the first condition is concerned.  In support, she cited Langdale v Danby [1982] 1 WLR 1123 where Lord Bridge said at p.1133 B-F :

“In the situation arising on an appeal to the Court of Appeal from a summary judgment, the application of these conditions and perhaps the conditions themselves will require some modification. It may well be that the standard of diligence required of a defendant preparing his case in opposition to a summons for summary judgment, especially if under pressure of time, will not be so high as that required in preparing for trial. The second and third conditions will no doubt be satisfied if the further evidence tendered is sufficient, according to the ordinary principles applied on applications for summary judgment, to raise a triable issue.”

21.  She also referred to Fortis Insurance Company (Asia) Limited v Lam Hau Wah Inneo, CACV 86/2010, unreported, 28 October 2010, an appeal arising from the lower courts’ order of entering summary judgment, where Kwan JA at [18] of the judgment applied Lord Bridge’s approach to give the defendant leave to adduce fresh evidence on appeal.

22.  Ms Wong also relied on Halifax Plc v Gould & Swayne & Others [1999] PNLR 184, also a summary judgment case, where Auld LJ observed at p 191A-B that in the interest of justice, the Ladd v Marshall test could be applied less rigorously in proceedings not amounting to a trial on the merits.

23.  Ms Lam, counsel for the Bank, argued that the authorities relied on by Ms Wong, taken at their highest, only support a far more limited proposition that for an appeal against a summary judgment, the standard of diligence required of a defendant preparing his case under pressure of time would not be as high as that required in the preparation of trial.  She especially drew our attention to what Lord Bridge said in Landgale v Danby after the citation relied on by Ms Wong :

“But I can see no injustice at all in requiring a defendant to use such diligence as is reasonable in the circumstances to put before the judge on the hearing of the summons [for summary judgment], albeit in summary form, all the evidence he relies on in defence, whereas it would be a great injustice to the plaintiff to allow the defendant to introduce for the first time on appeal evidence which was readily available at the hearing of the summons but was not produced.”

24.  Ms Lam therefore argued that there is no good basis upon which to suggest that the modified Ladd v Marshall test applies in the present case.

25.  In our view, when considering the first condition of the Ladd v Marshall test, the context in which the application for leave to adduce fresh evidence arose is crucial.  For the degree of reasonable diligence which the court expects the defendant to have exercised in his effort to obtain the evidence in question must be assessed against the overall circumstances of the case.  The court will take into account all relevant factors, such as the time available to the defendant to gather the evidence, the nature of the evidence, the difficulty encountered in obtaining the evidence, the effort that the defendant had used in gathering the evidence.  (The list is of course not exhaustive.)

26.  We do not think that merely because it is an appeal from a summary judgment or proceedings not amounting to a trial, the requirement of reasonable diligence will be automatically relaxed. It is only one of the factors that the court will bear in mind.  If, for example, in an application for summary judgment where the defendant is time-pressed to obtain the evidence in support of his defence and was unable to do so because of the shortage of time, the appellate court might be more inclined to grant him the indulgence to adduce fresh evidence on appeal.  (But even then, as Lord Bridge made it explicitly clear, that does not relieve him from his duty to use such diligence as is reasonable in the circumstances to put before the judge below all the evidence that he seeks to rely on, albeit in a summary form.)  However, if the defendant has been given ample time to gather all the evidence in opposition but has unreasonably failed to do so, we doubt very much if an appellate court would be prepared to relax the reasonable diligence requirement on his application to adduce fresh evidence on appeal simply because it is an appeal from summary judgment.

27.  At the risk of repetition, we emphasise again that the context in which the application to adduce fresh evidence on appeal is important in considering whether the first condition of the Ladd v Marshall test is met.

E2.    The first condition

28.  Turning to the present case, we are firmly of the view that Ms Yuan has failed to meet the first condition of reasonable diligence.

29.  To recap, that condition requires Ms Yuan to satisfy us that the 2^nd Certificate and the Statement could not have been obtained with reasonable diligence for use at the hearing before the Judge on 17 June 2015.

30.  In her first affirmation filed on 1 September 2015, Ms Yuan said :

“Evidence Could not Have Obtain at Hearing Below

8. Since around 2008, both the Defendant and I have been very busy and we seldom see each other. I am based in Fujian while the Defendant in Beijing. Both the Defendant and I need to have a lot of business trips and we only see each other several times a year.

9. It should be noted that I previously used the address of 中國福建省福劃市鼓樓區融僑花園二區 15 座 2D (‘Garden Unit’) as my address in my 1^st and 2^nd Affirmations as this was the address printed in my identity card in the Mainland China. However, as shown in my 2^nd Affirmation, the Garden Unit was sold in August 2014.

10. After applying to join the proceedings below as an intervener, I have tried very hard to search through my record in an effort to find documentary evidence to support the claim that I own half of the Property.

11. However, as the Property was purchased by the Defendant and I for more than 7 year, I have encountered a lot of difficulties in finding the supporting documents.

12. I also turned to the Defendant for help in January this year and asked him to provide any documents he could find to substantiate the fact that I own half of the Property.

13. Further, after receiving the Plaintiff’s affidavit dated 17 April 2015 filed in the proceedings below, my solicitor also approached the Defendant’s solicitor to find out if the Defendant has any documents evidencing my ownership in the Property.

14. To our disappointment, the Defendant or his solicitor was not able to provide my solicitor or myself with any documents prior to the hearing below on 17 June 2015.

15. After the decision of the Judge refusing my application to adjourn the hearing and to intervene on 17 June 2015, I again contacted the Defendant asking him to search through his records in respect of my previous payments to him on the Property.

16. My solicitor advised me and I verily believe that in or around mid to late July 2015 that the Defendant’s solicitor had, after quite some time and efforts, obtained a copy of the Defendant’s Bank Statements and the same were provided to my solicitor. The Defendant’s solicitor further provided the original certificate, which certified the ownership of the Defendant’s Bank Account, to my solicitor on 31 August 2015. My solicitor advised me and I verily believe that my solicitor has obtained consent of the Defendant’s solicitor in producing the Defendant’s Bank Statements to the Court.

17.    The Defendant’s Bank Statements could not have been obtained by me at the hearing below.  I was only able to obtain the same upon the assistance and consent of the Defendant.  It would therefore be grossly unjust if the Defendant’s Bank Documents, which evidenced my financial contribution to the Property, could not be adduced for the consideration of this Court for my appeal application.”

31.  In her second affirmation filed on 19 October 2015, Ms Yuan went on to say :

“I Could not Have Obtained the Evidence at Hearings Below

5. As stated in my first affirmation filed on 31 August 2015 (‘1^st Affirmation’), I had tried very hard to search through my records as well as asked the Defendant for help since January this year. Upon my instructions, my solicitors also made similar requests to the Defendant’s solicitors.

6. Despite our best efforts and to our disappointment, neither the Defendant nor his solicitors provide us with his bank statements at any of the hearings below.

…

11. However, despite our efforts, my solicitors and I were unable to obtain any documents from the Defendant in May or June 2015. I thought at the time those documents were unattainable and the Defendant had lost or no longer in possession of those documents due to the passage of time.

12. This explains why we could not adduce further evidence by filing any affirmation in reply on or before 29 May 2015. This is also the reason why my solicitor submitted to the Court at the hearing on 17 June 2015 that no further evidence would be adduced for the hearing – we thought at the time the Defendant had lost or no longer in possession of those documents due to the passage of time.

Further Evidence Has Crucial Bearing on Justice

13. The Defendant’s bank statement of the China Merchants Bank has a crucial being on my appeal as it was a contemporaneous document evidencing my financial contribution to the Property.

14. I apology to the Court for my oversight in respect of the certificate from China Merchants Bank filed on 31 August 2015. The bank account number ‘5240116004039999’ in the certificate [first page of Exhibit YP-5] (the ‘1^st Certificate of CMB’) did not match the bank account number ‘5240115915529999’ in the bank statement [second page of Exhibit YP-5] (the ‘Bank Statement of CMB’).

15. The mistake was an oversight due to haste as the 1^st Certificate of CMB was only provided to me by the Defendant’s solicitor on the same date of the filing of my first affirmation on 31 August 2015. It is also noted that the first few digits and the last few digits of the accounts were the same. Upon discovery of the mistake in early October 2015, my Solicitors promptly contacted the Defendant’s solicitor.

16. On 12 October 2015, the Defendant’s secretary Ms Qin Lin (錢林) emailed my solicitor Ms Mok a scanned copy of the certificate issued by the China Merchants Bank dated 12 October 2015 (‘2^nd Certificate of CMB’). She also stated in the email in Chinese that the original would be sent to Hong Kong on that day.

There is now produced and shown to me marked exhibit ‘YP-6’, a true copy of the said email dated 12 October 2015.

17. On 14 October 2015, my solicitors received the original of the 2^nd Certificate of CMB sent to them by the Defendant’s secretary Ms Zhao Xia (趙夏).

There is now produced and shown to me marked exhibit ‘YP-7’, a true copy of the courier record from Ms Zhao Xia (趙夏) to my solicitor Ms Mok.

18. The 2^nd Certificate of CMB certified that the bank account number ‘5240115915529999’ at China Merchants Bank (which was defined as ‘Defendant’s Bank Account’ in my First Affirmation) is held by the Defendant.

There is now produced and shown to me marked exhibit ‘YP-8’, a true copy of the 2^nd Certificate of CMB dated 12 October 2015.

19. My solicitors advised me and I verily believe that the Defendant’s secretary Ms Zhao Xia (趙夏) advised my solicitor Ms Mok the following in a telephone conversation between them on 8^th October 2015:

a. The Bank Statement of CMB was an original printout from the Internet by the Defendant back in year 2007. It took them quite some time and efforts to dig out that Bank Statement of CMB as the record itself was more than 8 years old and the Defendant travelled frequently;

b. After digging out the Bank Statement of CMB, the Defendant went personally to the China Merchants Bank in Beijing to make application for the 1^st Certificate of CMB certificating the account holder of his bank account. The mistake in the certificate was made due to the similarities in the account numbers and the Defendant having more than one bank account in the China Merchants Bank; and

c. Upon learning of the oversight on the 1^st Certificate of CMB, the Defendant again went personally to the China Merchants Bank at Beijing asking for the issue of the 2^nd Certificate of CMB for the Defendant’s Bank Account.

20. As indicated in the Bank Statement of CMB, on 27 July 2007, I remitted RMB 3,000,000.00 to the Defendant as my contribution for the purchase of the Property.  The money came from my selling of the properties in Mainland China and/or savings in my bank accounts.  I recalled that the description on the last column of the Bank Transaction was provided by myself when making the remittance.”

32.  The explanations offered by Ms Yuan are far from satisfactory.

33.  Mr Yuan relied heavily on the fact that the sale of the Property took place some seven to eight years ago and she has not kept the documentary records showing her contributions.  So she repeatedly asked her solicitors to approach Mr Sun and his solicitors for the necessary documents showing her contributions, but to no avail.  However, there is no evidence whatsoever to show that Ms Yuan and Mr Sun were at the material times or are on hostile terms.  One naturally asks : why would Mr Sun be so reluctant to help his wife in protecting her interest over the Property?  There is simply no explanation coming from either Mr Sun or Ms Yuan on this obvious question.

34.  Ms Yuan also said that it was difficult for her to get in touch with Mr Sun.  It is because she and Mr Sun did not see each other much as both of them are busily engaged in their business, do not live together and have been travelling a lot.  But with modern means of instantaneous communication, such as emails and WeChat, there should be no difficulty for them to communicate with each another if they so wish.

35.  Ms Yuan asserted that since January 2015 she had repeatedly instructed her solicitors to contact Mr Sun’s solicitors for assistance but to no avail.  But not a single letter of the solicitors’ correspondence has been adduced.  So it remains a bare assertion.

36.  It was also Ms Yuan’s assertion that it was through the assistance of Mr Sun and his solicitors that the 2^nd Certificate and the Statement were eventually obtained.  But again it is a bare assertion without any documentary evidence, especially correspondence between solicitors, in support.

37.  What is conspicuously lacking is the explanation as to why Mr Sun, who had been so reluctant previously, would now suddenly decide to help Ms Yuan to obtain the 2^nd Certificate and the Statement, even to the extent of going to CMB in Beijing twice personally.

38.  Given the deficiencies in Ms Yuan’s evidence, we do not accept her assertion that she had used reasonable diligence to try to obtain the 2^nd Certificate or the Statement for use at the hearing below.  We hold that she has not met the first condition.

E3.    The second condition

39.  We also think that Ms Yuan has failed to meet the second condition of the Ladd v Marshall test. That condition requires that the 2^nd Certificate and the Statement must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive.

40.  The difficulty is that apart from the remark against the transfer of RMB$3,000,000.00 on 27 July 2007, there is not a single piece of evidence showing that the money came from Ms Yuan.  More importantly, as Ms Wong has accepted, there is simply no corresponding record in the bank statements produced by Ms Yuan of her bank accounts before the Judge to show that that sum of RMB$3,000,000.00 did come from her.  Nor is there any evidence, apart from Ms Yuan’s bare assertion, to show that the said sum of RMB$3,000,000.00 was actually utilized by Mr Sun to pay the deposit of the Property.

41.  Ms Wong harked back to her submissions that because of the lapse of time, it is not surprising that Ms Yuan does not possess all the necessary documentary evidence.  With respect, we disagree.  It is Ms Yuan’s case that her 50% beneficial interest in the Property derived from her contributions to its purchase price.  She accordingly bears the burden of proving the same and producing all necessary evidence to complete the chain of funds from her account, to Mr Sun’s account with CMB and to the payment of deposit for the Property.

42.  Because of the gaps in the evidence that we have pointed out, we do not think the 2^nd Certificate and the Statement would have any important influence on the result of Ms Yuan’s application before the Judge.

E4.    The third condition

43.  We are prepared to accept that Ms Yuan has met the third condition of the Ladd v Marshall test.  But what we have said above is sufficient for us to reject her application to adduce fresh evidence.

F. DISPOSITION AND COSTS

44.  For the above reasons, we dismissed Ms Yuan’s two Summonses.

45.  As the successful party, the Bank will have the costs of the present application.  Ms Lam asked for indemnity costs, complaining that Ms Yuan has abused the process.  We disagree.  We think the usual party and party basis should apply.

46.  According to the statement of costs prepared by the Bank’s solicitors, a total sum of HK$262,020.00 (including counsel’s fees of HK$40,000.00) has been incurred for this relatively simple application.  The solicitors’ costs said to have been incurred are on any view exorbitant.  We do not propose to deal with the statement of costs in detail.  We just wish to highlight the following points, which we find most unsatisfactory.

(1) The hourly rates claimed by each of the five fee earners are :

Title	Year of Admission	Hourly Rate (HKD)
Partner	1998	$8,400.00
Senior Associate	2007	$6,000.00
Associate	2010	$5,800.00
Trainee Solicitor	-	$2,800.00
Litigation Clerk	-	$2,800.00

The rates are grossly excessive and well not in line with the usual hourly rates allowed on a party and party taxation. We can see no justification for the fee earners to adopt such excessive hourly rates for a simple application like the present.

(2) The engagement of five fee earners is not justified.  One partner, one associate and one litigation clerk would suffice.

(3) The total time spent by the Partners (6.5 hours), the Senior Associate (23.5 hours), the Trainee Solicitor (5.7 hours) are grossly excessive.

47.  Taking a global approach, we think a reasonable sum for the solicitors’ costs including disbursements (but excluding counsel’s fees) should be HK$60,000.00.

48.  As said, counsel charged HK$40,000.00.  We think it is a reasonable sum for Ms Lam, who has 11 years of experience.

49.  Accordingly, we summarily assess the Bank’s costs on a party and party basis at HK$100,000.00.  We order Ms Yuan to pay that sum to the Bank forthwith.