HUANG HSIN YANG v. BANK OF CHINA (HONG KONG) LTD

HCSD 3/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPLICATION TO SET ASIDE A STATUTORY DEMAND

NO. 3 OF 2005

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D E C I S I O N

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1.  This is an application by the applicant for my reclusal from these proceedings.  By these proceedings, the applicant sought to set aside a statutory demand. 

Background

2.  The setting aside application was first heard on 1 February 2006.  It was adjourned for the applicant to adduce new evidence.  The hearing resumed on 13 February 2006.  Submissions were not concluded on that day.  It was further adjourned to 31 March 2006.  The applicant then applied to put in reply evidence when he could have done so on 1 or 13 February.  Leave was granted and the hearing on 31 March was vacated.  The new hearing was refixed to 23 June 2006.  The matter did not conclude on that day and was adjourned to 7 February 2007.  The applicant then applied to adduce further evidence and leave was granted to part of the application on 15 December 2006.  The hearing eventually finished in the evening of 7 February 2007.  The applicant’s case was that the respondent mortgagee had sold three lots of his properties at substantial undervalues.  At the end of the hearing, I reserved my decision.

The application to recluse

3.  On 13 February 2007 and before I gave my decision on the application, the applicant took out this application for my reclusal.  The applicant also filed affirmations in support of this application.  The respondent filed a reply affirmation on 28 February 2007.

The initial complaints

4.  The first hearing of the reclusal application took place on 1 March and the applicant appeared in person.  He filed a set of Chinese written submissions which made a number of complaints.  He referred to the hearing on 1 February 2006 which was adjourned for him to file fresh evidence.  He in particular referred to my costs order on that day which required him to pay the costs as assessed by me before he would be allowed to file the further evidence.  He said I made that costs order on my own initiative and I had therefore adjudged him a man without means or a man who would flout court orders.  Alternatively, I had already formed the view that his application to set aside the statutory demand was of no merit and I on my own initiative wanted to protect the interest of the respondent.

5.  Secondly, he complained that I had on 22 March 2006 ordered him to pay costs to the respondent on an indemnity basis when he applied to file an affirmation to reply to the respondent.

6.  His 3^rd complaint was that whilst the respondent had no evidence that it had marketed the properties for reasonable prices, I instead considered whether his valuation evidence contained exaggeration. 

7.  He also complained that I had in the hearing on 7 February 2007 took time to consider the various market price combinations presented by the respondent and tried to find out how much premium had to be added to one lot of properties so that he would cease to be indebted to the respondent.  He said when I did that I had already made a decision against him in mind and was just trying to look for a set of figures to justify my decision.

8.  He also complained that on 7 February 2007, I said whether the valuers would give evidence to answer my questions depended on whether I would allow the matter to go to trial.  He took that to mean that my decision was a matter of my whim and not a matter according to the law.

9.  He also complained that I had scrutinized his evidence with care, but did not do the same to the respondent’s evidence.

10.  His last complaint was that I did not allow his counsel to submit on the dishonesty of the respondent’s principal witness, Mr Luk.  However, I at the same time scrutinized his evidence with care.  He therefore said that my obvious purpose was to attack his credibility.

My response

11.  In the light of the nature of these proceedings, I do not think the 1^st cost order appeared biased.

12.  For the 2^nd cost order, I have given reasons for it.  The applicant could have made the application on 1 or 13 February.  But he only made it shortly before 22 March which necessitated the vacating of the adjourned hearing fixed on 31 March 2006.  Hence, I regarded it right to require the applicant to pay costs on an indemnity basis.

13.  For the third complaint, the applicant overlooked that the application was made by him and he had the burden of proof.  It was his case that the respondent had sold his properties at substantial undervalues and his valuation evidence of course had to be scrutinized with care.  If his evidence did not constitute sufficiently precise evidence to satisfy the court that he had a bona fide dispute on substantial grounds, then I would dismiss his application.  This would be so even if the respondent did not file any valuation evidence.

14.  Regarding my study of the various combination of values of sale and valuations, I had to do so to see in what scenario(s) the applicant would succeed in setting aside the statutory demand.

15.  On 7 February 2007, I said that whether the valuers would give answer to my questions depended on whether I would allow the matter to go to trial.  I said so to remind counsel for the applicant that he had to establish bona fide issues on substantial grounds before the mater would go to trial.

16.  There was also no basis for the applicant to say that I had refused to hear his counsel’s submissions on the credibility of a witness of the respondent.  There was a dialogue in which reasons were exchanged.  His counsel then accepted my view.

The aborted hearing on 18 June 2007

17.  The hearing on 1 March was scheduled for 30 minutes only.  It was insufficient and the hearing was adjourned to 18 June 2007.  The applicant again appeared in person on that day.  He sought leave to withdraw his 9^th affirmation.  The affirmation was also subject to an application by the respondent to expunge.  After this matter and the related costs orders were disposed of, the applicant suddenly fainted and was sent to a hospital by an ambulance.  The hearing was then adjourned to 24 August 2007.

New complaints

18.  The applicant obtained legal representation before 24 August.  His counsel filed a new set of written submissions.  The submissions contained many very serious accusations against me but were without any particulars.  The respondent sought particulars and the applicant promised to provide them at the hearing. 

19.  At the hearing on 24 August, the applicant’s counsel flipped through the bundle of transcript of the hearing of the setting aside and made various complaints against me by reference thereto.  Nearly all of the complaints then made had not been mentioned in the new written submissions.  No attempt was made to supply the respondent or the court with the promised particulars.

Fresh complaints and amendments

20.  The hearing did not conclude on that day.  It was further adjourned to 29 August 2007.  Counsel then submitted a new set of written submissions and the submissions filed before 24 August were withdrawn.  The hearing continued to 30 August.  On that day, Counsel further filed an amended version of the latest written submissions. 

The principle

21.  Both sides agree that the proper test for bias is that stated by Lord Hope of Craighead in Porter v Magill [2002] 2 AC 357 at para. 103 which has been adopted by the Court of Final Appeal in Deacons v White & Case [2003] HKC 374 at para. 21:

“The question is whether the fair minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.”

The analyses

22.  I now consider the complaints as contained in the latest written submissions with amendments.

23.  The 1^st complaint was that I had at the call-over hearing expressed an opinion which could depress the market value of one lot of the properties in question.  Counsel said that I had read the applicant’s evidence and then directed the respondent to provide evidence to support my opinion but not the applicant’s position.

24.  In the setting aside case, the applicant was complaining that one lot of property had been sold at substantial undervalue.  His valuer gave a much higher valuation.  His valuer further applied a 25% premium to the valuation to reflect a special interest of the purchaser, but did not give any reason on why the premium should be at 25%.

25.  Since the properties in question were some guestrooms of a guesthouse sandwiched between some other guestrooms owned by the purchaser, I therefore sought form the respondent the evidence that the location of the property would instead reduce its value.  In expressing myself as I did, I was merely asking to see the other side of the coin, if any.  I cannot see how this can form the basis of the above complaint.  I also do not think that I had thereby appeared to be biased.

26.  In the next complaint, the applicant complained that I had at the call-over hearing requested the respondent to produce valuation reports with comparables.  Counsel submitted in this application that I should not have “advised” the respondent to produce reports with comparables as it was for the advocates to decide what evidence to adduce.  I cannot see any basis for this complaint when I was just asking for proper evidence.

27.  The next complaint was that since I had advised the respondent at the call-over hearing to produce valuation reports with comparables, I should also have advised the applicant on 1or 13 February 2006 that he should file one more affirmation in reply to conclude that round of affirmations.  I did not do so and was wrong.  Again, I see no merit in this complaint. 

28.  The next complaint is that I had at one time asked the applicant to pinpoint what wrong the respondent had committed.  However, when the applicant showed that the respondent had not done any marketing for one lot of properties, then I changed my mind and pronounced a new rule to assist the respondent. 

29.  The so-called new rule I pronounced was that it was a mortgagee’s duty to obtain the market price.  If the market price was obtained, then the lack of marketing was irrelevant.  If the market price was not obtained, then the fact that the property had been marketed would still not exonerate the mortgagee.  Counsel said that my view was wrong.  He said I was totally wrong and my legal sense was vitiated after knowing that the respondent was unable to discharge the burden of marketing. 

30.  I cannot see where I had gone wrong.  A mortgagee is in most cases permitted by the mortgage deed to exercise the power of sale by public auction or private treaty.  There is no requirement of any particular mode of sale or marketing.  The duty is to get the best price reasonably obtainable.  Marketing is usually a way to obtain such price, but it does not mean that a mortgagee cannot by other means secure the best price reasonably obtainable.  I do not think this complaint can show any bias in me.  Even if I should be wrong on the law, that does not mean that I was biased against the applicant.

31.  The next complaint is focused on a discussion between the applicant’s counsel and me on the respondent’s valuation report and whether a 2^nd report with comparables should be obtained for the litigation.  One of the points that counsel appeared to be making in this application is that time had been wasted by such discussion so that he had taken much more time in his submissions.  Another complaint is that I was trying to work out an explanation for the respondent’s failure in producing any valuation report that had the support of comparables. 

32.  The discussion between counsel and me was not too focused and had taken a drift.  I started off by saying that expert reports must have comparables, otherwise, they will have no value at all.  I then doubt the need for mortgagees to obtain a 2^nd valuation with comparables after the sale had been concluded.  The discussion drifted on.  Counsel then clarified to me that the 2^nd report with comparables was for the purpose of litigation already commenced.  Then I pondered why the mortgagee should obtain a 2^nd report with comparables and what would happen if the 2^nd report should show the 1^st one being erroneous.  I then went on to say that the question was whether the mortgagee had done the right thing. 

33.  I do not think what I said in that discussion would mean that I was trying to explain away the respondent’s failure to produce valuation reports with comparables.  At the end, the conversation wound up with the conclusion that if the valuation report should be erroneous, the mortgagee would be liable though it may look to the valuer for an indemnity. 

34.  In this dialogue, I also referred to the fact that valuation reports obtained by banks normally did not contain comparables.  Counsel for the applicant submitted that I was then pronouncing a new concept of law on mortgagee duties.  I think I was just making a casual remark of the usual practice.

35.  Counsel also argued that my conduct of the proceedings appeared to an informed fair-minded bystander that I would not let go of any point until the applicant was defeated or alternatively I was oppressive and would not give the applicant an opportunity to win.  He gave 27 examples of this.  He later reduced it to 22 by deletion.  I am not going to deal with each and every of these so-called examples.  I will just analyse their nature and see if they can either collectively or individually show a fair-minded and informed observer that there was a real possibility that I was bias.

36.  There were instances where parts of a continuous dialogue were taken out of context.  Comments were then made on these parts on the basis that I had already decided certain issues. 

37.  A typical instance was on the discussion of the application of a 30% discount for the valuation of a lot of properties.  The 30% was to reflect the risk of uncertainty.  Complaint is now made that I had challenged the percentage and queried its basis.  The complaint goes to the extent of saying that even if the applicant should have supplied actuarial support for this percentage, I would still have challenged it.  When the transcript is read in context, I was merely discussing with counsel the need to provide for the uncertainty.  In one and the same breath, I echoed counsel’s remarks that the new tourism measures by the Mainland Government was going to have a positive effect on the valuation.  Reading the dialogue in context, I cannot detect any attempt by me to challenge the 30% discount or any appearance of bias in me.

38.  There were also instances when I raised issues for discussion with the applicant’s counsel.  Complaint is now made that I have played the role of the respondent’s counsel as the issues I raised had not been mentioned by the respondent’s counsel. 

39.  One instance was when I raised the question of logistics if the applicant were to acquire the guesthouse units which were in the same building where he had a guesthouse.  This issue appeared to me to be important as the applicant’s own guesthouse units were separated from the units in question by a few floors.  If the logistics for operating a guesthouse in two groups of guestrooms should prove to be difficult, then it could affect the applicant’s inclination to compete for these properties.  If this issue had not been raised by the respondent, it is perhaps because they were aware of the situation, but I was not and had to enquire.  The transcript in fact shows that I was under the impression that there was no logistical problem and was merely seeking confirmation from the applicant’s counsel.  If I appeared to be biased, it was against the respondent.  But I do not think I had any appearance of bias. 

40.  Another instance was when I enquired whether the properties were subject to tenancy that the respondent had previously consented to.  That again was a relevant matter.  If the respondent did not raised it, that was because they knew it, but nobody had told me about it and I had to enquire.  The sale with vacant possession would normally produce a higher value unless the sale was subject to a tenancy of favourable terms.  I cannot see why I appeared to be bias when I made this enquiry.

41.  There was another instance when I discussed with the applicant’s counsel on whether certain matter stated on affirmation by one Mr Siew, a witness of the applicant, was believable.  I think that was something I had to satisfy myself as the respondent never accepted the evidence as true.

42.  There was also an instance when I asked to be enlightened on the law relating to a purchaser with a special interest and enquired about the facts of the authority.  Complaint is now made that I was trying to distinguish the facts of the authority from the facts of this case and was therefore playing the role of the respondent’s counsel.  I do not think there is any merit in it.

43.  I had at one time tried to apply the maxim “omnia praesumuntur rite et solemniter esse acta” on what an estate agent would do after he has been entrusted with a property for sale.  Complaint is now made that my opinion on the law was tailored-made to suit the respondent’s case as the respondent had produced no evidence of marketing of the properties.  I may or may not be right in applying this maxim.  I do not think I was trying to say anything to suit the respondent’s case.  The respondent’s case was simply one of sale at or above the market price as supported by its valuation reports.

44.  There were also occasions when I discussed issues with counsel for the applicant and developed the issues by modifying the facts, I am now accused of moving the goal posts or I was not open to persuasion so that the applicant would never succeed in his application.

45.  One instance cited by the applicant was a dialogue between counsel and me on how to categorize some owners of units in the building as potential purchasers.  The dialogue eventually led to a categorization which counsel and I agreed.  However, complaint is now made that my query in the course of this dialogue on the arrangement between these owners and the guesthouse operator Mr Hui amounted to placing hurdles before the applicant.

46.  I was also accused of giving evidence when I casually said that two months would be long enough to market a real property in Hong Kong.  Counsel did not accept that.  At the end of this short dialogue, I sought and agreed with counsel’s view.  I just cannot see how a complaint can be made out of this.

47.  There was also a complaint that I did not accept a net 5% return as a good return on real property investment.  My response then was that there were risks to the investment like increase in interest rate and failure to obtain good terms of letting upon renewal of tenancy.  It now turned out that when the particular property was sold by the respondent, it was sold with vacant possession.  There was no subsisting tenancy to generate the 5% net profit or any profit for the purchaser.

48.  At the end of one of the hearing days, I advised the parties to consider a settlement, but I also said that the respondent need not concede on the issue of costs as the applicant’s evidence came out in dribs and drabs.  Complaint is now made that I could only indicate my preliminary view on the substantive matter, but not on costs.  I cannot understand the reasoning behind this.  In any case, if costs could not be resolved.  I would hear submissions and make the order.  There is a further complaint out of this.  It says that I was giving advice to the respondent on costs.  The costs issue I mentioned was an obvious matter.  I highlighted it just to facilitate the parties’ negotiation for settlement of the substantive issue.  I do not think that would give me an appearance of bias to the informed bystander.

49.  The above discussion has paraded a representative selection of the complaints made by the applicant.  The applicant’s stance seems to be that if I should raise any argument not mentioned by the respondent or disagreed with his counsel on anything, then it must because of my hidden motive to dismiss his application.  If I did not readily agree with his counsel’s approach, he would also take that as my bias against him.  I think it is unfortunate that the applicant should harbour these ideas in his mind.

50.  All in all, I do not think my conduct of the proceedings would appear to a fair-minded and informed observer that there was a real possibility that I was biased against the applicant.  The hearing has taken several days and spread over a long period.  No doubt there were occasions when I did not see things eye-to-eye with the applicant’s counsel.  Part of the reasons being that it is for the applicant to establish bona fide issues on substantive grounds.  In this case, the gap that the applicant has to bridge is very wide.  One of his arguments is that the guestrooms sold by the respondent for $6,300,000 in fact had a worth $16,000,000.  I really had to scrutinize the applicant’s evidence and arguments with case.  In any case, disagreement is very much different from bias.

Decision

51.  For the conclusion that I have come to above, I dismiss this application for my reclusal.  I also make an order nisi that the applicant do pay the respondent the costs of this application.