PACIFIC ELECTRIC WIRE & CABLE CO LTD v. TEXAN MANAGEMENT LTD AND OTHERS

HCA 2203/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2203 OF 2004

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And

HCA 2746/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2746 OF 2004

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BETWEEN

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And

HCA 2763/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2763 OF 2004

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BETWEEN

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（Heard together)

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REASONS  FOR  JUDGMENT

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1.  In these three actions, I made orders in terms of the plaintiff’s applications that two Taiwanese deponents, Mr Hsieh Chi-chia and Madam Liu Mu Jung, be subject to cross-examination on their affirmations made in support of applications by the Taiwanese defendants, Mr Hu Hung Chiu and Madam Hu Sun Mar Li to strike out orders giving the plaintiff leave to serve the actions on them out of the jurisdiction and for consequential orders.  These orders were made on the plaintiff’s undertaking to tender for cross-examination another Taiwanese deponent, Mr Wellington Koo Li-Hsiung, on whose affidavit it relies.  I now give reasons.

Background

2.  The plaintiff is a Taiwanese company.  Mr Hu was one of its directors.  Madam Hu is his wife.  In these actions the plaintiff claims against Mr Hu and other directors for breach of fiduciary duties.  It seeks to recover, from various defendants, real and personal properties in Hong Kong.

3.  In High Court Action No.2203 of 2004 the plaintiff claims that Mr Hu and other directors, in breach of fiduciary duties, made various unauthorised investments in Hong Kong, in particular in a number of shares in a listed company currently known as PacMos Technologies Holdings Ltd.  The plaintiff seeks to recover these shares from the registered holder of them in Hong Kong, and Mr Hu is sued as an accounting party by virtue of his directorships in companies involved in the acquisition of the shares.

4.  In HCA 2746 of 2004, the plaintiff seeks to recover from the registered owner a property in Shouson Hill which it claims is held on a resulting or constructive trust, and seeks an account from Mr Hu and others for all borrowings secured on that property.

5.  In HCA 2763 of 2004, the plaintiff seeks to recover from the registered owner property in the South Horizons Commercial Centre in Aberdeen, which it likewise claims is held on a resulting or constructive trust, and it likewise seeks an account from Mr Hu and others, including Mrs Hu, for all borrowings secured on that property.

6.  On 19 May 2005, the plaintiff obtained orders ex parte, granting leave to issue concurrent writs and serve them out of the jurisdiction on Mr and Mrs Hu in Taiwan.  Personal service was executed.  By summonses dated 27 July 2005, they apply in each case to discharge the order and to set aside the writ and service thereof and all subsequent proceedings.  In addition they apply for a declaration that the writ was not duly served and for dismissal of the action.

7.  The grounds for Mr Hu’s application, in each case, are that:

(i)      On 22 April 2005 the plaintiff commenced proceedings relating to the same subject matter and involving the like cause of action as in these proceedings in the Taipei District Court;

(ii)     the subject matter of the proceedings has only limited connection with Hong Kong;

(iii)    Mr Hu is not a Hong Kong resident and is currently restrained from leaving Taiwan;

(iv)    it is more appropriate and convenient for the dispute between the Plaintiff and the Mr Hu to be decided by the Taipei District Court;

(v)     the Plaintiff failed to disclose the existence of the Taipei proceedings in the ex parte application for leave to serve out; and

vi)      having regard to all the circumstances, it is not proper to order service out of the jurisdiction within Order 11 rule 4(2) and the court in its discretion should refuse leave.

8.  Mrs Hu’s grounds are that the claim against her does not fall within Order 11 rules 11(g) and (p) of the Rules of the High Court, and so the court had no jurisdiction to order service out of the jurisdiction; there is no serious issue to be tried as between her and the plaintiff, and having regard to all the circumstances, it is not proper to order service out of the jurisdiction within Order 11 rule 4(2) and the court in its discretion should refuse leave.

9.  The defendants filed affirmations by Madam Liu, who is their attorney-at-law in Taiwan, and Mr Hsieh Chi-chia, who is a retired judge and a practising lawyer there, in support of their applications.  The plaintiff filed an affidavit by their Taiwanese attorney, Mr Koo.  On 23 February 2006, they filed their summonses for discharge and setting aside, and the summonses were to be heard on 28 February 2006.  On 23 February 2006 the plaintiff filed its summonses to have the deponents cross-examined.  It appeared that the time reserved for the hearing was insufficient, with or without the cross-examination, and the hearing on 28 February was confined to the question of whether or not the deponents should be cross-examined.

Principles

10.  The principles which govern the exercise of the court’s discretion to order the cross-examination of witnesses on their affidavit evidence are set out in the judgment of Fuad JA in Wendy Wenta Seng Yuen v Philip Pak-yiu Yuen [1984] HKLR 431 at 436 E-H:

“As regard affidavits in general, there will be cases where the interests of justice dictate that a deponent should be subject to cross-examination.  For example, where the motives of directors in exercising their powers is in issue, as in Smith and Fawcett [1942] 1 Ch 304.  In other cases, in my judgment, the true rule must be that the court has an unfettered discretion to permit cross-examination on an affidavit but the applicant is not entitled to this right as of course.  He has to establish that in all the circumstances of the case there is a good and sufficient reason for the application.  He will not find this difficult where the evidence on the affidavits will result in what I might call a final order.  He will find it more difficult in interlocutory matters, perhaps, for, as the judge below had in mind, great delay and expense might be entailed.  It seems to me that what is essential for the applicant to show is that the proposed cross-examination might be productive of a useful result at the stage that the application is made.  If no reason can be suggested for supposing that the cross-examination will then be helpful, the application will be refused in the discretion of the court, indeed, in certain circumstances it might be regarded as oppressive and, as such, an abuse of the process of the court.”

11.  Guidance is also to be obtained from Andrew Wyles Waters v Malahon Credit Co. Ltd, HCSD 24 of 2001 in which To DJ said that what constitutes a “good and sufficient reason” must be examined in the light of the nature of the proceedings in which the affirmation is used; in that case, setting aside a statutory demand in bankruptcy, and Grand Empire Holdings Ltd v Marco International (HK) Ltd, HCA 14891 of 1999, in which Burrell J said:

“The court has an unfettered discretion to order
cross-examination and that discretion should be exercised in favour of the party seeking it when the court is satisfied that it is necessary in the interest of justice.  In other words, if there is a real risk that justice will not be done if cross-examination is not allowed, then leave should be granted.”

Issues in the applications to strike out

12.  There are three major issues here.  The first is whether the plaintiff is guilty of material non-disclosure, in failing to tell the Master of the proceedings already issued in the Taipei District Court.  The second is forum conveniens; whether it is more appropriate for the dispute to be decided by that court; and the third goes to whether or not service was validly effected.  This does not appear in the summonses, but it does appear in the affirmations.

13.  The witnesses are at odds on the first issue.  The civil proceedings in Taipei were ancillary to criminal proceedings against Mr Hu and other former officers and employees of the plaintiff in Taiwan.  The defendants’ witnesses say that the proceedings overlap with the Hong Kong actions; they may be dealt with by the presiding criminal judge and if the plaintiff recovers what it claims, the Hong Kong actions will not be necessary.  The plaintiff’s witness says that the ancillary civil proceedings were issued to preserve personal causes of action against the defendants in the criminal proceedings, against a 2-year limitation period, and further that the proceedings do not overlap with those in Hong Kong, in that the latter are proprietary in nature.  Further, recovery of property in Hong Kong will mitigate the plaintiff’s losses and reduced the final claim against Mr Hu and other defendants in Taiwan.

14.  The witnesses are also at odds on the second issue of forum conveniens for various reasons, which need not be set out here.  As to the third issue, Mr Hsieh says that service of Hong Kong proceedings other than through the Taiwanese courts is contrary to Taiwanese law, but Mr Koo says that while a procedure for service through the courts exists, it is not mandatory.

The arguments

15.  In the first place it is argued that these are interlocutory applications which will not result in final orders.  In the second place, it is said that cross-examination will involve unnecessary time and costs, and the court is in a good position to adjudicate on the applications without cross-examination.  Then it is said that the applications can be disposed of without the need to express a concluded view as to which expert is factually correct.  There is no question of motive, intention or bona fides of any of the witnesses.  Finally, the issues on which the plaintiff seeks to cross-examine the experts are not determinative of the applications to set aside.

16.  A final order is one which will finally dispose of the controversy between the parties; see Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Co. Ltd & Anor, FACV 1 of 2003.  Here, it is agreed, the proceedings will go on anyway; the only thing that the order will decide is whether the go on here or in Taiwan.  That is no doubt right, but it seems to me that if the Hong Kong courts are ultimately found to be forum non conveniens, that will finally dispose of the matter so far as the Hong Kong courts are concerned.  In practical terms, if the defendants succeed, that is the end of the plaintiff’s case in Hong Kong.  It is said that the plaintiff could start afresh, but I do not see how it could, in the face of a decision of forum non conveniens.  In any event, I do not read the judgment of Fuad JA to mean that, where evidence on the affidavits will not result in a final order, cross-examination must be ruled out.

17.  As to whether the cross-examination is necessary for the fair and expeditious disposal of this matter, I think there are two important points.  The first is that the witnesses are at odds about the effect of the Taipei civil proceedings.  This goes to the question of whether the non-disclosure of them was “material”; i.e. whether it was “relevant to the weighing operation which the court has to make in deciding the point before it”; see Thermax Ltd v Schott Industrial Glass Ltd [1981] FSR 289. It is argued that I can decide on material non-disclosure without the need for cross-examination.

18.  Here there is a dispute between lawyers, in a foreign jurisdiction, as to the effect of proceedings there; were they a matter of formality, to guard against a possible limitation point, or were they material.  I do not think this is something which can properly be decided without cross-examination of the lawyers concerned.

19.  The second point goes to the question of the validity of the service.  By Order 11 rule 5(2), nothing in this rule is to authorise or require the doing of anything in a country or place in which service is to be effected which is contrary to the law of that country, and by Rule 5(3), the writ need not be served personally so long as it is served in accordance with the law of the country or place in which service is effected.  Again we have two diametrically opposing views.  I have perused the Taiwanese documents exhibited (in translation), such as the letter from the Judicial Yuan and must say that it seems to me that they are open to interpretation; I would not wish to decide who is right, without hearing further from them.

20.  I do not think that either of these points should be decided without cross-examination.  I do not accept that that the issues on which the plaintiff seeks to cross-examine are not determinative of the applications.

21.  I accept that all these witnesses, being practising lawyers, and one a retired judge, should be expected to be truthful, and that there is no question of their bona fides.  However, cross-examination does not necessarily only go to credit.

22.  As to time and costs, as it turns out, the parties agree that the evidence should be taken by video link.  There will be extra time and costs involved, but I do not see them as excessive in the circumstances.

23.  Overall, it seems to me that if the witnesses are not cross-examined, there will be a real risk of injustice to the plaintiff, and therefore the discretion should be exercised in the plaintiff’s favour, so as to order cross-examination.