DENNIS KWOK HON MING v. POON SUI CHEONG ALBERT AND ANOTHER

HCMP 1526/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1526 OF 2013

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MISCELLANEOUS PROCEEDINGS NO 1527 OF 2013

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MISCELLANEOUS PROCEEDINGS NO 1528 OF 2013

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REASONS FOR DECISION

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1.  Following my judgment dated 14 December 2016 on the Petitioner’s unfair prejudice petitions, by which I ordered the Majority Shareholders to buy‑out the Petitioner’s shares at value to be fixed (“the Main Judgment”), there have been several applications for directions relating to the valuation process. I refer to my orders and related decisions dated 21 February, 15 March, 6 April, 13 April, 7 July and 3 August 2017. In particular, by order dated 15 March 2017, I ordered that the Petitioner’s shares be valued by Deloitte and Colliers (“the Valuer”). I will use the abbreviations used in the aforementioned decisions.

2.  On 26 October 2017, there were listed before me three summonses.  Two related to the valuation process.

(a) The Majority Shareholders’ Summons dated 25 August 2017 to adduce the expert report of Mr Cullen (“the MS’ Summons”);

(b) The Petitioner’s Summons dated 29 August 2017 seeking an order for a supplemental report from the Valuer (“P’s Summons”);

(c) A summons dated 12 September 2017 by the 9^th Respondent in each of the three petitions (“the Companies”) for an order for the Petitioner to deliver up identified documents including original title deeds relating to the Land within 28 days (“the Companies’ Summons”); along with a summons dated 19 October 2017 to amend the Companies’ Summons (“the Amendment Summons”).

3.  On 26 October 2017 I made the following orders:

(a) The MS’ Summons be adjourned in order to enable the Majority Shareholders to file evidence in support; with directions for consequential evidence; and costs of and incidental to the adjournment to the Petitioner.

(b) P’s Summons be dismissed with costs to the Majority Shareholders with certificate for two counsel.  I also directed that if the Petitioner wished to apply for leave to adduce further expert evidence, the application was to be made within 21 days supported by evidence (with consequential directions).

(c) As to the Companies’ Summons:

(i) The Amendment Summons be allowed, with costs of and incidental thereto to the Petitioner.

(ii) The Companies’ Summons (as amended) be adjourned to a date to be fixed with a time estimate of 2 hours; with costs of and incidental to the listing of the Companies Summons on 26 October 2017 to be to the Petitioner.

4.  I now record my reasons for these orders.

The MS’ Summons

5.  The MS’ Summons was not supported by evidence.

6.  The Majority Shareholders’ primary submission is that the appointment of the Valuer was the appointment of a court‑appointed expert pursuant to Order 40 of the Rules of the High Court (“RHC”), and a further expert report may be adduced without leave pursuant to RHC Order 40, rule 6.  Alternatively, the Majority Shareholders submit that if the appointment of the Valuer was pursuant to RHC Order 38, rule 4A (evidence by a single joint expert), then leave should be granted to adduce a further expert report pursuant to Order 38 rule 36..

7.  No evidence has been filed by the Majority Shareholders, in particular, in respect of what led to the appointment of the Valuer.  My review of the Court file and the parties’ submissions to the Court prior to the 15 March 2017 order indicated a common intention to seek the Court’s assistance with the appointment of a single joint expert (“SJE”).  I expressed my concern that this had not been addressed in evidence in support of this application.

8.  It is common ground that if the appointment of the Valuer was pursuant to Order 38, rule 4A (and not Order 40) of the RHC, then leave is required to adduce any further expert evidence.

9.  The appointment of a SJE, whether by agreement between the parties or imposed by the Court, does not per se bar a party from seeking leave to instruct its own expert to challenge the SJE’s evidence or aspects thereof: Daimler AG v Leiduck (re: expert evidence)[2014] 3 HKLRD 56 at para 32.

10.  Leave should and would be granted if, upon balancing all relevant considerations, it is just and accords with the underlying objectives of the Civil Justice Reform to do so: Daimler at para 33.  Relevant considerations are set out in Daimler at paras 34 – 38.

11.  Essentially, if leave is required, there is a case management decision to be made having regard to the circumstances as to whether it is appropriate to allow further evidence.

12.  In this case, it seems reasonable to infer that whereas the Majority Shareholders and the Petitioner both agreed to a single valuation panel (whether by way of SJE or court‑appointed expert is still disputed by the parties and to be clarified) to produce a valuation of the Petitioner’s shares, once the valuation was given, neither the Majority Shareholders nor the Petitioner were entirely happy with the conclusion of the Valuer in respect of the Land value.  The Majority Shareholders want to adduce the Cullen Report, and the Petitioner wants to require the Valuer to provide additional opinion evidence.

13.  The notes at Hong Kong Civil Procedure 2017 38/4A/6 address the question of what happens if one of the parties is unhappy with the report of a SJE and wants to instruct another expert.

14.  The Cullen Report canvases matters which demonstrate that the Valuer’s valuation in respect of the Land was grossly excessive, to the tune of some HK$68 million.  This is a very significant difference from the Valuer’s conclusions, and, at first blush, suggests that the interests of justice require serious consideration to be given to granting leave for further expert evidence in order to test the Valuer’s opinion.

15.  However, in the absence of supporting evidence for the MS’ Summons, it is not possible to tell whether the Cullen Report was produced on the same basis and with the same information as the Valuer’s report.  There has already been a lengthy valuation process by the Valuer with the parties being entitled to provide information and also to raise questions on the draft report before it was finalized.  If the Cullen Report has been produced on a different factual basis from the Valuer’s report, that would be a significant factor against allowing the Cullen Report to be adduced.

16.  Mr Joffe as counsel for the Majority Shareholders sought an adjournment to file evidence in respect of the nature of the appointment of the Valuer, as well as the reasons why leave should be granted for the Cullen Report to be adduced.  The Petitioner opposed the adjournment and sought dismissal of the MS’ Summons.  Given the significance of the apparent discrepancy in valuation of the Land, I considered it appropriate that an adjournment should be allowed for proper supporting evidence to be filed.  However, the failure to produce appropriate evidence was entirely the Majority Shareholders’ fault, and so they have to bear the burden of the costs thrown away.

P’s summons

17.  P’s Summons seeks an order that the Valuer be required to produce a supplemental report which addresses the development potential of the Land.

18.  The fundamental problem with the application is that the Valuer has already addressed development potential in the report.  This may be seen at Section 5 of the Final Report dated 23 June 2017.  The Petitioner’s complaint is really that he does not agree with how the Valuer has taken account of development potential.  However, this is not the same as a failure of the Valuer to address an issue; rather, the Petitioner disagrees with the Valuer’s opinion.

19.  In my view, the appropriate course for the Petitioner if he seeks to challenge the Valuer’s report is to consider doing so either by way of cross‑examination or by way of seeking to adduce a further expert report in respect of the relevant issues.

20.  The Petitioner then submitted that the Valuer had been influenced by the Majority Shareholders.  I was not shown any evidence to substantiate that assertion.  Rather, it appeared that both the Petitioner and the Majority Shareholders made use of their opportunity to make submissions to the Valuer, and the Valuer then proceeded to express a conclusion.  In any event, if the Valuer’s opinion is not correct, for whatever reason, then the Petitioner can consider challenging it.

21.  With respect to the Petitioner’s assertions of apparent bad faith of the Majority Shareholders during the valuation process, I note that the Petitioner has already raised a similar complaint during the hearing on 3 August 2017 to the effect that the Valuer was not being provided with accurate information by the Majority Shareholders.  That led to directions for a formal application to be made if the Petitioner wished to pursue the same, but the Petitioner elected not to do so.

22.  I see no jurisdictional nor factual basis upon which to make the order sought by the Petitioner.  Accordingly, I dismissed P’s Summons with costs to the Majority Shareholders.  Although opposed by the Petitioner, I granted certificate for two counsel.  Whilst P’s Summons by itself is not particularly complex, there was a jurisdictional problem with the application being made by the Petitioner (without legal representation) and the application has to be seen in the context of the MS’ Summons and case management of the valuation process, which matters were already being addressed at the hearing by the Majority Shareholders represented by at least two counsel.

23.  I made directions to give the Petitioner an opportunity to seek leave to adduce expert evidence to challenge the Valuer’s report if he sees fit, with a view to such application being heard with the MS’ Summons.

The Companies’ Summons

24.  The Companies’ Summons was listed to be heard with the aforegoing 2 summonses despite the time estimate not being increased.  As long as the Companies’ Summons was going to be contested, it should have been clear that there would not be sufficient time to deal with it at the same hearing.

25.  In addition, the Companies failed to provide their substantial skeleton argument with authorities to the Petitioner in good time prior to the hearing.

26.  Accordingly, the Companies’ Summons was adjourned to a date to be fixed with a time estimate of 2 hours with costs to the Petitioner.