YANG SONG v. CHEN HUA CHIH

HCA2491/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2491 OF 2008

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BETWEEN

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J U D G M E N T

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1.  This is an appeal against the decision of Master Levy on 31 January 2011 in which he dismissed the plaintiff’s application for leave to adduce expert evidence on PRC law from Professor Guo Feng.

2.  Between 1993 and 1996 the defendant carried on a business in Hong Kong called Eastasia International (Hong Kong) Industrial Company (“Eastasia”).  That business was deregistered in Hong Kong in 1996 but it appears it continued trading in the PRC under that name. 

3.  In December 1993 when the business was still registered in Hong Kong the defendant entered into a joint venture with an entity I shall simply called “Guiyang” for short.  By it Eastasia, his business, was to hold 60% of the shares of that joint venture with the defendant as the chairman.  One of the terms was that in the event of the defendant wishing to transfer his interest, the consent of Guiyang was required and Guiyang had the option to purchase the shares. 

4.  In October 2005, the defendant entered into an agreement with the plaintiff whereby he was to transfer all rights and liabilities, i.e. his interest in the joint venture, to the plaintiff but the defendant says that agreement was subject to the joint venture agreement with Guiyang.  In January 2007, when the defendant found himself unable to fund the joint venture anymore, he agreed to transfer his 60% holding in the joint venture to his Guiyang partner in accordance with the original agreement of 1993.  The plaintiff regarded this as a breach of the agreement of October 2005 with himself and he issued proceedings in Hong Kong.  The defendant, at some stage, sought to challenge the jurisdiction of the Hong Kong court but failed to do so.

5.  The plaintiff’s claim in effect is that the defendant in breach of the transfer agreement with him, had transferred his interest to Guiyang and amongst the issues are the plaintiff’s reliance upon the written agreement in Chinese and two written declarations, the plaintiff’s allegation that he paid RMB220,000 as part of the agreement, the consequent allegation the defendant failed to honour the agreement with the plaintiff, and the allegation that Guiyang did not have a right to preemption.  One of the questions posed is : did the plaintiff have notice of the right to preemption? The plaintiff claims an order for specific performance, which would obviously affect Guiyang who has not been made a party to the proceedings, and damages. 

6.  The plaintiff uses, as his designation of the defendant’s business in the PRC, “Eastasia in PRC” but that seems to be no more than a shorthand description for the plaintiff’s convenience.  The defendant says there is no such entity.  Whether or not that is a significant dispute will no doubt dealt with.  It is for the trial judge to decide.  The defendant says the plaintiff well knew of the preemptive right of Guiyang and that he, the plaintiff, had to obtain approval from Guiyang for the transfer to the plaintiff and had to provide funds for the joint venture.  The defendant says he failed to do so and so the interest was transferred to Guiyang in accordance with the original agreement. 

7.  It is now I think much more convenient, sensible and concise if I go directly to the decision of Master Levy starting at the bottom of page 40 of the transcript :

“Before discussing the issues of the claim, I find it useful to highlight several salient features of Yang’s Claim:

(1) He is suing Chen as an individual in Hong Kong and Eastasia is not a party to the claim.

(2) The agreement between the parties and the two declarations were prepared by Hong Kong lawyers.

(3) Some of the terms as pleaded in the re-amended statement of claim, such as the payment by the plaintiff of renminbi 220,000 under the said agreement, were not written in the agreement.

(4) Although it is alleged that the agreement of the year 2007 by which Chen sold and transferred Eastasia’s interests was invalid, Yang has not asked for the setting aside of the said agreement.

(5) The specific performance would affect the interest of the joint venture partner which is a PRC entity and it is not a party to the Hong Kong proceedings.

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In the re-amended statement of claim, Yang had described the business Chen conducted in the PRC in the name of Eastasia as ‘Eastasia in PRC’. There is in fact no company registered in the name of Eastasia PRC, hence ‘Eastasia in PRC’ was only a description for the sake of identifying the business Eastasia conducted in the PRC and it does not have any separate status as counsel described.

Further, Chen was the sole proprietor of Eastasia and it is trite law, as Chen reiterated by his first Chinese declaration, that all the interests and liabilities of Eastasia were that of Chen’s alone. Hence all interests and liabilities of Eastasia in the joint venture agreement would belong to Chen personally.

I do not find the proposed expert evidence either relevant or useful.

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In the draft expert report, it is observed that the professor himself has appeared to have taken on the role of interpreting the terms and effect of the agreement and the two declarations which, in my view, should not be within the purview of an expert and such evidence should not be admissible. Interpretation of the agreement is a matter for the trial judge. As for the PRC law, the professor has only alluded to the PRC law that, despite Eastasia having ceased business, their liabilities are personal to that of Chen.

As I have highlighted previously, the written terms of the agreement were in fact very brief and there are other unwritten terms that the parties have pleaded. Hence, should there be any issue on the subject matter of transfer and the full terms and effect of the agreement between the parties, I think it will be a matter for the trial judge.

Similarly I do not think the PRC law would be useful.”

and (page 43) :

“The essential issue in dispute is whether Chen had allegedly breached the agreement and, should it be found he had, appropriate relief to be granted.

Since Yang has only sued Chen, who is a Hong Kong resident, and no relief is sought against any PRC party, I do not find it be necessary to apply PRC law to decide whether Chen had been in breach, the terms and effect of the agreement, and the validity of the year 2007 transfer agreement Chen entered [into] with the joint venture partner.

Further, as I have observed above, a lot of matters contained in the draft report contain the expert’s personal opinion and his subjective interpretation, rather than giving opinion on PRC law, which are really bordering on the verge of the expert usurping the function of the court rather than giving purely legal opinion to assist the court in arriving at a just resolution of the disputes.

For the reasons stated above, I do not find the proposed expert is relevant …”

8.  Expert evidence is not needed and in any event, as Master Levy indicated, although Professor Guo Feng is an expert, much of his report is concerned with issues which are for the judge to determine.  That is not the role of an expert. Accordingly I dismiss this appeal with costs.