HIGH FASHION GARMENTS CO LTD v. NG SIU TONG AND OTHERS

HCA 12093/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 12093 OF 1999

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R U L I N G

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1. This is an application for the admission at the trial of this action of the evidence of Lam Pik Yue ["Lam"] by way of affirmation. In the summons of 29 April 2003, the application was made under Order 38 Rule 2. In the course of argument, Mr Yu (counsel for the Plaintiff) advanced an alternative argument that apart from Order 38 Rule 2, the affirmation should be admitted as evidence by virtue of Section 47 of the Evidence Ordinance. A hearsay notice dated 16 April 2003 has been served in respect of that affirmation.

2. The witness was a former director of the Plaintiff and had been the superior of Mr Lau Kam Wing ["Lau"]. Lau was the wholesale manager of the Plaintiff and his duties included the sale of stocks in the warehouse of the Plaintiff. It is the Plaintiff's case that Lau had misappropriated stocks of the Plaintiff and sold the same to, inter alias, the Defendants. The Defendants operated a business of local sale of stock garments. The Plaintiff alleged that the Defendants were dishonest and were aware of or should be aware of the stolen nature of those goods. The Plaintiff claimed compensation from the Defendants under the equitable principles of "knowing receipt" and "knowing assistance". On the other hand, the defence case is that those transactions were ordinary sale of stocks and they at all material time dealt with Lau in good faith.

3. The Defendants intend to call Lau as a defence witness. According to the witness statement of Lau, Lau would testify that he was assigned by Lam to sell the stocks of the Plaintiff and there was an occasion when Lam sold the same at very low prices to dispose of stock garments of poor quality. Lau therefore did accordingly. Also when the stock accumulated to a large quantity, Lam would urge Lau to dispose of the stock locally and Lau would sell the same at lower prices. Initially, Lau needed to obtain Lam's approval as to the selling prices for stock. Later on, Lam was too busy to be involved and the matter was left in Lau's hands. If Lau's evidence were accepted as truthful, that would assist the Defendants in showing their bona fide because the Plaintiff is relying on the low levels of prices of goods sold to the Defendants and the absence of approval of the selling prices by Lau's superior as evidence of irregularities.

4. The Plaintiff therefore prepared evidence from Lam to refute the evidence of Lau. However, Lam resigned from the Plaintiff in 1996 and emigrated to Singapore. She is now living with her family in Singapore. Due to the current crisis involving SARS in Hong Kong and Singapore, she is unwilling to travel to Hong Kong to testify. Hence, the Plaintiff applied for her evidence to be admitted by way of Affirmation.

5. Lam's evidence is, in my judgment, quite important. Amongst the other witnesses called by the Plaintiff, two joined the Plaintiff in 1997. The material transactions took place between 1995 and 1998. Hence, in many respects, these two witnesses could only give evidence based on documents and for some reasons the trial bundles do not include a complete set of all relevant documents relating to the sale and delivery of stock garments. Although the third witness has been employed by the Plaintiff since September 1994, she was in another department. According to her evidence, she learnt from Lam about the proper procedures concerning the sale of stock though she had no personal involvement until 2001. Lam appeared to be the only witness of the Plaintiff who had direct and personal involvement in the matter up to her resignation in 1996.

6. I have invited the parties to consider the taking of the evidence of Lam through video-link. If such a course were adopted, Lam would not be required to travel to Hong Kong and the Defendants would still be able to cross-examine her. The Defendants were agreeable to such a course but the Plaintiff rejected the suggestion due to possible delay of the trial.

7. The Defendants are faced with very serious allegations. As mentioned, the evidence of Lam could have significant impact on the case. In the exercise of my discretion under Order 38 Rule 2, I must take into account of the legitimate interest of the Defendants in cross-examining crucial witnesses. In my judgment, on balance, the Defendants in the present case should not be deprived of such an opportunity when cross-examination could be achieved through video-link although this might result in some delay of the trial. It seems to me that in any event, the trial could not be completed within the 6 days allocated to the case. I am of the view that the potential prejudice to the Defendants caused by the lack of opportunity to cross-examine Lam must outweigh the prejudice to the Plaintiff caused by delay stemmed solely from making necessary arrangement for cross-examination of Lam.

8. Subject to the point relating to Section 47 of the Evidence Ordinance, I am minded to allow the Plaintiff to read the affirmation of Lam as evidence at the trial on condition that the Plaintiff shall procure Lam to attend a designated venue in Singapore at specified time for cross-examination by counsel for the Defendants through video-link.

9. I turn to Mr Yu's submission under Section 47 of the Evidence Ordinance. Since this action was commenced after the Evidence (Amendment) Ordinance 1999 had come into operation, the position of hearsay evidence is governed by the new rules. Section 47 is in the following terms,

"(1) In civil proceedings evidence shall not be excluded on the ground that it is hearsay unless-

(a) a party against whom the evidence is to be adduced objects to the admission of the evidence; and

(b) the court is satisfied, having regard to the circumstances of the case, that the exclusion of the evidence is not prejudicial to the interests of justice.

(2) The court may determine whether or not to exclude evidence on the ground that it is hearsay-

(a) in the case of civil proceedings before a jury, at the beginning of the proceedings and in the absence of the jury;

(b) in the case of any other civil proceedings, at the conclusion of the proceedings.

(3) Nothing in this Part shall affect the admissibility of evidence admissible apart from this section.

(4) The provisions of sections 48 to 51 shall not apply in relation to hearsay evidence admissible apart from this section, notwithstanding that it may also be admissible by virtue of this section."

10. Section 48 provides safeguards to a party against whom hearsay evidence is adduced.

"Rules of court may provide that where a party to civil proceedings adduces hearsay evidence of a statement made by a person and does not call that person as a witness-

(a) any other party to the proceedings may, with the leave of the court, call that person as a witness and cross-examine him on the statement as if he had been called by the first-mentioned party and as if the hearsay statement were his evidence in chief;

(b) any party to the proceedings may call additional evidence to attack or support the reliability of the hearsay statement or to attack or support the reliability of that additional evidence."

The relevant rule is Order 38 Rule 21.

11. Hence, even if Mr Yu were correct in contending that the Plaintiff can rely on Section 47 to adduce the affirmation of Lam as evidence, the Defendants could apply to call Lam as a witness for cross-examination. In the light of my above analysis, if I agree with Mr Yu's submission on Section 47, I shall be inclined to exercise my discretion in the present circumstances to accede to such an application by the Defendants. Rule 21 (2) empowers this court to give directions to secure the attendance of Lam for this purpose. As I said in another context in Ip Man Shan Henry v Ching Hing Construction Co. Ltd. [2003] 1 HKC 39, with the advance in technology and the commencement of operation of the Technology Court, attendance should include attendance at venue other than the court building for the purpose of giving evidence at trial through video-link. I am of the view that Rule 21 (2) is wide enough to give this court the power to direct the Plaintiff to procure the attendance of Lam for cross-examination through video-link.

12. I hasten to add that each case must depend on its own facts and circumstances. In holding as I did in Paragraph 11 above, I am not suggesting that in every case where a party seeks to adduce hearsay evidence, the other party would be entitled to seek an order from the court directing the former party to procure the attendance of the maker for cross-examination. Such a proposition is plainly untenable and would probably defeat the main purpose of the Evidence (Amendment) Ordinance 1999 to further liberalize the admission of hearsay evidence. The discretion must be exercised in the light of, amongst other things, the impact of that piece of hearsay evidence, the relationship of the maker with either party, the history of the case, the practicalities as to the procurement of the maker to give evidence and other relevant considerations. I am of the view that the factors set out in Section 49 of the Evidence Ordinance (albeit in the context of weighing hearsay evidence) would also be relevant.

13. Therefore, in the circumstances of the present case, it makes little difference whether Mr Yu was correct in his contention on the effect of Section 47. However, since the argument has been advanced, in deference to the efforts of Mr Yu, I would also give my reasons for ruling against Mr Yu on this point. I come to the conclusion that although the affirmation of Lam could be said to be a "statement" and "hearsay" within the definitions for those terms under Section 46 of the Evidence Ordinance, the Plaintiff cannot rely on Section 47 to escape from the directions given by court under Order 38 Rule 2.

14. One might observe that if Mr Yu were correct in his construction of Section 47, there could be far-reaching consequences in the conduct of civil litigation. Directions for cross-examination on affidavits could be given not only under Order 38 Rule 2, but also under Order 28 Rule 4 in originating summons proceedings. Similar directions are often given in the context of proceedings in the Companies Court and the Bankruptcy Court. If Section 47 prevails over these directions, a litigant could simply ignore such directions and insist that his affidavits be admitted as evidence. If that were so, there is simply no point to retain these rules in our Rules of the High Court and all affidavit evidence should be dealt with under the regime in Part IV of the Evidence Ordinance. But I am not aware of such a change in practice after the enactment of the Evidence (Amendment) Ordinance 1999 and I doubt very much whether this was the intention of the legislature.

15. In my judgment, Section 47 does not bestow a litigant a right to ignore or disregard directions given by court as to cross-examination of deponents of affidavit evidence. Section 47(1) only removes one obstacle as to admission of evidence, viz. exclusion of evidence on the ground of hearsay. It does not deal with other restrictions, including procedural restrictions laid down by other rules embodied in the Rules of the High Court and directions given by court for conduct of the case. Section 55B (1) of the Evidence Ordinance reinforces this conclusion.

16. Section 47(4) also makes it clear that the regime in Part IV of the Evidence Ordinance is not applicable to hearsay evidence that could be admissible under other avenues, notwithstanding that it may also be admissible under Section 47(1). Hence, affidavit evidence should continue to be governed by Order 38 Rule 2 and Order 28 Rule 4(3) and other applicable rules specifically catered for the same in other civil proceedings instead of Section 48 and Order 38 Rule 21.

17. Similar conclusions were reached in England under the old rules, see Rover International v Cannon Films Sales [1987] 1 WLR 1597 at p.1603 H to 1604E and Re Dominion International Group Plc [1995] 1 WLR 649 at p.654G to 655E. For reasons given above, I am not satisfied that the changes implemented by Evidence (Amendment) Ordinance 1999 entail changes in respect of practice and procedures for admission of affidavit evidence.

18. Mr Yu submitted that in any event, I should not determine the admissibility of the affirmation under Section 47 at this stage because non-compliance with the conditions the court may impose under Order 38 Rule 2 cannot be conclusive on the admissibility under Section 47. Since my conclusion is that Section 47 does not override the court's power to exclude evidence in terms of restrictions imposed under Order 38 Rule 2, I do not agree. Moreover, even if I were wrong in that regard, my view is that admissibility under Section 47 should be dealt with at this stage because the Defendants might avail themselves of Section 48 to ask for cross-examination of Lam. As indicated above, in the context of the present case, this court will achieve the same result under Order 38 Rule 21.

19. I therefore rule in accordance with what I said in Paragraph 8 above. I will hear parties on the directions that I should give for the use of the Technology Court for cross-examination of Lam.