RICK COWLEY and WONG WING SZE TIFFANY (JOINT AND SEVERAL TRUSTEES IN BANKRUPTCY OF THE PROPERTY OF LAU YU ALSO KNOWN AS JAFFE LAU v. ALL POWERFUL HOLDING LTD AND ANOTHER

HCA 2289/2018

[2022] HKCFI 250

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2289 OF 2018

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BETWEEN

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REASONS FOR DECISION

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1.  This is an appeal by the Defendants from a Master’s decision who ordered that the Supplemental List of Documents dated 21 April 2021 of the 1^st and 2^nd Defendants (“SLOD”) be expunged and excluded from trial.

2.  At the conclusion of the hearing, I dismissed the appeal with reasons to be handed down later. These are my reasons.

3.  These proceedings are commenced by the trustees in bankruptcy of Mr Jaffee Lau (“the Bankrupt”) to avoid a share transfer by the Bankrupt of his 1 ordinary share in the 2^nd Defendant to the 1^st Defendant which took place on 20 January 2015. The main issue in this case is whether the share transfer was for valuable consideration, and whether it amounted to a disposition with an intent to defraud creditors.

4.  The SLOD covers three documents:

a. Valuation Report dated 11 November 2020 for the value of the Luoyang Property as at 31 December 2014;

b. Review Report dated 18 December 2020 for the 9 months ended 31 December 2014; and

c. Loan Agreement dated 11 November 2014.

5.  Leave to file expert evidence has been granted in this case. On 17 September 2020, the parties exchanged their expert reports, and a without prejudice meeting between the experts took place on 28 October 2020.

6.  During that meeting, the Defendants indicated that they intended to rely on various new documents. These included the 3 documents covered in the SLOD. The Plaintiff objected to the production of these documents since the Plaintiff’s expert was not able to consider them in his expert report.

7.  As a result, the parties were unable to complete the joint expert report, and the matter came before a Master. The Master observed that the joint expert report was not intended to be an opportunity for the experts to adduce new evidence. This was plainly correct in my view. This led the Defendants to issue a summons dated 22 January 2021 for leave to adduce a Supplemental Expert Report, together with the 3 documents (“Supplemental Expert Summons”).

8.  The Supplemental Expert Summons was withdrawn by the Defendants, and a consent order was made on 16 April 2021. The joint expert report was then filed on 19 April 2021.

9.  However, the Defendants then filed the SLOD on 21 April 2021. The Plaintiff objected to this, and took out an application on 15 June 2021 that the SLOD be expunged and excluded from trial. The Master granted the order sought by the Plaintiff. It is from this order that the Defendants now appeal. It is common ground that this appeal is a fresh hearing.

10.  For the Plaintiff, Mr Ludwig Ng argues that it is an abuse of process for the Defendants to seek to introduce the SLOD in circumstances where the Defendants withdrew its Supplemental Expert Summons. In particular, the Defendants are now attempting to adduce the same documents which they sought to adduce in a previous summons which was abandoned.

11.  Mr Tom Cheung, for the Defendants, argued that the 3 documents were relevant to the preparation of the expert reports, they were also relevant documents in his clients’ possession, and that their production was justified by the continuing obligation of discovery. In addition, he contended that the Valuation Report and Review Report were not expert evidence as such.

12.  Having heard the respective submissions by the parties, I agree with the submissions of the Plaintiff. In my judgment, I am not satisfied why the Defendants should be entitled to rely on, or refer to, these documents in circumstances where they withdrew the Supplemental Expert Summons. By issuing that application, the Defendants is taken to accept that the 3 documents should be dealt with by the respective experts. However, the Defendants have decided not to pursue the Supplemental Expert Summons.

13.  In my judgment, to allow the SLOD to stand would be unsatisfactory. Expert evidence has been completed, and if the documents were allowed to be referred to at trial, the Plaintiff’s expert would not be given an opportunity to consider and give an opinion on these documents. Obviously, having a further round of expert evidence is not an option since the Defendants no longer pursue that.

14.  There is no explanation for the late discovery of these documents. Mr Cheung mentioned that there was an injunction imposed, and this caused difficulties for the Defendants to adduce documents. However, this was not supported by any evidence. As such, I am unable to take this explanation into account.

15.  I am informed by Mr Ng that, although the matter has not been set down for trial, there are no further steps required to be taken apart from this appeal. In my view, there is a real risk that allowing the SLOD will cause further delay to the action, which is contrary to the prompt resolution of this dispute which was commenced in 2018. For example, the loan agreement dated 11 November 2014 is not referred to by the Defendants in their witness statements. Further rounds of witness evidence at this late stage would obviously be undesirable.

16.  Although the parties are subject to a continuing obligation of disclosure, that is not a blank cheque for late discovery. Nor does it provide any satisfactory answer to the abuse of process point raised by the Plaintiff.

17.  For these reasons, I dismissed the appeal. I granted a summary assessment of costs payable by the Defendants to the Plaintiff forthwith for HK$76,650. I was satisfied the sum was reasonable, and Mr Cheung confirmed that there was no objection to the amount claimed by the Plaintiff.