LAM YEE HUNG v. CHINACHEM CHARITABLE FOUNDATION LTD

HCA 764/2015

[2022] HKCFI 329

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 764 OF 2015

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REASONS FOR DECISION
AND
DECISION ON COSTS

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1.  There were two summonses before this court. One was taken out by the defendant for extension of time for filing various witness statements purportedly pursuant to the order of this court made on 9 November 2021. The defendant went ahead to have those statements filed before the present hearing, and therefore the application became effectively one for retrospective extension of time. This met with the plaintiff’s summons for those statements of the defendant and documents disclosed by its two further lists of documents to be expunged. At the end of the hearing, this court granted the order sought by the plaintiff. These are my reasons.

Background

2.  The backdrop of the present case was the litigation between Chan Chun Chuen and the defendant in respect of the validity of the will of the late Nina Wang commenced back in 2007.  In the present case, the plaintiff claims to have provided money to the defendant in funding the latter’s conduct of that litigation.  The major dispute is whether such funds said to have been caused by the plaintiff to be deposited in the names of different parties with the defendant on divers dates in 2009 were loans to the defendant, as the plaintiff contends, or unconditional donations to the defendant, as the defendant contends.

3.  The plaintiff’s case is premised on an oral agreement between the plaintiff and Dr Kung Yan Sum (“Dr Kung”), chairman of the board of the defendant, during certain meetings in 2009.  The defendant denies the existence of the meetings, and hence any agreement, at all, and avers that the deposits in question were all recorded as unconditional donations in its financial records.

4.  The trial of this case was then due to commence in less than two weeks, that was 18 January.

5.  By the time of the pre-trial review, the parties have filed statements of their witnesses in the following chronological order:

(1)  the statement of the plaintiff (“P-1^st”);

(2)  the statement of Chan Kam Por (“Chan”)  for the defendant;

(3)  the statement of Dr Kung Yan Sum (“Dr Kung”)  (“Dr Kung-1^st”)  for the defendant;

(4)  the supplemental statement of the plaintiff (“P-2^nd”);

(5)  the supplemental statement of Dr Kung (“Dr Kung-2^nd”)  for the defendant;

(6)  the second supplemental statement of the plaintiff (“P-3^rd”); and

(7)  the second supplemental statement of Dr Kung (“Dr Kung-3^rd”)  for the defendant.

6.  The pre-trial review was heard before this court on 29 September 2021.  The legal representatives then newly coming on record to act for the plaintiff indicated that he would apply for leave to call a new witness.  The application for leave to adduce the witness statement of this new witness was subsequently taken out on 12 October 2021.  Further incidental discovery was also made.

7.  The plaintiff’s application was eventually resolved by consent of the parties.  On 9 November 2021, this court gave leave to the plaintiff to adduce the witness statement of Pang Chun Sing (“Pang”)  with consequential leave to the defendant to file and serve on or before 26 November 2021 its further supplemental witness statements in reply to the matters raised by the Pang’s statement and the documents in the plaintiff’s further discovery (“the 9/11/2021 Order”).

8.  On 26 November 2021, the defendant filed a summons for extension of time for filing and serving its further supplemental witness statements pursuant to the 9/11/2021 Order.  That was the defendant’s time summons before this court. The correspondence between the parties’ solicitors recorded that these further witness statements were supplied by the defendant’s solicitors to the plaintiff’s solicitors in the evening of 3 December 2021.  They consisted of:

(1)  the third supplemental statement of Dr Kung (“Dr Kung-4^th”);

(2)  the statement of Woo Kwok Hang (“Woo”); and

(3)  the statement of Madam Kung Yan Sum (“Madam Kung”).

9.  As mentioned, the defendant’s solicitors went ahead to file the above witness statements on 6 December 2021 before its time summons was heard.  They did so after much heated argument with the plaintiff’s solicitors by way of correspondence.  The parties also saw fit to engage this court in such argument by way of correspondence.

10.  This manner of engaging the court in the parties’ argument by correspondence has repeatedly been criticized by the court of the first instance and the appellate level from time to time. This caused this court to have to point that out in writing to the parties in December 2021, and to point that it would be for the parties, being legally advised, to consider if any application should be taken out.

11.  Hence the plaintiff’s summons taken out on 3 January 2022 now before this court.

12.  Everything stemmed from the 9/11/2019 Order. Whether or not the further witness statements filed by the defendant were legitimate depends on whether they served no more than replying to the matters raised by Pang’s statement and the plaintiff’s further list of documents filed pursuant to that order.  The stance of the defendant was that all its further witness statements and further discovery fell within the ambit of that order. All it needed was (retrospective)  time extension for their filing.

13.  The plaintiff disagreed.  By his summons, the plaintiff applied for the expunging of:

(1)  Woo’s statement;

(2)  Madam Kung’s statement; and

(3)  parts of Dr Kung-4^th that refer to (1)  and (2)  above.

14.  The plaintiff also sought to expunge the documents disclosed by way of the two further lists of documents filed by the defendant.

15.  Alternatively, in the event that leave was given to retain Woo’s witness statement for reliance by the defendant at the trial, the plaintiff would seek leave to file and serve a further statement of Pang and a statement of a new witness Mao Lai Wai on the basis that they would be necessary to specifically address the new matters raised by Woo’s statement.

The principles

16.  It is the case management discretion of the court.  Counsel referred to various authorities in their submissions.  All the circumstances of the present case have to be taken into account.  Amongst others, the state of the evidence by the time of the 9/11/2021 Order, the matters covered by Pang’s statement, the ambit of the 9/11/2021 Order, the evidence intended to be adduced by the further witness statements and discovery by the defendant as well as the limited time prior to the forthcoming trial were the particularly relevant to this court’s exercise of discretion.

The witness statement of Pang

17.  Pang and his involvement in the present case were actually set out in the existing witness statements of the plaintiff, which the defendant, if so advised, has had the opportunity of addressing even before the plaintiff sought leave to also call Pang as a witness.  By his witness statement, which is 4-page long consisting of 14 paragraphs, Pang intends to give first-hand evidence of his involvement at the trial.  As counsel for the defendant described it during his submission, this would mainly serve to corroborate the evidence of the plaintiff in those respects of his case.

18.  In summary, Pang gives an account of the following matters:

(1)  his mutual friendship with the plaintiff and the late Tsui Tsin Tong (“Tsui”)  and how he came to know Dr Kung of the defendant through Hui Yip Wing (“Hui”);

(2)  the discussion initiated by Tsui during their meal gathering at China Club, Central, attended by him and the plaintiff in 2008 about the defendant’s urgent need for funds for the litigation with Chan Chun Chuen;

(3)  how the three of them, including the plaintiff, went about the assembly of funds from various sources within and outside Hong Kong;

(4)  his presence in a meeting in early 2009 at China Club, which was attended by Tsui, the plaintiff, Dr Kung and Hui when a loan of about HK$40-50 million and its terms, including interest, to the defendant was discussed;

(5)  his subsequent discussion with the plaintiff regarding interest of the loan;

(6)  after the oral agreement between the parties for the loan has been reached, his assisting the plaintiff, who was not in Hong Kong, to arrange the funds secured by the plaintiff from his various sources as well as to deposit the same in various sums and in the names of various third parties, including the Kan couple and their company Ray IH Limited, into the bank account of the defendant on divers dates in 2009; and

(7)  subsequent to the deposit of a total sum of HK$42,850,000 to the defendant, his conversation with Hui as well as knowledge from the plaintiff and the Kan couple about the absence of any written acknowledgement of the loan by the defendant to anyone of them.

19.  The matters mentioned under §18(1)  and (2)  above did not involve anyone from the defendant, and were already mentioned in P-1^st. Dr Kung and the plaintiff came to know each other through Hui (who was then a member of the board of the defendant).  There is dispute as to the occasion and venue when that happened, but such dispute was already addressed by Dr Kung-1^st and P-2^nd.

20.  Part of the matters mentioned under §18(3)  above may be said to be newly raised, but their alleged happening involved no one from the defendant.

21.  The matters mentioned under §18(4)  above constitute the major dispute between the parties.  However, the meetings in 2009, including the one which was attended by Pang, and what happened during those meetings were already mentioned and addressed by P-1^st, Dr Kung-1^st, P-2^nd, P-3^rd and Dr Kung-3^rd.  Importantly, Dr Kung in his statements consistently denies the existence of any of the meetings in 2009 at all.

22.  The matters mentioned in §18(5)  above may be said to be newly raised, but again they involved no one from the defendant.

23.  The matters mentioned in §18(6)  above were already mentioned in P-1^st, P-2^nd and P-3^rd. As far as the deposits of the funds into the bank account of the defendant are concerned, the defendant also addressed how they were booked and reflected in its financial records in Chan’s statement, Dr Kung-1^st and Dr Kung-2^nd.

24.  The non-existence of any bilateral written record of the parties and unilateral acknowledgement of the alleged loan by the defendant is undisputed fact.  The matters mentioned in §18(7)  above in this respect were already mentioned in P-1^st.  The matters so mentioned also did not involve anyone from the defendant.

25.  Also mentioned in the statements of the plaintiff and addressed by the statements of Dr Kung and Chan was the executive committee meeting of the board of governors of the defendant on 25 August 2009 which the plaintiff and Pang also attended.  However, Pang made no mention of that in his statement, and therefore no reply in respect of that matter would be called for.

26.  In view of the state of evidence by way of witness statements prior to Pang’s witness statement, what the latter raised in terms of really new issues to which the defendant may need and would be in a position to reply are actually very limited.  However, purportedly for such purpose, the defendant has filed their various witness statements, including those of the following two new witnesses.

Witness statement of Woo

27.  Woo did not propose to give evidence in respect of the any of the matters happened between the parties by the end of 2009 already covered by the existing witnesses.  His statement began by referring to mid-2010 when Pang allegedly approached him for assistance in the development of the defendant in charity with the assistance of the central government in the Mainland.  He went on to describe his effort in rendering such assistance. These matters were irrelevant to the present action and hardly matters in response to the statement of Pang.

28.  Of the entire statement, the only part that might be said to be relevant was Woo’s mention of a meeting on 8 July 2010 at China Club which he attended with the plaintiff, Pang and Dr Kung.  The possible relevance lied in his statement that Pang represented during the meeting that he and the plaintiff has donated tens of millions of Hong Kong dollars to the defendant to fund its litigation and other respects.  However, such part of the statement of Woo was still problematic.

29.  First, the dispute as to the nature of the deposits of funds to the defendant said to be caused by the plaintiff and arranged through Pang was hardly newly raised by Pang.  Second, and importantly, the alleged meeting on 8 July 2010 was nowhere mentioned and did not arise out of the evidence of Pang as per his statement.  If considered relevant, there is no reason why this would not and could not have been raised by Dr Kung in any of his previous witness statements.  As Woo stated, Dr Kung was present at that alleged meeting.

30.  The circumstances were such that it was really the defendant which was seeking to call a new witness to raise a new factual issue.  If allowed, it would have entailed the plaintiff at the receiving end of that to have to respond to that for the first time.  This also explains why the plaintiff’s legal representatives complained about the need to rush up with additional evidence in order to address such new allegation.

31.  Woo’s statement exceeded the ambit of the 9/11/2021 Order.

32.  Further, given the then limited time before the commencement of the trial, it would not be fair and appropriate exercise of discretion to allow the witness statement of Woo even confined to this limited scope of his evidence.  It was somehow argued on behalf of the defendant that no prejudice would be caused to the plaintiff, as he has managed to come up with the necessary further witness statements (as mentioned, including one new witness)  for the purpose of addressing such evidence of Woo.  This was not fair. It was inappropriate for the defendant to effectively take advantage of the prejudice that it has caused to the plaintiff, in terms of forcing the latter to have to rush up with such new evidence within much less than ordinary time and merely out of prudence, to justify its move.

Witness statement of Madam Kung

33.  Madam Kung is the younger sister of the late Nina Wang and Dr Kung.  According to her, she has been the head of administration of the Chinachem Group since the death of her elder sister until 2019.

34.  In summary, Madam Kung’s statement covered the following matters purportedly in reply to Pang’s statement:

(1)  A governor of the defendant has no power under its memorandum and articles of association to commit it to any loan without authorization.  There was no such authorization by the board of governors.  The plaintiff and Pang should have had knowledge about that in view of the accessible information by the general public.

(2)  Referring to the matter mentioned in §18(7)  above, namely the conversation between Pang and Hui after the deposits in question have been made to the defendant, Madam Kung states that she has not learned from Hui about any loan by the plaintiff.

35.  §34(1)  above could not be said to be called for by Pang’s statement.  What it said would have been a matter of the defendant’s internal management.  The defendant has pleaded generally (at §3 of the re-amended defence and counterclaim)  that it is a charitable corporation limited by guarantee permitted to accept charitable donations unless otherwise agreed to by the defendant.  Even if it was argued that the widest possible construction of such pleading might amount to the specific reference to the constitution of the defendant regarding its capacity to borrow, the contention in respect of constructive knowledge on the part of the plaintiff (and Pang)  about all those still lacked the necessary pleading foundation.  The alleged constitutional restriction of the authority of the defendant to borrow was not properly put in issue.  To the extent that the defendant went further to contend constructive knowledge on the part of the plaintiff and Pang, the same was also not properly in issue.

36.  According to Pang’s witness statement, the alleged conversation between him and Hui was personal to them, and the evidence in this respect serves to (partly)  accounted for the undisputed lack of documentary record of the alleged loan agreement between the parties. It was difficult to see how this was a matter calling upon Madam Kung to reply to.  What she stated in this respect also had nothing to do with such alleged conversation.

37.  Admittedly, Madam Kung’s witness statement serves an additional, and probably more important, purpose, namely to replace Chan as a witness for the defendant.  In this respect, Madam Kung stated as follows:

(1)  In her recent contact with Chan on 24 November 2021, Chan refused to testify on the ground that he has left the defendant.

(2)  She would replace Chan as witness for the defendant, and for that purpose adopt and verify the content of Chan’s statement in entirety.

(3)  As an update, she gave the names of the persons newly appointed to the board of the defendant.

38.  It should be noted that Chan made his statement in September 2017 while his last term of alternate governorship at the defendant had already come to an end in March 2017.  Departure from the defendant was hardly convincing as a new development explaining his backing out at this stage.  That aside, the defendant also did not approach the attempt to replace a witness properly.

39.  A proper application supported by explanation by affidavit of the need for the replacement should have been made.  It was to begin with wrong for the defendant to effectively hitch-hike on the 9/11/2021 Order to introduce a witness to replace a witness.  The ambit of the order never contemplated or permitted that.  Despite similar complaint by the plaintiff, the defendant somehow persisted in its stance.  Hence the plaintiff’s present application.

40.  The new witness tendered must still be one who would be in a position to testify from his or her own knowledge and belief, with grounds, as to the matters covered by Chan’s statement.  To prevent prejudice in view of the tight timeframe prior to the trial, what the new witness would testify about must not be permitted to exceed those covered by Chan’s statement.  In other words, it must be true replacement of witness and nothing more.

41.  Apart from being the head of administration of the Chinachem Group, Madam Kung was also a member of the board of the defendant.  However, in the statements of Dr Kung and Chan, the latter was described as the member of the board of governors responsible for the account and finance matters of the defendant.  He was also said to be the one responsible for preparing the relevant records of the defendant for the year 2009.  In such circumstances, it would be for Madam Kung, who was never suggested to be responsible for or involved in such account and finance matters of the defendant, to set out in her own words to what extent and on what basis she herself was in a position to testify as to the matters scheduled to be covered by Chan as the defendant’s witness.

42.  However, all that Madam Kung proposed to do was to adopt the content of Chan’s statement in entirety.  This might sound convenient but gave rise to awkwardness.  Various parts of Chan’s statement referred to his own consideration of documents, report by staff to him personally and his own enquiry made with the other governors that accounted for his observation and views as stated.  These could not be matters that Madam Kung might simply adopt in entirety as her own evidence.

43.  Last, her evidence to update on the appointment to the board of governors of the defendant, albeit apparently harmless, exceeded the evidence that Chan was expected to give.  That also did not arise out of the evidence of Pang.

44.  The defendant might not expect to put its opponent and the court on the spot to differentiate the objectionable parts from the possibly legitimate parts of the witness statement of Madam Kung sought to be introduced the way that it was.  Even assuming that this court were prepared to entertain an oral application for leave to do so, which the defendant did not actually make, it would have been inappropriate for the court to entertain, let alone to allow.  There was only a time summons from the defendant, as the defendant took the stance that the statement of Madam Kung could either be allowed pursuant to the 9/11/2021 Order or alternatively in the absence of a proper application.  Both in my decision were wrong.

The 3^rd supplemental witness statement of Dr Kung (“Dr Kung-4^th”)

45.  Following the non-admission of the witness statements of Woo and Madam Kung, the references to them in Dr Kung-4^th must be expunged.

46.  As mentioned, the alleged meetings in 2009 where the alleged oral loan agreement was reached in the presence of Pang was not a new issue raised by Pang’s statement.  As Dr Kung acknowledged in this new statement of his, all he intended to say regarding that would be to repeat his denial of the existence of any of those meetings already covered by his previous statements.

47.  The emphasis in Dr Kung-4^th that all the donations and the deposits in question said to be from the plaintiff have been utilized in funding the litigation with Chan Chun Chuen did not arise out of any matters newly raised by Pang’s statement.  Nor was the contention that any loan would have been extended to the estate of late Nina Wang instead of the defendant.

48.  That said, the plaintiff did not seek to expunge the parts of Dr Kung-4^th mentioned in the preceding two paragraphs, and therefore they were saved simply on that basis.

The defendant’s 3^rd list of documents

49.  The documents disclosed by way of the defendant’s 3^rd list of documents consisted of three categories: (i) notice of change of secretary and director of the defendant dated 4 October 2021; (ii) excerpts and extracts of articles in media.

50.  Change of secretary and director of the defendant as of 4 October 2021 was irrelevant to the resolution of the dispute in the present case.  The excerpts and extracts were not self-explanatory in terms of relevance.  They were not allowed.

The 4^th supplemental list of documents

51.  Disclosed by the 4^th supplemental list of documents are copies of the originating proceedings in HCMP 2299/2013 and HCA 410/2013.  The actions were referred to in the witness statements of the defendant’s witnesses.  As court documents, which are self-explanatory, they were allowed.  Counsel for the plaintiff did not insist otherwise.

Conclusion and order

52.  The witness statements of Woo and Madam Kung were expunged.  Dr Kung-4^th, subject to proper redaction, was allowed to be filed and served within 2 days.

53.  Following the above, the alternative application by the plaintiff for leave to adduce further witness statements and further documentary evidence became unnecessary.

54.  The documents disclosed by the 3^rd supplemental list of documents were expunged.

55.  Trial Bundle D, consisting of the new witness statements and documents from the defendant, was removed.  Instead, Dr Kung-4^th with the necessary redaction and the documents disclosed by the 4^th list of documents would have to be inserted by the plaintiff into the trial bundles within 7 days.

56.  In view of the above, no order was made in respect of the defendant’s time summons.

Costs

57.  The plaintiff sought costs against the defendant on an indemnity basis. The defendant did not resist costs but only the taxation scale.

58.  The stance and approach of the defendant, while legally advised, was incorrect and unexpected.  It made the conscious decision, notwithstanding pre-application written complaint by the plaintiff, to proceed the way it did.  The plaintiff had to respond both urgently and as a matter of prudence, but such work and costs were wasted.  For the record, I do not find such work of the plaintiff in response to be unreasonable in the circumstances.  The argument on behalf of the defendant (in its subsequent submission on costs)  that the plaintiff should have waited for the outcome of the applications before responding reflects a persistent failure to acknowledge the impact and prejudice of the then tight timeframe before the commencement of the trial.

59.  There was therefore justification for this court to share the adverse view of the conduct of the litigation on the part of the defendant in this episode, and thus adverse costs on a higher basis.  Common fund basis at the least, this court said.  This court therefore directed that costs shall be summarily assessed by the court on such basis, and gave the incidental directions for the lodging and service of statement of costs and comment.

Summary assessment

60.  The plaintiff’s costs as aforesaid are summarily assessed at the sum of HK$150,000, payable by the defendant in 14 days.