LAI KAR YEE v. THE PRUDENTIAL ASSURANCE CO

CACV 233/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 233 OF 2014

(ON APPEAL FROM HCSD NO 1 OF 2014)

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REASONS FOR DECISION

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Hon Barma JA (giving the Reasons for Decision of the Court):

1. This was an application by the applicant, Lai Kar Yee, made by summons dated 1 April 2015, seeking leave to adduce fresh evidence in the form of three further affidavits at the hearing of her appeal from the decision of Deputy High Court Judge Lok (as he then was) dated 5 November 2014 by which he dismissed her application to set aside a statutory demand which had been served on her by the respondent, the Prudential Assurance Company Limited. The appeal proper is due to be heard on 2 June 2015. The application is opposed by the respondent.

2. The background to the application can be briefly summarised as follows:

(1)  The applicant was employed by the respondent as an insurance agent between 1 May 2012 and 1 November 2013.  Soon after taking up such employment, she received a Sign-On Fee of HK$5,023,000 pursuant to a Service Agreement dated 12 March 2012.  The Service Agreement provided that the Sign-On Fee would be repayable if the applicant’s employment were terminated within less than 24 months, or if the applicant failed to reach certain production targets within 24 months.

(2)  The applicant’s employment was terminated in less than 24 months, on 2 November 2013, and the respondent demanded repayment of some HK$5,013,395, being the Sign-On Fee less certain amounts due to the applicant.  On 19 November 2013, the statutory demand was issued.  On 2 January 2014, the applicant applied to set aside the statutory demand.

(3)  Before the judge, the applicant’s case was that the respondent had represented to her that her contract would not be terminated within 24 months on the ground of failure to meet specified monthly or periodic production targets within that period – in other words, that she would have the whole of 24 months within which to reach the total production target for the 24 month period.  The judge rejected this case, holding that the applicant’s evidence in support of it was incredible and not worthy of belief, and that her opposition to the statutory demand was no more than a cloud of objections that were without substance.  In his decision, the judge identified what he considered to be the weaknesses in the applicant’s case.

(4)  After the judge gave his Decision, the applicant produced further affidavits consisting of her 7^th Affidavit and the Affirmation of Leung Cherng Jiunn, both dated 10 December 2014, and deployed them in support of an application to the judge to postpone the presentation of a bankruptcy petition until after the determination of this appeal, pursuant to Rule 48(7) of the Bankruptcy Rules (Cap 6A).  The applicant now seeks to adduce such evidence (together with the 3^rd Affirmation of Law Lai Wun Winnie dated 12 December 2014 which was filed by the respondent in response to the further evidence of the applicant) as additional evidence for the purposes of her appeal.

3. The additional evidence addresses various criticisms that the judge had made of the applicant’s evidence before him.  The applicant’s 7^th Affidavit addresses the commercial incentives for and authority of the respondent’s senior officers to make the alleged representations and assurances; the allegedly different circumstances in which the Service Agreement and an Agency Agreement which respectively set out overall and monthly production targets were entered into; the circumstances surrounding the termination of the applicant’s employment including explanations for her responses (or lack of them) to various communications from the respondent prior to her termination; and further details of allegedly improper conduct by certain officers of the respondent which the applicant claims were the real cause of her termination.  Leung’s Affirmation seeks to support the applicant’s case by providing evidence that he and others heard or received similar assurances to those relied on by the applicant, and further evidence of the allegedly improper conduct on the part of the respondent’s officers.

4. The admission of fresh evidence for the purposes of an appeal is governed by RHC Order 59 rule 10(2).  It is in the following terms:

“The Court of Appeal shall have power to receive further evidence on questions of fact, either by oral examination in court, by affidavit, or by deposition taken before an examiner, but no such further evidence (other than evidence as to matters which have occurred after the dated of the trial or hearing) shall be admitted except on special grounds.”

5. It is well established that, generally speaking and subject to certain exceptions, further evidence will not be admitted for the purposes of an appeal unless it satisfies the three criteria set out in Ladd v Marshall [1954] 1 WLR 1489: (1) that it could not have been obtained with reasonable diligence for use in the proceedings below; (2) it would probably have an important (but not necessarily decisive) influence on the result of the case; and (3) it must be apparently credible (but need not be incontrovertible).

6. Before us, Ms Yu, appearing for the applicant, submitted that the Ladd v Marshall test does not apply to appeals from an unsuccessful application to set aside a statutory demand, and that a more relaxed approach is to be adopted, on the basis that an application to set aside a statutory demand is not a decision on the merits. In support of this submission, she drew our attention to a number of English authorities in which this somewhat less stringent approach was taken, both before and after the implementation of Civil Procedure Reform in England (Royal Bank of Scotland v Binnell [1996] BPIR 352; Norman Laurier v United Overseas Bank Ltd [1996] BPIR 635; and Salvidge v Hussein [1999] BPIR 410).

7. With respect, it does not seem to us that these authorities assist the applicant.  In Hong Kong, this court (differently constituted) has held in Cheung Sun Lam v Lai Kam Man & others (CACV 148/2011, unreported, CA, 18 March 2013) that the Ladd v Marshall approach is to be adopted in appeals against the refusal to set aside a statutory demand.  Although Ms Yu submitted that the court did not fully consider the matter then, it seems to us that the approach taken in that case is clearly right.

8. Prior to the Civil Justice Reform (“CJR”), RHC Order 59 rule 10(2) restricted the need for special grounds being required for the adducing of further evidence to appeals “from a judgment after trial or hearing of any cause or matter on the merits”.  However, after CJR, this limitation was removed, so that special grounds are required (with very few exceptions) in all cases where it is sought to adduce further evidence on appeal.  That this is so is, we think, confirmed by the introduction of a similar restriction on the adducing of further evidence in appeals from the decision of a master to a judge. Previously, an appeal from a master to a judge was by way of a complete rehearing, and parties were free to put in further evidence for the purpose of the appeal.  However, following CJR, RHC Order 58 rule 1 was amended to add a further sub-rule (sub-rule (5)), which is in materially identical terms to the relevant parts of Order 59 rule 10(2) as it now stands, so as to restrict the receipt of further evidence on appeals from a master to cases in which there are special grounds for doing so.  It is clear from the Final Report on CJR (see e.g. Proposal 31 and paragraph 523(g), and Proposal 42 and paragraph 645(b)) that the intention was to preclude fresh evidence being admitted, even on interlocutory appeals from a master.  There is no reason to think that the amendment to RHC Order 59 rule 10(2) was not made with the same purpose in mind.  That being so, the effect of the amendment is clearly to extend the applicability of the Ladd v Marshall principles to appeals generally, whether interlocutory or final, and whether or not they involve a determination on the merits.

9. We therefore agree with Mr Chan, who appears for the respondent, that this application should be approached on the basis of the tests laid down in Ladd v Marshall.

10. That being so, we think it is clear that, in this case, the applicant fails to satisfy the first of the criteria mentioned in paragraph 5 above.  None of the matters which it is sought to raise by the additional evidence relates to matters arising after the hearing before the judge.  On the contrary, all of the matters mentioned in the applicant’s 7^th Affidavit are matters which must have been known to her at the time of the hearing below.  They, together with the matters referred to in Leung’s Affirmation, were undoubtedly matters which the applicant could, with reasonable diligence, have put before the judge.  The applicant was legally represented below, and it was for her and those advising her to decide what evidence to put before the court.  The fact that there were no pleadings below does not assist the applicant, as the onus was on her to demonstrate to the court, by sufficiently precise evidence, that there existed a bona fide dispute of substance in relation to the debt claimed by the respondent.  This, the judge held, on the evidence before him, she had failed to do.  On the hearing of her appeal, this court will consider whether or not he was right to come to that conclusion.  But it will do so on the basis of the evidence before him, and not on the basis of evidence which, in our view, could have been (but was not) put before him.

11. The failure of the applicant to overcome the first hurdle imposed by Ladd v Marshall is sufficient to dispose of this application.  Mr Chan also submitted that the applicant could not overcome the second or third requirements either.  However, having concluded that the application must be dismissed for the reasons we have given, we do not think that it would be appropriate for us to express any views on these further points.  If the applicant’s appeal should ultimately turn out to be unsuccessful, a bankruptcy petition will be presented against her.  It may well be that she will seek to rely on the additional evidence which is the subject of this application in opposing such a petition, and it does not seem to us that it would be desirable for us to express any views as to its relevance or credibility at this stage, when it is not necessary for us to do so in order to dispose of this application.

12. For the foregoing reasons, we would dismiss this application, with costs to the respondent.  Such costs are to be taxed on the party and party basis if not agreed.