TALENT WEAVING DYEING & PRINTING LTD v. ABLE BILLION TEXTLES LTD

HCA 1495/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1495 OF 2011

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DECISION

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The application

1.  This is the plaintiff’s application to strike out paragraphs 47-54, 56-59, the preamble of paragraph 60 and second sentence of paragraph 66 of the witness statement of Fu Ka Fai, which was filed on 28 September 2012 [B152-195] and also paragraphs 33-35 of the witness statement of Tam Yee Ling Elaine filed on the same date [B196-213]. (the “impugned paragraphs”)

2.  Mr. B. Lo, counsel acts for the plaintiff and Mr. S.W. Lee, counsel acts for the defendant.

Grounds in support of and against the application

3.  The plaintiff relies upon the ground that the impugned paragraphs consist of irrelevant allegations on the plaintiff’s internal affairs having no bearing on the plaintiff’s claim of conversion against the defendant and that they are scandalous and constitute an unfair and prejudicial attack against the integrity of the plaintiff’s witnesses.[1]

4.  The defendant opposes this application on the ground that the matters raised in the impugned paragraphs are relevant to the issues of the present case.[2]

The legal principles

5.  The following legal principles are not in dispute:

a.  this court has the jurisdiction to strike out or expunge any scandalous matter in the witness statements: Wong Luen Hang v. Chan Yuk Lung (unreported) HCA 2654/2007; 28 August 2008 per Fung J. §§13-14

b.  evidence that bears no relevance to the pleaded issues in dispute is scandalous and is inadmissible and liable to be struck out;

c.   evidence given by way of witness statements pursuant to Order 38 rule 2A shall not make inadmissible evidence admissible.  HKCP (2013) vol. 1 §38/2A/13;

d.  witness statement which is inconsistent with the party’s own pleadings should be struck out, and to decide relevance, the court will only refer to the pleadings: Hua Tyan Development Ltd. v Zurich Insurance Co. Ltd. (unreported) HCA480/2009; 20 July 2012 by Chung J.;

e.   scandalous parts of witness statements by reference to the pleaded issues should be struck out: Vastco Textile Ltd. v Super Glory Corporation Ltd (unreported) HCA1678/2009; 11 October 2011 by DHCJ M. Chan (as she then was);

f.    evidence that is beyond the ambit of the pleaded issues is scandalous and should be struck out: John Simpson Warham v Cathay Pacific Airways Ltd (unreported) HCMP4400/2001 & Others ; 10 December 2008 by Reyes J.

The factual background

6.  The burden is on the plaintiff to show to the court that those impugned paragraphs are scandalous and should be struck out.

7.  The plaintiff claimed against the defendant for damages on the ground that the defendant, had, without the consent of the plaintiff, wrongfully converted the plaintiff’s goods to its own use by (a) taking and consigning them for shipment to customers in its own right and (b) failing to pay to the plaintiff the market value of the goods.  The plaintiff therefore claimed damages in the total sum of HK$6,668,062.15.  The defendant admits that it had taken and consigned the goods for shipment to customers in its own right, but alleges that it was done pursuant to a proposal made in early 2010 (which was later agreed upon) by Mr. Chau Kwai Cheong (one of P’s directors; “Chau”), via Mr. Fu Ka Fai (another of P’s directors; “Fu”), to Ms. Ryder Choi ( a sales agent of P and the director and beneficial owner of Defendant “Choi”) that Choi should form her own company (D) to take customer orders, which would then place orders with P to make the fabric products for sale to such customers (the “2010 arrangement”).[3]

Discussion

8.  Mr. Lo submits that defendant’s only pleaded case on the reasons that led to the alleged arrangement is two-fold, namely: (a) differences on profit sharing between P and Choi leading to the 2010 arrangement; and (b) that (by way of the 2010 arrangement) P would be able to reduce the expense of its Hong Kong sales office (the reason for plaintiff to agree to the 2010 arrangement). On these bases, the defendant argues that there was no wrongful conversion.[4]

9.  Mr. Lo therefore argues that the impugned paragraphs are not relevant to those issues above and they should be struck out.

10.  Mr. Lee, however, refers me to the judgment of Barma J. (as he then was) in Chan Woon Fui v Chan Wing Suen & OthersHCCW 350/2004(unreported); 11 July 2005 to note that it is not this court’s function to dispose of the disputes of fact between the parties and the pertinent question is “whether they should be permitted to remain in the affirmation.”  See paragraph 17.  Paragraph 4 of this judgment has also set out the court’s power to strike out either the whole or any part of the witness statement or affidavit which is scandalous, irrelevant or oppressive.

The impugned paragraphs

11.  Paragraphs 47 - 54 of Mr. Fu’s witness statement contain serious allegations of fraud upon the bank for credit facilities by the Plaintiff’s shareholders and directors.  These allegations of fact were not pleaded in the Defence, which Mr. Lee has not disputed and, as such, they are irrelevant for the trial.  To retain such allegations in the witness statement will attract unnecessary arguments at trial and will waste time and costs.  The remarks by Reyes J. in John Simpson Warham v Cathay Pacific Airways Ltd (unreported) HCMP4400/2001 & Others; 10 December 2008 by Reyes J. is apt – the defendant is not allowed to make grievances outside the pleaded issues.  They should be struck out.

12.  Paragraphs 56-59 of Mr. Fu’s witness statement are on the arrangements leading to “the Agreement to Split”, which was formed after the 2010 arrangement pleaded in paragraph 3(i) of the Defence.  Mr. Lee submits that the defendant mainly relies upon the 2010 arrangement to defend its case and the Agreement to Split was another separate agreement between Chau and Mr. Fu subsequently reached.  This Agreement to Split does not form part of the defence and it was not pleaded.  In the witness statements, the defendant had already given the facts in support of the 2010 arrangement.  The purpose of putting the facts leading to the Agreement to Split is because the plaintiff has, in the Reply, at paragraph 13 set out the events that cover the Agreement to Split, which the defendant does not agree.  The defendant considers that it should respond to those facts as stated in Mr. Fu’s witness statement.

13.  The defendant is not allowed to respond to the Reply by way of witness statement without a proper foundation of the pleadings.  The defendant may consider amending the Defence or applying for leave to serve a Rejoinder.  Alternatively, the defendant may, if it considers that the issue of Agreement to Split is not relevant to its defence, ignore it or deal with it by way of cross-examination of the plaintiff’s witnesses on this issue.  What the defendant is not permitted to do is to adduce evidence outside the pleaded issues as decided in Hua Tyan Development Ltd. and John Simpson Warham.

14.  Mr. Lee asks me not to strike out these paragraphs pending the defendant’s application for leave to amend the Defence or for leave to file and serve the Rejoinder.  Mr. Lo opposes this suggestion, saying that there is no such application before the court and there is no material as what the defendant will say in the Amended Defence or the Rejoinder.  I agree with Mr. Lo.  The legal principles stated above are trite and the defendant should know in advance that it should not have included these paragraphs in the witness statement without a proper pleading to support them.  I decide to strike them out.

15.  The preamble of paragraph 60 refers to breach of the Agreement to Split.  For the same reasons above, I strike out this preamble too.

16.  The second sentence of paragraph 66 of Mr. Fu’s witness statement refers to the Agreement to Split issue, which I have struck out.  As such, this sentence is also irrelevant and should be struck out.

17.  Paragraphs 33-35 of Miss Tam’s witness statement are in support of the issue of the Agreement to Split, which I have struck out.  As such, they should be struck out too.

The costs

18.  As to the costs of this application and this hearing, they should follow the event (with counsel’s certificate for today) and be assessed summarily under Order 62 rule 9A RHC.  Mr. Lo has prepared the schedule of costs, which have been considered by Mr. Lee.  On a broad-brush approach, the costs are assessed at $55,000.00 to be paid by the defendant within 14 days from the date hereof.

The order

19.  I shall now make an order in terms as follows:

a.  The impugned paragraphs in paragraph 1 of this Decision be struck out;

b.  The costs of this application, including all costs reserved and for this hearing be assessed at $55,000.00 to be paid by the defendant within 14 days from the date hereof.