OCI CAPITAL LTD v. LANHAI INTERNATIONAL TRADING LTD AND ANOTHER

HCA 1499/2019

[2023] HKCFI 1804

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1499 OF 2019

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BETWEEN

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D E C I S I O N

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A. The Plaintiff’s application to amend the Statement of Claim

1.  The Plaintiff’s claim in this action is that the Defendants are in breach of an oral agreement made on or about 30th April 2019 (“the Oral Agreement”) to purchase certain shares (“the Shares”) for $80m.

2.  By a summons of 30th June 2023, the Plaintiff seeks leave to amend its Statement of Claim such that the allegation that the Plaintiff and the Defendants made the Oral Agreement becomes an allegation that the Plaintiff and the Defendants, with the 1st Defendant acting on behalf of the 2nd Defendant, made the Oral Agreement.

3.  There is no real dispute as to the applicable principles, although there is a difference of emphasis between the parties. Counsel for the Plaintiff, Mr Cheung, cites the following at paragraph 17 of his skeleton.[1]

3.1 As a matter of general principle, amendments to clarify the real dispute between the parties are usually allowed unless injustice that cannot be compensated for in costs may arise.

3.2 Leave is readily granted to amend before trial unless it can be shown that the new claim is bound to fail.

3.3 Absent any real prejudice, an application to amend, even if late, must be decided on the general principle that the court seeks to adjudicate on the real issues between the parties.

3.4 Where prejudice is claimed, the burden is on the party opposing amendment to show prejudice.

3.5 Pure delay is usually not a bar to amendment unless there is unexplained undue delay.

4.  Counsel for the Defendants, Mr Lau, cites the following at paragraphs 18 and 19 of his supplemental skeleton.[2]

4.1 In this post-CJR era, a late application to amend or to introduce new evidence has a fairly high threshold to pass.

4.2 The prejudice which will be caused by refusing an application for late admission of evidence has to be balanced against the prejudice caused to the other party in allowing it in at a late stage.

4.3 Where an indulgence is sought from the court, it would be a rare case that this would be given, even on terms as to costs, without a satisfactory explanation being given to justify the grant of the indulgence.

4.4 An applicant for an amendment would be expected to provide a full account for the lateness of his application, and justification as to why the application should be entertained.

5.  Mr Cheung submits that (1) the amendment is minor in nature, doing no more than to clarify the Plaintiff’s position as to how the 2nd Defendant entered into the Oral Agreement, (2) the 2nd Defendant’s Defence and the Defendants’ evidence is consistent with the amendment, (3) the trial dates will not be affected as the trial is scheduled to commence on 5th October 2023, (4) no new evidence will be needed, (5) whilst the application could have been brought earlier, no prejudice will be caused to the Defendants, (6) the claim is sizeable, involving an agreement to buy shares for $80m.

6.  However, Mr Lau submits that (1) no explanation has been given for the late application, (2) the amendment is not properly particularised and is embarrassing, (3) the amendment is not supported by the 2nd Defendant’s Defence, contrary to the Plaintiffs’ allegation, (4) the Defendants would suffer prejudice in having to respond to the amendment.

7.  I agree that the amendment should not be allowed.

8.  As regards the nature of the amendment, delay and prejudice, my view is as follows.

8.1 The amendment would raise a new allegation that the Oral Agreement was entered into by the 2nd Defendant through an agent. However, no particulars of the allegation have been given. As Mr Lau points out, it is not stated whether actual authority (express or implied) is alleged, or apparent authority is alleged. Whilst it appears from the submissions this morning that some sort of actual authority is alleged, there are no particulars, and more importantly, these matters are not set out in the proposed amendment.

8.2 The Defendants would be entitled to seek such particulars, to plead to them, and if thought appropriate to call evidence in response.

8.3 Whilst there is still time before the trial which could enable the Defendants to do this, they should not be put into the prejudicial position of having to seek particulars of a case advanced against them in order that they can respond to it prior to trial.

8.4 There is one further aspect of prejudice. I note that the 1st Defendant is a company. It is not clear which persons of the 1st Defendant is or are said to have acted on behalf of the 2nd Defendant as agent or otherwise caused the 1st Defendant to become the 2nd Defendant’s agent.

8.5 Based on what is in the 1st Defendant’s Defence (but not the Plaintiff’s Statement of Claim), one possibility as to who might be said to be a representative of the 1st Defendant who could have acted as agent for the 2nd Defendant is Mr Mi. Paragraph 19.2 of the 1st Defendant’s Defence pleads a discussion between Mr Mi and the Plaintiff’s representatives in which it was said that there was an agreement in principle that the Debt (as therein defined) would be purchased at $80m. I further note that in paragraph 14 of the parties’ agreed statement of facts, it is said that the Plaintiff’s case is that there were discussions between Mr Mi and the Plaintiff’s representatives on 30th April 2019 and that the Oral Agreement was reached.

8.6 However, the Defendants’ unchallenged evidence is that Mr Mi is under investigation by the authorities in mainland China, and (1) was not contactable from December 2021 to the end of June 2022, his personal freedom having being restricted during that period, (2) was intermittently contactable between 30th June 2022 until around 9th June 2023, having returned to the LanHai Group during that period, and (3) has not been contactable since 9th June 2023, his personal freedom being under the control of the mainland authorities.

8.7 In such circumstances, I agree that the Defendants would be prejudiced in that they may well not be able to seek any instructions from Mr Mi in relation to the new allegation so as to plead to the new allegation, or to adduce further evidence to respond to the new allegation. Whilst the Plaintiff says that no new evidence would be needed in respect of the new allegation, and whilst it may be that the Plaintiff chooses not to adduce any such evidence, it may be that the Defendants would wish to adduce evidence from Mr Mi. Given Mr Mi’s circumstances, this may not be possible, again prejudicing the Defendants.

8.8 No explanation has been given for the (accepted) delay in making the application. As Mr Lau points out, the amendment relates to the Oral Agreement which was made some four years ago on around 30th April 2019. The Plaintiff’s solicitors have already previously indicated to the court (in Timetabling Questionnaires and Listing Questionnaires filed on 20th March 2020, 12th November 2021 and 25th November 2021) that its pleadings are in order and do not require amendment. It is not clear why the Plaintiff only now considered it appropriate to apply for the amendment to say that the agreement was made by the 1st Defendant on behalf of the 2nd Defendant. Whilst I accept that delay alone is not necessarily fatal to an application for amendment, and it is the case that there are three months before the trial is to commence, so that this is not a case of the worst possible delay, it still behoves the applicant to explain the reasons for the delay so that there is material by which the court can assess whether to grant the indulgence being sought.

8.9 It is true that the Plaintiff’s claim is sizeable. But this cuts both ways. The 2nd Defendant is being sued for $80m. All along, it was made clear in the 2nd Defendant’s pleadings and witness statement that she did not make any oral agreement as alleged, and did not have any communication with the Plaintiff. It is now being said, four years after the commencement of the proceedings, that instead, the 2nd Defendant made the Oral Agreement through an agent. The 2nd Defendant would be prejudiced if she were to have to respond, at this stage, to what is an unparticularised allegation, and without the ability to take instructions from the person likely to have relevant evidence to offer.

9.  As regards the argument that the amendment is consistent with the 2nd Defendant’s Defence and the Defendants’ evidence, so that there is no prejudice to the Defendants, I do not agree.

9.1 It is said that the 2nd Defendant has pleaded that several days before 30th April 2019, she agreed to act as the nominee of the LanHai Group (of which the 1st Defendant formed part) to acquire and hold the Shares if the LanHai Group and the Plaintiff managed to reach agreement in due course as to the settlement of the Debt (see Defence of the 2nd Defendant at paragraph 10). Reliance was also placed on the Defendants’ witness statements which say that Ms Lu (the 1st Defendant’s investment director) asked the 2nd Defendant whether she could act as nominee of the LanHai Group, and she said that the agent arrangement was acceptable to her.

9.2 The argument is that the 2nd Defendant could not have been willing to act as the nominee of the LanHai Group to acquire and hold the Shares without at the same time authorising the 1st Defendant to enter into a binding agreement on her behalf to acquire the shares: see Plaintiff’s skeleton paragraph 18.3.

9.3 However, the fact that the 2nd Defendant agreed to hold the Shares as the 1st Defendant’s nominee does not mean that the 2nd Defendant agreed to buy the Shares in her own right.

9.4 The Plaintiff also relies on paragraph 11.2 of the 2nd Defendant’s Defence, where the 2nd Defendant pleads that she provided her PRC identity card number and addresses to Ms Lu of the 1st Defendant who told her that the details would be necessary for the purpose of the negotiations between the Lanhai Group and the Plaintiff.

9.5 However, this does not indicate consent to the 1st Defendant acting on behalf of the 2nd Defendant to purchase the Shares. If anything, this paragraph indicates that the discussions were between the 1st Defendant (of the Lanhai Group) and the Plaintiff, not the 2nd Defendant and the Plaintiff.

10.  The Plaintiff’s summons is dismissed.

B. The Defendants’ application for evidence to be taken by VCF

11.  By a summons of 9th June 2023, the Defendants have applied for an order that three witnesses are to give evidence at the trial via video-conferencing facilities (“VCF”) by way of remote hearing, and that they are to do so before an independent party, preferably a practising lawyer or notary public, and at the premises of that independent party.

12.  Again, there is no real dispute as to the applicable principles, which were summarised by Anthony Chan J in Re Nobility School [2020] HKCFI 891 at [9].

“(1) The giving of evidence by video conferencing facilities (“VCF”) is an exception;

(2) The starting point is that proceedings are conducted in court. I would add that this is more important when it comes to a trial;

(3) Sound reason is required to justify a departure from the starting point;

(4) The solemnity of court proceedings and its atmosphere is highly important in the taking of evidence;

(5) The court may be more disposed to exercise its discretion to allow evidence by VCF in respect of technical or purely factual evidence which involves no serious issue on credibility or relatively unimportant evidence;

(6) Where the credibility of the witness is seriously contested, it is important for the witness to be examined under the solemn atmosphere of the court;

(7) Costs and convenience may be important considerations which the court will have to weigh in the determination of the application;

(8) Ultimately, it is a matter of judgment of the court choosing the course best calculated to achieve a just result by taking into account all the material considerations, including whether the witness is capable of attending the proceedings, any prejudice to the other party, the Underlying Objectives, any delay to the proceedings and practical considerations like the availability of the facilities (see Practice Direction 29).”

13.  The Defendants also cite Lai Shui Yin v Jing Guo Ying [2022] HKCFI 2643 at [5] for the propositions that the usual rule requiring witnesses to give evidence in court is not inflexible, that the use of VCF is in line with the court’s duty to manage cases, and that the court should decide the mode of taking evidence on a holistic consideration of all the circumstances. These do not seem to me to differ from what was stated in Re Nobility School. The Defendants also seek to rely on Lai Shui Yin for its facts, but it is trite that each case turns on its own facts.

The 2nd Defendant

14.  The 2nd Defendant has made an affirmation explaining that she is under investigation by the Qujing Public Security Bureau, which has prohibited her from leaving mainland China. She is therefore unable to travel to Hong Kong in October 2023 to attend the trial. She has however indicated that if the restriction imposed on her is lifted before the trial, she will attend the trial to testify in person.

15.  In such circumstances, Mr Cheung fairly accepts that the 2nd Defendant should be given the opportunity of giving evidence by way of VCF, subject to the proviso that she will attend trial in person if the travel restriction is lifted.

Mi Chunlei

16.  As Mr Mi remains uncontactable as of today, Mr Lau seeks to adjourn this part of the application.

Lu Xiaoying

17.  Ms Lu has made an affirmation saying that she lives in Los Angeles with her 7-year old son, whom she needs to look after, and that “the cost for hiring helpers in the United States is very high and unaffordable”. She also says that her elderly parents also live in Los Angeles (but not with her), that her mother suffers from cancer and needs to undergo chemotherapy and radiation therapy, and that whilst her father tries his best to look after her, he himself is ageing. Ms Lu says that she is responsible for their daily needs such as driving her father to stores, shopping for food and taking them to their medical appointments.

18.  No doubt, Ms Lu has strong personal and family reasons for not wishing to travel at this time. However, I note that it is not being said that it would be impossible, impracticable or otherwise unacceptable to make alternative arrangements to assist Ms Lu’s parents in going to stores or medical appointments, or to shop for food, during the few days when Ms Lu might need to travel to Hong Kong. Indeed, it is not even suggested that inquiries have been made as to whether such arrangements might be put in place. Similarly, it is not being said that it would be impossible to make arrangements to care for Ms Lu’s son for a few days or that such arrangements have been explored.

19.  Mr Cheung submits that the Defendants have provided few details of the reasons relied on in support of the application. Mr Lau submits that the information which Ms Lu has provided is of a personal nature and it would be intrusive to ask Ms Lu to offer any further particulars. I accept that in cases of this nature, a witness may not wish to provide what is no doubt sensitive and highly personal information. On the other hand, in the present case, it seems to me that leaving aside such information, there is insufficient evidence as regards the viability of making alternative arrangements for Ms Lu’s role as caretaker.

20.  I accept Mr Cheung’s submission that Ms Lu’s evidence is important and is challenged by the Plaintiff. The Plaintiff would be prejudiced by the inability to cross examine her in the solemn setting of court proceedings.

21.  In the circumstances, I do not consider that the matters put forward by the Defendants amount to a sound reason to justify a departure from the general rule that proceedings should be conducted in court.

Disposition

22.  I therefore allow the VCF application in respect of the 2nd Defendant only. I adjourn the Defendants’ summons insofar as it relates to Mr Mi sine die, with liberty to the Defendants to restore it if there is a change in circumstances.