SIU WAI MING v. SHIU WAI HONG AND OTHERS

CACV 84/2020

[2022] HKCA 612

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 84 OF 2020

(ON APPEAL FROM HCA NO 290 OF 2014)

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J U D G M E N T

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Hon Kwan VP (giving the Judgment of the Court):

1.  This is the application of the plaintiff for leave to adduce new evidence in his appeal against the judgment of B Chu J on 5 March 2020 (“the Judgment”), which was given after a six-day trial. The summons was issued on 31 August 2021.

2.  Having considered the papers and submissions, we exercise our power to determine this application on paper without an oral hearing, pursuant to Order 59 rule 14A(1) of the Rules of the High Court.

Background

3.  The plaintiff brought this action against his brother the 1^st defendant to recover his half share of the sale proceeds of a property at Scenic Garden, which was sold in 2009. The plaintiff and the 1^st defendant were the beneficial owners of this property, which was registered under the name of the 1^st defendant. The plaintiff alleged that the property was sold without his consent and the 1^st defendant had failed to account to him the proceeds of sale.

4.  The 2^nd and 3^rd defendants are the son and daughter-in-law of the 1^st defendant. They were sued as a tracing claim was brought by the plaintiff in respect of a property subsequently purchased in the name of the 4^th defendant, a company owned by the couple. They were also alleged to have dishonestly assisted the 1^st defendant in dissipating the sale proceeds of the Scenic Garden property which were trust money.

5.  The judge dismissed the plaintiff’s claim, as she found in favour of the 1^st defendant that the plaintiff had surrendered his beneficial interest in the Scenic Garden property during a telephone conversation with the 1^st defendant in May 1998. The claims against the other defendants for dishonest assistance, knowing receipt and tracing were also dismissed.

6.  The plaintiff filed a notice of appeal on 2 April 2020. On 15 July 2021, the defendants issued a summons for security for costs of the appeal[1]. In the course of opposing this application, the plaintiff filed an affirmation on 18 August 2021 in which he asserted that he has a meritorious appeal and exhibited a draft amended notice of appeal and a number of documents claiming that the 1^st defendant’s allegations against him in the action could be rebutted by such documentary evidence.

7.  On 25 August 2021, the defendants’ solicitors wrote to the plaintiff’s solicitors pointing out that seven items of the documentary exhibits were not adduced in the trial below and have not previously been disclosed to the defendants, and that no application had been made for the admission of such further evidence. It was in those circumstances that the plaintiff’s solicitors issued the present summons for leave to adduce further evidence on appeal. Ms Wendy Lau submitted on behalf of the plaintiff[2] that as the summons was issued on 31 August 2021 in response to the other side’s letter of 25 August 2021, there was no undue delay. This is plainly unacceptable. This summons was issued 17 months after the notice of appeal was filed. We will come back to the question of delay.

8.  In this application, leave was sought to adduce seven items of documents marked “SWM-6”, “SWM-8”, “SWM-9”, “SWM-10”, “SWM-12”, “SWM-13” and “SWM-14”[3]. Ms Lau submitted that these documents would have a very important effect on the mind of the trial judge because they could: (1) support the plaintiff’s case that the alleged surrender had never taken place; (2) rebut the defendants’ allegations that the plaintiff had misappropriated $1.2 million from Pao Sun (the family furniture business) during November 1991 to August 1994 (“the Relevant Period”), that the partnership of the three brothers had continued after the “3 Brothers’ Agreement” in April 1995, and that the 1^st defendant had incurred $400,000 for the renovation works of the Scenic Garden property in mid-1995; and/or (3) discredit the reliability of the 1^st defendant’s evidence.

9.  There was helpfully set out in table form in the submissions of Mr Richard Khaw, SC for the defendants[4] a brief description of the nature and contents of each of the documents and the reasons given by the plaintiff for relying on such new evidence. We do not propose to set out the details.

If the conditions in Ladd v Marshall are satisfied

10.  This application is made pursuant to Order 59 rule 10(2) of the Rules of the High Court, which provides that: “The Court of Appeal shall have power to receive further evidence on questions of fact … but no such further evidence (other than evidence as to matters which have occurred after the date of the trial or hearing) shall be admitted except on special grounds.”

11.  It is common ground that the admission of fresh evidence on appeal is governed by the three conditions in Ladd v Marshall [1954] 1 WLR 1489 at 1491, and that the burden is on the applicant to show that all three conditions have been satisfied:

(1)  the further evidence could not have been obtained with reasonable diligence for use at the trial;

(2)  the further evidence is such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and

(3)  the evidence is such as is presumably to be believed.

12.  We wish to make two observations before dealing with the conditions.

13.  First, the dispute in this action is mainly on the facts and it is apparent from the grounds of appeal in the amended notice of appeal that the plaintiff brought this appeal to challenge the findings of fact of the trial judge. As stated by Lam VP (as he then was) in Eshed Diam (HK) Ltd v Siam Color Gems & Jewelry Ltd, CACV 128/2017, 16 May 2018 at §13:

“The adherence to a stringent standard against admission of fresh evidence in an appeal is important. As it has been said repeatedly, in the context of modern litigation, the main event is the trial and an appeal should not be exploited as a second bite of the cherry, having failed once at the trial. In an appeal against a finding of fact (as in the present appeal), this Court primarily examines if the court below made any palpable error in coming to its factual findings. The availability of appeal is not designed as providing an avenue for supplementing one’s evidence after some gaps in the evidence were exposed at the trial.”

14.  Yuen JA made similar comments in Yui Chung Yin v Ng Kit Sum, CACV 25/2013, 7 July 2015 at §21:

“It is well-established that all the evidence that a litigant can marshal in relation to the issues in a case should be adduced at trial. At trial the plaintiff advanced “the orientation point” on the strength of the existing evidence. He did not ask for an adjournment to produce further evidence (such as these reports) to strengthen his case. In my view, having made that choice, he must live with it. It is inimical to the proper fair and efficient administration of justice if a litigant is allowed to produce fresh evidence like these to try to bolster his argument after he has lost the case.”

15.  The present application to adduce further evidence on appeal is an attempt to bolster the plaintiff’s evidence after he has lost the case having gone through a full trial. It is inimical to the administration of justice and the public interest that there should be finality in litigation if he were given another opportunity to marshal his evidence. Hence, “special grounds” are required to be shown pursuant to Order 59 rule 10(2) for leave to be granted.

16.  Second, this application ought to be viewed against the background of the severe criticisms of the trial judge that the plaintiff’s disclosure of documents was “selective”, “piecemeal” and “completely unsatisfactory”[5]. It is the plaintiff’s case that he was asked by their father to come back from Canada to take over the management of the family furniture business at the shop at Ground Floor, 15 Queen’s Road East (“the Shop”) and he did so on 1 August 1999. The judge found that from that time onwards, all the business documents should be in the plaintiff’s possession, custody and/or power[6]. Owing to the selective disclosure of business documents without reasonable or credible explanation, the judge had drawn adverse inference against the plaintiff that there were withdrawals of funds by him from the business during the Relevant Period for his personal use which he had not accounted for and that he had mismanaged the business[7].

17.  In light of the above findings, it is only right that the present application should be subjected to close scrutiny, as submitted by Mr Khaw, particularly the explanation given by the plaintiff that the further evidence could not have been obtained at the trial with reasonable diligence.

18.  We now examine the first of the Ladd v Marshall conditions.

19.  The plaintiff gave the following explanation why the further documents were not available for production at the trial in his supporting affirmation for this application:

“In general, all the further evidence aforementioned could not have been produced to the Court, save “SWM-6” which belongs to me and my wife[8], because they are the documents of (a) the 1^st Defendant; or (b) Pao Sun during the time of which I am not in charge.

However, after the trial hearing, the aforementioned documents were accidentally found in a box in the cockloft of the Shop, which was hidden by my late father”[9].

20.  He repeated the explanation in his affirmation in reply:

“For reasonable diligence, save SWM-6 which belongs to me and my Wife, the rest are documents of the 1^st Defendant and the documents of Pao Sun during which period I was not in charge of the Family Business, i.e. Pao Sun. They were accidentally found in a box stored in the cockloft of the Shop of Pao Sun after the trial hearing.”[10]

21.  In our judgment, the plaintiff has clearly failed to show that the further documents could not have been obtained at the trial with reasonable diligence. The Shop was sold by the father in March 2000[11]. The plaintiff did not mention who found the box, when and where and under what circumstances the box was found. No particulars were given as to how these documents, which are of different dates and categories, were put together in the box. There is no or no proper explanation to demonstrate why these documents could not have been obtained with reasonable diligence for the trial.

22.  We note also the plaintiff had given evidence at the trial that the father had given him a box containing various documents to keep as a souvenir of the family furniture business. The plaintiff initially said that all the documents produced by him in the action were inside this box. He has changed his evidence several times as to the contents of this box, in particular whether there were any documents relating to the business during the Relevant Period[12].

23.  The plaintiff’s claim that the fresh evidence could not have been produced as they are documents that belong to the 1^st defendant or Pao Sun, save for “SWM-6”, is not a valid explanation. As mentioned earlier, the judge has found that the financial documents relating to the family furniture business should be in the plaintiff’s possession, custody and/or power ever since he took over the management of Pao Sun in August 1999. Besides, during the trial, the plaintiff had disclosed not only documents belonging to Pao Sun, but also personal documents belonging to the father and the 1^st defendant, including tax returns, notices of assessment, telegraphic transfer forms, bank deposit confirmations, bank facility letter andtenancy agreements[13].

24.  We agree with Mr Khaw that the alleged accidental discovery of a box of documents after trial without any proper explanation is consistent with the plaintiff’s selective and piecemeal discovery in the past and his casual attitude towards his obligation as a litigant to make proper discovery. As noted earlier, this summons was issued as a response to the defendants’ solicitors pointing out that the documents sought to be relied on have not been disclosed in the proceedings below. A party seeking to adduce new evidence on appeal “must apply as early as practicable” (Practice Direction 4.1, para 37). This has not been complied with. There is hardly any justification for the delay of 17 months after the filing of the notice of appeal for this application to be taken out.

25.  In Re Estate of Chiu Keung [2020] 3 HKLRD 779 at §43, the Court of Appeal refused to entertain an application to adduce new evidence on appeal which was made one day before the hearing of the appeal and referred to past decisions[14] which held that late application for admission of new evidence with no satisfactory explanation of the delay would be refused on the ground of lateness only, without regard to whether the Ladd v Marshall requirements have been satisfied.

26.  We are inclined to think that a delay of 17 months is substantial. As there is no satisfactory explanation for this delay, the present application ought to be rejected on this ground alone. Besides, we do not think the first condition of Ladd v Marshall is satisfied. So the application would have been dismissed in any event.

27.  It is not necessary to consider whether the other two conditions of Ladd v Marshall are met. For completeness, and in view of the detailed submissions made by Ms Lau on the second condition (that the further evidence would probably have an important influence on the result of the case, even though it may not be decisive), we would mention that we are inclined to agree with Mr Khaw’s submissions that the further evidence is but peripheral in nature and not likely to have any important influence on the outcome of this action. It suffices to give some salient examples. The mere fact that the plaintiff had transferred $100,000 from his joint account with his wife to Pao Sun in July 1994 (“SWM-6”) is far from sufficient to rebut the finding (based on the adverse inference on account of his failure to produce relevant business documents of the Relevant Period) that he had withdrawn funds from the business for his personal use. Even if the undated cheque stubs (“SWM-8”) showed that Pao Sun had paid its supplier Shen Fat Furniture a total of about $500,000, they are simply not sufficient to rebut the 1^st defendant’s case that he had to repay Shen Fat $1.2 million due to the plaintiff’s misappropriation of this amount, as it cannot be shown that $500,000 was the only amount paid to Shen Fat. Similarly, an invoice for renovation of the Scenic Garden property of $53,000 and a receipt for the deposit of $18,000 (“SWM-12”) can hardly rebut the 1^st defendant’s evidence that he had incurred $400,000 for the renovation. The bank statements of the 1^st defendant in November 1996 and February 1997 (“SWM-13”) cannot be taken to reflect his financial position at the time of the alleged surrender in the telephone conversation in May 1998.

28.  Furthermore, insofar as the plaintiff alleged that the further evidence is relevant to discredit the reliability of the 1^st defendant’s evidence generally, the threshold in the second condition of Ladd v Marshall is much stricter than in other instances. It is incumbent on the plaintiff to demonstrate that the admission of such evidence (which goes to credit only) will be conclusive or near conclusive of the appeal in the plaintiff’s favour in the sense that no reasonable tribunal could be expected to act on the evidence of the 1^st defendant (A Solicitor v The Law Society of Hong Kong [1996] 1 HKLR 260 at 263I to 264C). That threshold has plainly not been met in this instance.

29.  The plaintiff has not satisfied this court that the first and second conditions in Ladd v Marshall are met.

If any residual discretion should be exercised

30.  Ms Lau sought to invoke the residual discretion of the court to admit further evidence on appeal even though not all the conditions of Ladd v Marshall are satisfied.

31.  In support of her contention it is “established law that the courts will allow fresh evidence when to refuse it would affront common sense or a sense of justice”, she quoted from: Lord Wilberforce in Mulholland v Mitchell [1971] AC 666 at 680A to B (“Positively … it may be expected that courts will allow fresh evidence when to refuse it would affront common sense or a sense of justice.”); Sir John Donaldson MR in R v Home Secretary, Ex p Momin Ali [1984] 1 WLR 663 at 670A to B to the effect that the principles in Ladd v Marshall are subject always to the discretion of the court to depart from them if the wider interests of justice so require; Potter LJ in Nima SARL v Deves Insurance Public Co Ltd [2003] 1 CLC 600 at §40 that the principles established by the authorities before the Civil Procedure Rules (“CPR”) are not to be slavishly followed but should be applied insofar as they advance the overriding objective of the CPR; Hale LJ in Hertfordshire Investments Ltd v Bubb [2000] 1 WLR 2318 at 2325E to H that under the CPR the discretion in admitting fresh evidence on appeal must be exercised in accordance with the overriding objective of doing justice; and Chow JA in A Solicitor v The Law Society of Hong Kong [2021] 5 HKLRD 445 at §§21 and 22 in which he applied the principles in Re China Fishery Group Ltd [2020] HKCA 169 at §26 and considered it relevant in the exercise of the court’s residual discretion whether it would be “an affront to one’s sense of fairness not to admit the evidence”.

32.  In quoting from a judgment, it is always important to have regard to context. Lord Wilberforce’s statements were made in an application to admit evidence as to matters which had occurred since the trial, in which there was a dramatic change of circumstances (at 675B to C, 678A). Sir John Donaldson was dealing with an application to admit new evidence in the sphere of public law and judicial review, in which special considerations apply. As for the English cases decided after the CPR, it is pertinent to bear in mind that under the CPR, it is no longer necessary to show “special grounds”[15]. The “special grounds” requirement has been retained in Order 59 rule 10(2) in the Civil Justice Reform in Hong Kong.

33.  Chow JA recognised there is a residual discretion to admit fresh evidence on appeal even though it does not relate to matters which have occurred after the trial or hearing and the application was not made in public law proceedings. He set out in §23 compelling considerations why the residual discretion should be exercised in the case before the court. He emphasised in §24 that “this judgment should not be read as a general relaxation against the Ladd v Marshall conditions for admission of fresh evidence in the Court of Appeal”.

34.  The circumstances here are far removed from those considered by Chow JA in A Solicitor v The Law Society of Hong Kong. There is no affront to one’s sense of fairness or justice not to allow the plaintiff to supplement the gaps in his evidence that were exposed after a full trial. We decline to exercise any residual discretion in his favour.

Conclusion and costs

35.  We dismiss the plaintiff’s summons filed on 31 August 2021. Costs of the application should follow the event.

36.  Having considered the defendants’ statement of costs for summary assessment, we will allow reasonable costs to the defendants in the amount of $367,474 on the basis there will be a certificate for two counsel.

37.  The costs order and summary assessment are orders nisi. They will be made absolute if there is no application for variation within 14 days of the handing down of this judgment.