CHEN JINHUI v. WONG KAM SAN (黃錦新), by his guardian ad litem, HUANG YUEXIA (黃月霞) AND OTHERS

CACV 173/2021 &

CACV 178/2021

(On appeal from HCA 1524/2012)

[2022] HKCA 1522

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 173 & 178 OF 2021

(ON APPEAL FROM HCA 1524/2012)

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court):

INTRODUCTION

1.  There are before the Court a number of applications by the 1^st to 3^rd Defendants and 4^th to 6^th Defendants for leave to adduce fresh evidence in support of their respective appeals (CACV 173/2021 and CACV 178/2021) against the judgment of Deputy High Court Judge Leung dated 19 March 2021.

2.  Having considered the papers including the submissions of Mr Eugene Fung, SC (together with him, Ms Andrea Yu and Ms Jennifer Fan) for the Plaintiff, Mr Douglas Lam, SC (together with him, Mr Chow Ho Ku) for the 1^st to 3^rd Defendants, and Mr Paul Shieh, SC (together with him, Ms Eva Sit, SC and Mr James Man) for the 4^th to 6^th Defendants, we consider it appropriate to determine the applications without a hearing on the basis of written submissions only pursuant to Order 59, rule 14A(1) of the Rules of the High Court, Cap 4A.

BASIC FACTS

3.  The Plaintiff (“Chen”)’s claim in this action is for the recovery of 80% of the shares (“the Shares”) in the 5^th Defendant (“Hawkins”), which Chen alleges the 1^st Defendant (“Wong”) agreed, subject to certain undertaking given by him, to sell and transfer to him in satisfaction of debts of more than RMB 21 million due from Wong and/or his companies to him.

4.  The transactions giving rise to the disputes between the parties are of some considerable complexity. For the purpose of disposing of the present applications, the following brief summary, taken largely from the written judgment of Deputy High Court Judge Leung dated 19 March 2021 (“the Judgment”), should suffice.

(i)  The parties

5.  Chen, a Mainland resident, was formerly a branch manager of Bank of China in Shunde province. Chen came to know Wong in about 1990 and had business dealings with him in that capacity.

6.  Wong was the beneficial owner of various companies including順德全順實業發展有限公司 (“Shunde Quanshun”) and Hawkins, a company incorporated in Hong Kong. His interest in Hawkins was held through 2 corporate vehicles, namely, (i) the 2^nd Defendant (“Line Power”), a Hong Kong company, and (ii) the 3^rd Defendant (“Trengei”), a BVI company, the shares of which were held by him and his personal assistant, Liu Yong (“Liu”).

7.  In early 1996, Wong embarked on a Sino-foreign joint venture business in the Mainland known as 遼陽順鋒鋼鐵有限公司(“Shunfeng”), which held iron ore mining rights in Liaoning. Wong’s 80% interest in Shunfeng was held through Hawkins. The remaining 20% interest in Shunfeng was held by the Mainland counter-parties to the joint venture.

8.  The 4^th Defendant (“Lead Success”), a Hong Kong company, and the 6^th Defendant (“Superfine”), a BVI company, are beneficially owned by Bao Zichen (“Bao”). Bao is also the ultimate beneficial owner of two other companies known as 本溪火連寨鐵礦選礦廠(“Huolianzhai”) and Everest Development Group LLC (“Everest”), with Yu Hai Yang (“Yu”) acting as his representative in relation to those companies. As at 12 September 2008, Yu also held 99% of the shares in Lead Success on behalf of Bao.

9.  Since 2004, Wong had been involved in a series of litigations[1] with Yeung Wing Keung (“Yeung”) and his associates (“Yeung’s camp”) over the control of Hawkins/Shunfeng, the details of which it is not necessary to recite in this judgment.

(ii)  The 2003 Agreement

10.  In late 1995, Chen resigned from Bank of China and joined Wong’s group as deputy general manager and deputy director.

11.  Since 1996, Chen had been assisting Wong to obtain financing from third parties for Wong’s businesses. Chen also personally lent money to Wong. According to Chen, all those loans were treated as due and owing by Wong to him personally, even though some of the loans were sourced from third parties and some of them were used for the purposes of Wong’s companies.

12.  According to Chen, at a meeting on 10 January 2003, he and Wong reached an agreement (“the 2003 Agreement”), whereby Wong agreed to settle indebtedness of over RMB 21 million (including a loan of RMB 700,000 advanced at that meeting) by transferring (inter alia) the Shares to him. The 2003 Agreement was evidenced by 3 key documents:

(1)  借欠款清單 (“the Debt Acknowledgement List”) - a typewritten document (or more accurately a document generated from a printer) which appeared to have been signed by Wong and bore the company chop of Shunfeng;

(2)  確認書 (“the 10/1/2003 Confirmation”) dated 10 January 2003 - a Chinese document written on the letterhead of Shunfeng which appeared to have been signed by Wong and bore the company chop of Shunfeng; and

(3)  承諾書 (“the Letter of Undertaking”) dated 10 January 2003 - a Chinese document written on the letterhead of 順德華群纤維絲束有限公司 (Shunde Vastqueen Fiber Tow Co Ltd) and signed by Chen.

(iii)  The transfer of Hawkins to Lead Success/Superfine

13.  Subsequent to the making of the 2003 Agreement, Wong entered into two further financing arrangements with other third parties, namely:

(1)  a quadri-partite agreement dated 14 September 2003, under which Huolianzhai agreed to lend RMB 20 million to Shunfeng - it was agreed that, in default of repayment, the debt would be satisfied by 50% of the shares in Hawkins; and

(2)  an agreement dated 20 April 2006 (“the April 2006 Agreement”), under which Everest agreed to provide a loan of HK$20 million to Wong to fund the legal costs of Wong’s ongoing litigations with Yeung and a further loan of HK$350 million to fund the operations of Shunfeng after control of Hawkins/Shunfeng had been restored to Wong - the agreement provided that Wong had the option of issuing a specified number of new shares in Hawkins (at the price of HK$1 per share) calculated by an agreed formula to Everest in repayment of the loans.

14.  Pursuant to the April 2006 Agreement, Yu was appointed as general manager, director and legal representative of Shunfeng, and his appointment was approved by the Liaoyang Administrative Bureau for Industry and Commerce (遼陽市工商行政管理局) (“Liaoyang ABIC”) in March 2007.

15.  By an agreement dated 29 August 2008 (“the August 2008 Agreement”) entered into between Wong, Liu, Line Power and Trengei (as transferor) and Lead Success (as transferee), the former agreed to transfer 100% of the shares in Hawkins to Lead Success for the consideration of RMB 130 million, part of which was to be settled by the outstanding indebtedness of RMB 10.2 million owed by Wong to Everest under the April 2006 Agreement.

16.  Pursuant to the August 2008 Agreement, the Hawkins shares were transferred to Lead Success on 12 September 2008. Some further representatives/nominees of Bao were appointed as directors of Shunfeng on 19 December 2008.

17.  The August 2008 Agreement was subsequently superseded and replaced by a further agreement dated 2 April 2011 (“the April 2011 Agreement”) entered into between Wong, Liu, Line Power and Trengei (as transferors) and Superfine (as transferee), under which the former agreed to transfer 100% of the shares in Hawkins to Superfine for the reduced consideration of RMB 115 million. For the purpose of this judgment, it is not necessary to set out the reasons which led to the making of the April 2011 Agreement or details of its subsequent performance. It suffices for us to mention out that the consideration payable by Superfine under the April 2011 Agreement was agreed by the parties thereto as having been fully paid by 27 October 2014.

(iv)  The Judgment

18.  On 23 August 2012, Chen commenced the present action in the High Court to enforce the 2003 Agreement and recover the Shares from the Defendants. The trial of the action took place in January and May 2019, and judgment was given on 19 March 2021.

19.  At the trial, Wong denied making the 2003 Agreement. He put forward a positive case of forgery in 2 senses: the signature was not his; but if it was, it was there already on a blank document pre-signed by him and the contents were added afterwards at a time unknown to him[2].

(1)  In respect of the Debt Acknowledgement List - Wong made no admission about the document. His alternative position was that even if he had signed the document, he did so without knowledge or consent. There was no allegation of forgery by Wong in respect of that document[3].

(2)  In respect of the 10/1/2003 Confirmation, Wong did not admit the signature on the document to be his signature. He also said that he had in the course of business pre-signed papers or letterheads of Shunfeng in blank for administrative convenience, and was not sure whether the signature on that document was a forgery or whether the 10/1/2003 Confirmation was written on one of those pre-signed blank papers[4]. In view of the fact that the two handwriting experts, Mr Radley and Ms Yang engaged by Wong and Chen respectively, both opined that the signature on the document was written by Wong and it was highly unlikely to be simulation, the substantial issue before the Judge was whether the 10/1/2003 Confirmation was written on a pre-signed letterhead of Shunfeng as alleged by Wong[5].

(3)  In respect of the Letter of Undertaking, as it was written and signed by Chen only, there was no question of forgery in either of the 2 senses alleged by Wong. The dispute was whether it came about together with the Debt Acknowledgement List and the 10/1/2003 Confirmation on 10 January 2003[6].

20.  After considering the oral testimony of the witnesses, including Chen but not Wong (who had become mentally incapacitated by the time of the trial[7]), expert evidence on handwriting and paper/ink dating, other contemporaneous and documentary evidence, including in particular two letters dated 6 September 2005 (“the 6/9/2005 Letter”) and 8 September 2005 (“the 8/9/2005 Letter”), as well as the inherent probabilities of the conflicting versions put forward by the parties, the Judge found the 2003 Agreement proved. For the present purpose, it is not necessary to set out the detailed analysis of the evidence by the Judge. At §135 of the Judgment, the Judge stated his conclusion as follows:

“I am satisfied that the background of indebtedness of Wong owed to Chen which gave rise to the Debt Acknowledgement List was factually true. Not only has Chen managed to establish on a balance of probabilities the indebtedness as a matter of fact, but he has also established that Wong did sign the Debt Acknowledgement List to admit the indebtedness on 10 January 2003. I am also satisfied that Wong did sign the 10/1/2003 Confirmation on that day, and I reject the contention that it came about by way of addition of the text to what Wong has pre-signed (or pre-chopped with the company stamp) in blank as alleged. As the Letter of Undertaking came about as part of the package on the same occasion, I too find that this document came to be signed together with the other two documents on 10 January 2003. It follows that the 2003 Agreement is proved.”

21.  The Judge next considered and rejected a number of specific defences raised by the 1^st to 3^rd Defendants, namely: (i) past consideration[8], (ii) incomplete agreement[9], (iii) uncertainty[10], (iv) limitation[11], and (v) laches[12].

22.  The Judge found that Lead Success and Superfine could not take the Shares free of Chen’s interest in them by reason of their notice of Chen’s interest by late 2005[13], or late 2009[14], or March 2011[15], and in any event prior to the full payment of the agreed consideration for the Shares in October 2014[16], and also because they did not act in good faith[17]. The Judge further found that Lead Success and Superfine were liable to Chen as constructive trustees on the basis of “knowing receipt” of the Shares[18].

23.  In the result, the Judge granted declaratory relief in respect of the Shares in favour of Chen, and made an order that, in default of the transfer back to Chen of the Shares, Wong, Lead Success and Superfine shall jointly and severally be liable to pay to Chen the following amount: RMB 92 million (being the value of 80% of the shares in Hawkins as assessed by the Judge - RMB 115 million x 80%) less the amount of RMB 60 million pursuant to the Letter of Undertaking given by Chen plus interest on RMB 21,925,140 calculated at the prevailing official interest rates in the PRC from 11 January 2003 until full payment.

THE NOTICES OF APPEAL

24.  Both the 1^st to 3^rd Defendants and 4^th to 5^th Defendants have lodged appeals against the Judgment.

25.  In the notice of appeal of the 1^st to 3^rd Defendants dated 16 April 2021, 2 grounds of appeal are raised:

(1)  The Judge erred in holding that the 2003 Agreement did not fail for lack of valid consideration from Chen.

(2)  There was no or insufficient evidence upon which the Judge could find that the market value of the Hawkins shares was RMB 115 million for the purpose of assessment of damages.

26.  Attached to the Reply Skeleton Argument of the 1^st to 3^rd Defendants dated 16 August 2022 is a draft Supplementary Notice of Appeal (“D1-D3’ draft Supplementary Notice of Appeal”). It contains 9 paragraphs, and raises various grounds of appeal against findings of fact made by the Judge which 1^st to 3^rd Defendants intend to pursue based on new evidence to be admitted (see §30 below).

27.  In the notice of appeal of the 4^th to 6^th Defendants dated 16 April 2021, the following grounds of appeal are raised:

Appeal on fact

(1)  The Judge erred in finding that the 6/9/2005 Letter was authentic, and in treating it as proof, or giving weight to it as evidence, of its contents (§§1 and 2).

(2)  The Judge erred in relying on the 6/9/92005 Letter to make further adverse findings against the 4^th and 6^th Defendants (§3).

(3)  The Judge erred in failing to find that the transfers of the Shares to Lead Success and Superfine were unrelated to and without knowledge of Chen’s interest in the Shares (§4).

Appeal on law

(4)  The Judge erred in holding that the relevant time for considering the issues of (i) bona fides and (ii) absence of notice was when full payment was made and not when legal estate was acquired (§5).

Remedies

(5)  The Judge erred in failing to have regard or sufficient regard to the investment and improvement in Shunfeng since about 2007 by Bao/Yu’s camp, and it was inequitable to require the 4^th to 6^th Defendants to make restitution by transferring the Shares to Chen (§6).

(6)  The Judge ought to have afforded the 4^th to 6^th Defendants the right to elect to “pay off Chen’s interest subject to any set-off” (§7).

THE PRESENT APPLICATIONS

(i)  The 4^th to 6^th Defendants’ applications

28.  By a summons dated 7 December 2021 (“the December 2021 Summons”), the 4^th to 6^th Defendant applied for leave to adduce 15 items of new evidence for the purpose of their appeal in CACV 178/2021. The 4^th to 6^th Defendants subsequently issued three further summonses dated 21 January 2022, 31 January 2022 and 23 February 2022 (“the February 2022 Summons”) respectively seeking leave to amend the December 2021 Summons. The amendments sought by the summonses of 21 and 31 January 2022 are effectively superseded by the amendments sought by the February 2022 Summons. The parties agree that no order is required to be made in respect of the summonses of 21 and 31 January 2022.

29.  The December 2021 Summons as proposed to be amended by the February 2022 Summons now relates to 23 items of proposed new evidence (“Item 1” to “Item 23” respectively) as set out in an Amended Schedule.

(ii)  The 1^st to 3^rd Defendants’ application

30.  By a summons dated 15 July 2022, the 1^st to 3^rd Defendants applied for leave to adduce (i) the same Items 1 to 23 (referred to as Items 2(1) to (23) in the Schedule to that summons), and (ii) Exhibit “ZRW-32” to the 4^th Affirmation of Zhang Rongwen (“Zhang”)[19] filed on 27 June 2022, as fresh evidence for the purpose of their appeal in CACV 173/2021.

APPLICABLE PRINCIPLES

31.  It is not in dispute that the three conditions in Ladd v Marshall, namely, that the proposed new evidence:

(1)  could not have been obtained at the trial with reasonable diligence (“Condition 1”);

(2)  must be such that, if given, would probably have an important influence on the result of the case, though it need not be decisive (“Condition 2”); and

(3)  is apparently credible though it need not be incontrovertible (“Condition 3”),

are, in principle, applicable to the current applications for admission of new evidence (save in respect of Item 23 and Exhibit “ZRW-32”).

32.  Nevertheless, Mr Shieh argues that where it can be shown that there is a reasonable prospect of success that fraud was practised in the proceedings below, the application of the 3 conditions would be modified. According to Mr Shieh:

(1)  “Fraud” in this context means “conscious and deliberate dishonesty in relation to the relevant evidence given”, including where the judgment is obtained by perjured evidence, not fraud in the underlying dispute.

(2)  For Condition 1, the criterion of reasonable diligence can be relaxed.

(3)  For Condition 2, the fresh evidence must be material in that it has to show that the previous relevant evidence, action, statement or concealment was an operative cause of the court’s decision to give judgment in the way it did, or that it would have entirely changed the way in which the court approached and came to its decision; and thus the conscious and deliberate dishonesty must be causative of the impugned judgment being obtained in the terms it was. “Materiality” of the fresh evidence is to be assessed by reference to its impact on the evidence supporting the original decision, not by reference to its impact on what decision might be made if the claim were to be retried on honest evidence. That said, that fresh evidence does not have to be of decisive influence or of such character that it would have formed a determining factor in the result.

In support of these submissions, Mr Shieh relies on the judgment of the Court of Appeal in Lu Yongliang v Bank of China Ltd, Dongguan Branch [2020] HKCA 1089, at §§21-25, and the judgment of the UK Supreme Court in Takhar v Gracefield Dev Ltd [2020] AC 450.

33.  On the other hand, Mr Fung submits that before the court would consider relaxing the reasonable diligence criterion for the purpose of Condition 1, “clear evidence of a judgment being obtained by fraud” must be shown (Lu Yongliang, at §§12-14), and “where fresh evidence is adduced in the Court of Appeal tending to show that the judge at first instance was deliberately misled, the court will only allow the appeal and order a retrial where the fraud is either admitted or the evidence of it is incontrovertible” and “[i]n any other case, the issue of fraud must be determined before the judgment of the court below can be set aside” (Noble v Owens [2010] 1 WLR 2491, at §27).

34.  We consider the relevant principles for the admission of fresh evidence in appeal in fraud cases to be as follows:

(1)  As held by Lam VP (as he then was) in Lu Yongliang, a distinction should be drawn between (i) a case of judgment obtained by fraud, and (ii) a case where an allegation of fraud was relied upon in the substantive underlying merits of the dispute (§12).

(2)  In the former situation, ie where a judgment was obtained by fraud, the party seeking to impeach the judgment obtained may commence a fresh action to set it aside. “An action to set aside an earlier judgment for fraud is not a procedural application but a cause of action … an original bill differed from a bill of review on the basis of further evidence, which was essentially procedural and did require leave” (Takhar v Gracefield Developments Ltd [2020] AC 450, at §60 per Lord Sumption). In an action to set aside a judgment on the ground that the judgment was obtained by fraud, the court is not concerned with the exercise of the power of appeal or review in the same action. It is not a precondition that the unsuccessful party has exercised reasonable diligence to discover the fraud in the earlier proceedings. The reasonable diligence requirement is a condition to be satisfied only where leave to adduce new evidence on appeal is sought (Lu Yongliang, at §§15-19; Clone Pty Ltd v Players Pty Ltd (2018) 353 ALR 24, at §64).

(3)  In the latter situation, ie where fraud in the substantive underlying merits of the dispute or in the course of the events leading up to the dispute is relied upon, the three Ladd v Marshall Conditions should be applied in its full vigour for the admission of fresh evidence (Lu Yongliang, at §§13-14).

(4)  The possible relaxation of the reasonable diligence requirement under Condition 1 for the admission of fresh evidence in fraud cases is confined to the situation where an applicant can demonstrate a “reasonable prospect of success” that the judgment below was obtained by fraud in accordance with the principles summarized by Aikens LJ in Royal Bank of Scotland plc v Highland Financial Partners [2013] 1 CLC 596 (at §106), as opposed to fraud in relation to the general underlying merits of the case (Lu Yongliang, at §§14, 23 & 25).

(5)  The principles summarized by Aikens LJ in Royal Bank of Scotland were reiterated by Kwan VP in Mayer Corporation Development International Ltd v Alliance Financial Intelligence Ltd [2019] HKCA 777, at §72 -

(a)  there must be “conscious and deliberate dishonesty” in relation to the relevant evidence given;

(b)  the fresh evidence must be “material”, in that it demonstrates that the previous relevant evidence, action, statement or concealment was an operative cause of the court’s decision to give judgment in the way it did, or that it would have entirely changed the way in which the first court approached and came to its decision; and thus the conscious and deliberate dishonesty must be causative of the impugned judgment being obtained in the terms it was; and

(c)  the question of “materiality” of the fresh evidence is to be assessed by reference to its impact on the evidence supporting the original decision, not by reference to its impact on what decision might be made if the claim were to be retried on honest evidence.

(6)  Even in such a situation, Conditions 2 and 3 must still be satisfied for the admission of the proposed new evidence (Lu Yongliang, at §§71-72 & 79). That this is so was made plain by the Court of Appeal refusing to grant leave to appeal in Lu Yongliang [2021] HKCA 1047, at §10.

DISCUSSION

(i)  The Receipt in Item 10 and Items 16-22

35.  As earlier mentioned, in finding the 2003 Agreement proved, the Judge relied on, inter alia, the 6/9/2005 Letter and 8/9/2005 Letter:

(1)  The 6/9/2005 Letter was apparently sent from Yu to Wong, in which Yu referred to the 10/1/2003 Confirmation and the Letter of Undertaking. Yu said in the letter that the two documents showed that Wong had agreed on 10 January 2003 to transfer, inter alia, 80% of the shares in Hawkins to Chen, and asked Wong to explain how, in those circumstances, Huolianzhai could recover the outstanding debt or use shares in Hawkins in satisfaction of the outstanding debt.

(2)  The 8/9/2005 Letter was apparently Wong’s reply to Yu, in which Wong “expressed his confidence that Chen would not seek to enforce the 10/1/2003 Confirmation without his prior notice”, referred to “the legal advice of [Messrs C L Chow & Macksion Chan] that Huolianzhai’s interest would be secure so long as it was a bona fide purchaser of Hawkins’ shares for value without notice”, and stated that “[e]ven assuming Chen would take legal action, the Hawkins’ shares could be transferred to another third party company before transferring to Huolianzhai”[20].

(3)  The Judge considered that the 8/9/2005 Letter amounted to an “admission” by Wong that he had signed the 10/1/2003 Confirmation[21], and was also evidence that Lead Success and Superfine had notice of Chen’s interests in the Shares in September 2005[22].

36.  As for the provenance of those letters, according to Chen, he unexpectedly received them by mail to his home address on 18 July 2011. The evidence before the Judge suggested that they were sent by Wong to Chen[23]. It was not, however, clear why Wong would send the letters to Chen in 2011, and the Judge did not make any definitive finding on that issue[24]. On the other hand, Yu denied having written the 6/9/2005 Letter or seen it until it was revealed by Chen for the purpose of the litigation, and Wong also denied having prepared and sent out the 8/9/2005 Letter.

37.  The 4^th to 6^th Defendants now seek to adduce a receipt in Item 10 (“the Receipt”) and Items 16-22 as fresh evidence to show that the 6/9/2005 Letter and the 8/9/2005 Letter were not authentic, and thus when Lead Success acquired the Shares from Wong in 2008, it did so in good faith without notice of Chen’s prior equity:

(1)  The Receipt is dated 15 June 2001, and purports to be a receipt by Chen from Kang Zhuang (“Kang”)[25] of, inter alia, 5 blank pieces of paper with letterhead, pre-signed and pre-stamped by Wong.

(2)  Item 16 is an invoice issued by a chop-maker called 維盾 to Shunfeng dated 15 July 2004 (“the July 2004 Invoice”) for the sum of RMB 135 for 4 company chops.

(3)  Item 17 are documents retrieved from a file kept by 維盾 upon inquiries made by Zhang with the current management of 維盾showing that Shunfeng applied for 4 new company chops to be made on 29 June 2004 and its old company chops were destroyed on 15 July 2004.

(4)  Item 18 is a legal opinion from Weng Di of Hong Li Law Office of Liaoning dated 21 January 2022 on the applicable PRC laws/regulations requiring a company which has changed its chop to return the old chop to the chop-maker for destruction.

(5)  Item 19 is a record of interview dated 23 December 2021 with a person called Yang Zhu (楊竹), who was the accountant of Shunfeng during the period from 1996 to 2005 and handled the change of Shunfeng’s company chops in 2004.

(6)  Item 20 and Item 22 (financial statements) purport to be some Shunfeng documents showing the use of the old and new company chops before and after July 2004.

(7)  Item 21 consists of documents obtained from Agricultural Bank of China showing that Shunfeng applied for change of company chops on 15 July 2004.

(8)  Item 22 (letters dated 7 and 8 September 2005) are letters exchanged between Shunfeng and Liaoyang ABIC retrieved from Shunfeng’s file.

38.  Mr Shieh argues that Items 16-22 show that on 29 June 2004, Shunfeng applied to have 4 new chops made, and on 15 July 2004, the new chops were collected and the old chops were destroyed, and argues the fact that Shunfeng’s old (destroyed) chop was still appended to the 8/9/2005 Letter strongly suggests that it was a forgery. In support of this argument, Mr Shieh refers to the fact that after July 2004, the new chop of Shunfeng was consistently applied in various documents of Shunfeng, and that another letter of Shunfeng also dated 8 September 2005 (“the 2^nd 8/9/2005 Letter”) in Item 22 bore the company’s new chop. Mr Shieh further argues that the Receipt supports the Defendants’ case that Wong had the practice of pre-signing and pre-stamping blank letter papers, and directly contradicts Chen’s evidence at the trial that it was not possible for Wong to pre-sign and pre-stamp blank papers with letterhead of his companies, and that he never received such papers from Wong.

39.  The 4^th to 6^th Defendants say the documents could not have been obtained for use at the trial with reasonable diligence because:

(1)  Yeung’s camp previously took away Shunfeng’s documents (up to 2005) in December 2006 when Yeung was still in control of Hawkins/Shunfeng;

(2)  the Shunfeng documents were later seized by the Public Security Bureau of Dengta City (“the Dengta City PSB”) when investigating Wong’s potential criminal conduct upon the complaint of Yeung’s camp;

(3)  the seized documents could not be returned to Shunfeng until the completion of the investigation against Wong;

(4)  it was only after Wong’s death on 29 November 2019 (after the conclusion of the trial on 28 May 2019) and after the Judgment was handed down on 19 March 2021 that the 4^th to 6^th Defendants requested the Dengta City PSB to return the Shunfeng documents;

(5)  the Shunfeng documents were eventually returned in 7 boxes on 13 April 2021, including Items 1-16 and 20, and the financial statements of Shunfeng in Item 22;

(6)  it was from those 7 boxes of documents that the 4^th to 6^th Defendants found the evidence concerning the destruction of the old chops of Shunfeng in 2004, which “led to further inquiry and discovery or obtaining of further evidence relating to the change of the chop (including #17-19, 21 and [the 2^nd 8/9/2005 Letter] under #22)”[26].

40.  Mr Lam’s submissions on behalf of the 1^st to 3^rd Defendants in respect of the Receipt and Items 16-20 are to the same effect.

Condition 1

41.  We are not satisfied that the Defendants have discharged the burden of showing that the proposed new evidence could not have been obtained for use at the trial with reasonable diligence.

(1)  The Defendants have failed to produce credible or satisfactory evidence to show what documents were actually seized/detained by the PSB, or returned to Shunfeng, or the dates on which the documents were seized/detained or returned. Significantly, there is no evidence emanating from the Dengta City PSB, or independent evidence, identifying the documents actually seized/detained or returned, or the dates of the alleged seizure/detention or return of the documents (save that in a handwritten note apparently made by 燈塔市公安局經偵大隊 dated 11 May 2011[27], it was mentioned that the Dengta City PSB had detained some (unparticularised) pre-2005 accounting records of Shunfeng in connection with the investigation of suspected criminal conduct on the part of Wong). In the 1^st Affirmation of Zhang dated 25 November 2021, he states that the Dengta City PSB failed to provide any appropriate or formal records of the documents returned by the Dengta City PSB, or the process concerning the return of documents despite request, contrary to applicable regulations (上述的當局歸還文件及資料的過程竟然令人沮喪地沒有記錄。儘管我方提出過要求，國內當局仍然沒有為此類活動提供合適及正式記錄，這是不符合常規的). Even if the Dengta City PSB failed or refused to provide documentary proof of the documents which were actually seized/detained, or returned to Shunfeng, or the dates on which the documents were seized/detained or returned, the relevant correspondence with the Dengta City PSB (including the request made to the Dengta City PSB for the release of Shunfeng’s documents and for relevant records concerning the documents returned in April 2021, and the Dengta City PSB’s replies) could have been produced, unless the whole process relating to the request for supporting documentary evidence was conducted by way of oral communications only. Zhang has not suggested that this was the situation, which we consider to be an unlikely scenario in itself.

(2)  Wong died on 29 November 2019. Zhang said he learnt about Wong’s death from a letter sent by the 1^st to 3^rd Defendants’ solicitors (C L Chow & Macksion Chan) to the Court and copied to the 4^th to 6^th Defendants’ former solicitors dated 30 December 2019. He did not however take any steps to retrieve any documents seized by the Dengta PSB until after judgment was handed down on 19 March 2021 and the Defendants had lost the case. On his evidence, the Dengta PSB very swiftly (on 13 April 2021) released the documents after being informed of Wong’s death. The Defendants could reasonably have asked the Dengta PSB for the release of the documents soon after the passing away of Wong. If the Defendants had taken steps earlier, they would presumably have got the documents earlier, and could have asked the Judge to reopen the hearing based on the documents obtained.

42.  There is an additional reason why we do not consider that the Defendants have satisfied the reasonable diligence requirement in relation to the proposed evidence that Shunfeng changed its company chops in July 2004:

(1)  According to the 2^nd affirmation of Zhang filed on 17 January 2022, what sparked off the inquiry and led to the discovery of the proposed new evidence concerning the change and use of the 4 new company chops of Shunfeng was the July 2004 Invoice (Item 16).

(2)  Assuming for the sake of argument that the July 2004 Invoice was indeed not in Shunfeng’s possession between December 2006 and April 2021 and was only returned to Shunfeng in April 2021 as alleged, we consider that the critical information that the 1^st to 3^rd Defendants required which would likely have led to the discovery of the proposed new evidence regarding the change of Shunfeng’s company chops in July 2004 was not the July 2004 Invoice, but the fact that Shunfeng applied to change its company’s chops in June 2004 and received the new chops in July 2004. At that time, Wong was still the Legal Representative, and in control, of Shunfeng[28]. Bearing in mind the importance of the company chops in the context of a PRC company[29], it can reasonably be assumed that Shunfeng’s application for the new company chops was made with the knowledge and consent of Wong (and there is no evidence which suggests the contrary). There was a clear visual difference between the old and new company chops of Shunfeng (as can be seen from the pictures at §9(3) of Mr Shieh’s Skeleton Argument dated 29 June 2022). It would have been obvious to Wong that the old company chop of Shunfeng was still appended to the 8/9/2005 Letter notwithstanding the fact that Shunfeng had, allegedly, changed its chops in July 2004.

(3)  Even without the July 2004 Invoice, the 1^st to 3^rd Defendants could have made appropriate inquires with 維盾 concerning the change of Shunfeng’s company chops in July 2004 which would have led them to the other documents not under detention by the Dengta City PSB mentioned above, ie Items 17, 18, 19 and 21 and the letters in Item 22 (including the 2^nd 8/9/2005 Letter). While it is appreciated that Wong had become mentally incapacitated in about 2013[30], there is no suggestion that there was no one else in Wong’s camp, including Liu (his personal assistant who gave evidence for the 1^st to 3^rd Defendants at the trial), who had knowledge about the change of Shunfeng’s company chops in 2004, or the visual differences between the old and new chops.

(4)  In so far as the 4^th to 6^th Defendants are concerned, Bao’s nominees (including Yu) have been acting as Legal Representative, general manager and directors of Shunfeng since no later than March 2007. They would have possession and control of Shunfeng’s current company chops and documents bearing Shunfeng’s company chops dated both before and after July 2004 (including the 2^nd 8/9/2005 Letter in Item 22). In view of the fact that it had all along been the 4^th to 6^th Defendants’ contention that the 8/9/2005 Letter was a forgery[31], it can reasonably be assumed that they would have carefully examined the 8/9/2005 Letter and noticed, or ought to have noticed, the obvious difference between (i) the company chop appearing on that document, and (ii) the company chops currently in use by Shunfeng and those appearing in other contemporaneous documents of Shunfeng (including the 2^nd 8/9/2005 Letter which was in Shunfeng’s possession all along and not seized or detained by the Dengta City PSB). Reasonable inquiries, including inquiries with Yeung’s camp, would, or would likely, have revealed the fact that Shunfeng changed its company chops in July 2004 and sparked off the same inquiry leading to the discovery of Items 17, 18, 19 and 21 and the financial statements in Item 22 now proposed to be adduced as new evidence.

Condition 2

43.  We are also not satisfied that Condition 2 is satisfied in so far as the Receipt is concerned. The relevance of the Receipt to the authenticity of the disputed documents, in particular the 10/1/2003 Confirmation and the 8/9/2005 Letter, is at best tangential. It is not mentioned in the Receipt which company’s letterhead the 5 blank pieces of paper related to. The Receipt plainly cannot constitute direct evidence that the aforesaid disputed documents were forgeries as alleged by the Defendants. As pointed out by the Judge at §71 of the Judgment, even assuming that Wong had the habit of pre-signing letterheads in blank, that of itself would not prove that the 10/1/2003 Confirmation was compiled from such pre-signed letterhead. While the Receipt could be used to challenge the credibility of Chen, there was other evidence accepted by the Judge which supported his conclusion that the disputed documents were authentic:

(1)  In respect of the 10/1/2003 Confirmation - (i) the direct evidence of Zheng Zhiguang (“Zheng”, the nephew of Wong who worked as his driver and assistant in the Mainland during the period between 1996 and 2008), who saw the signing of the document by Wong at the meeting on 10 January 2003[32], and (ii) the Work Record of Chen[33].

(2)  In respect of the 8/9/2005 Letter - (i) the direct evidence of Zheng, who said that he handled the sending out of the 8/9/2005 Letter[34], and (ii) the discovery by Wong’s own handwriting expert (Mr Radley) of the handwriting impression on the 8/9/2005 Letter left by the handwritten instruction of Wong for documents to be mailed to Chen at his home address together with Wong’s signature and the date of 30 June 2011[35]. Pausing here, it may also be noted that it was Mr Radley’s evidence, with whom Chen’s handwriting expert (Ms Yang) agreed, that there was strong evidence to support that the signature on the 8/9/2005 Letter was appended by Wong[36].

(3)  We do not consider that the Receipt, if admitted, would probably have an important influence on the result of the case.

44.  Finally, we do not consider that the possible relaxation of the reasonable diligence requirement should be applied when considering whether the Receipt and Items 16-22 should be admitted as new evidence. The new documents, taken at their highest, do not show any dishonest conduct in the trial on the part of Chen. He received the documents from an anonymous mail, as supported by the hidden impression discovered by Mr Radley. Even if the 8/9/2005 Letter was a forgery, there does not seem to be anything to show that Chen should know it was a forgery. Zheng was a mere witness, not a party. To set aside a judgment for fraud it is not enough to show that a witness committed perjury. It is necessary to show that the judgment was obtained by fraud and that the fraud was that of a party to the action or was at least suborned by or knowingly relied upon by that party: Dale v Banga [2021] EWCA Civ 240, at §27. We are not satisfied that the proposed new evidence is sufficient to show a “reasonable prospect of success” that the Judgment was obtained by fraud for which Chen should be held responsible as required for the possible relaxation of the reasonable diligence requirement.

45.  In all, we refuse to exercise our discretion to admit the Receipt and Items 16-22 as new evidence in the present appeals.

(ii)  Item 23

46.  Item 23 consists of, inter alia:

(1)  a purported聲明書dated 3 February 2022 (“the 2022 Chen Declaration”), in which Chen stated that:

(a)  he was currently under restraint at home (監視居住) because he was suspected of having committed offence(s) of fraud;

(b)  he had forged various documents used in legal proceedings in Hong Kong, including the 10/1/2003 Confirmation, the Debt Acknowledgement List, the Letter of Undertaking, the 6/9/2005 Letter and the 8/9/2005 Letter;

(c)  he wished to withdraw the proceedings in Hong Kong; and

(d)  he had asked his appointed lawyer in the PRC, Cheng Rui (“Cheng”), to send his declaration to the victims’ lawyers and his own lawyers in Hong Kong (Mak Ka Ping of Adrian Yeung & Cheng); and

(2)  an appointment letter signed by Chen dated 4 February 2022, whereby Chen appointed Cheng as his lawyer in relation to his fraud case (“the Letter of Appointment”).

47.  According to Zhang, he received copies of the 2022 Chen Declaration and the Letter of Appointment from Cheng on 4 February 2022. Mr Yeung Wing On and Ms Mak Ka Ping Judy have also confirmed that they received copies of those documents from Cheng on 4 February 2002.

48.  As the matters evidenced by the documents in Item 23 came into existence after the trial, the Ladd v Marshall conditions do not apply. The application is governed by the words in parenthesis in Order 59, rule 10(2) of the Rules of the High Court:

“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 date of the trial or hearing) shall be admitted except on special grounds.”

49.  The applicable principles for the admission of evidence of matters arising after the trial are well settled. The Court of Appeal has a wide discretion to admit new evidence with regard to matters which have occurred after the hearing. However, this discretion is to be exercised sparingly with due regard to the need for finality in litigation. Whilst it is not possible to produce an exhaustive list of relevant considerations, among them are the extent to which the fresh evidence may affect the outcome, the time element and the conduct of the parties. The evidence should be admitted where it would be an affront to one’s sense of fairness not to admit it. And the new evidence must substantially affect a basic assumption made at the trial: the matter is one of degree. See Re China Fishery Group Ltd [2020] HKCA 169 at §26; China Medical Technologies Inc v Bi Xiao Qiong [2020] HKCA 541 at §22; Hong Kong Civil Procedure 2002, Vol 1, §59/10/13.

50.  Mr Shieh submits that the admission by Chen of his forgeries is clear and unambiguous, and the 2022 Chen Declaration should plainly be admitted for the purpose of the 4^th to 6^th Defendants’ appeal. Mr Lam submits that Chen’s admission is obviously hugely important and changes the entire complexion of the case, and everything in his clients’ appeal must now be viewed through the prism of this admission of fraud by Chen.

51.  On the other hand, Mr Fung has argued with considerable force that the provenance of the 2022 Chen Declaration is highly questionable, and it would be unsafe for the Court to treat Chen as having admitted to forging evidence used at the trial. In particular, Mr Fung points out that right up to the date before he was detained in the Mainland (22 January 2022), Chen had been instructing his lawyers in Hong Kong to fully enforce the Judgment and oppose the 4^th to 6^th Defendants’ applications for stay of execution and admission of new evidence, as well as the substantive appeal. However, on 23 January 2022, Chen was apparently taken away in Shunde and brought to Liaoning by the Public Security Bureau of Benxi City, Liaoning, upon a complaint of fraud laid by Bao (who, on his own account, has strong business and political influence in Liaoning[37]). Shortly afterwards, Chen made the alleged admission of forgeries.

52.  There are obvious questions to be asked as to whether Chen in fact made the alleged admission, and whether such admission (if made) was voluntary. There are also suspicious circumstances concerning the purported appointment of Cheng as Chen’s lawyer in the PRC. These matters are fully set out in the affirmations of Yeung Wing On and Mak Ka Ping Judy filed on 26 April 2022, and §§25-32 of the Plaintiff’s Skeleton Submissions dated 2 August 2022. On the other hand, it is submitted on behalf of the 1^st to 3^rd Defendants that Chen’s change of position is not incredible because he had an incentive to mitigate his potential criminal liability. In our view, these matters cannot be resolved in the present applications for admission of new evidence, and require further consideration with the assistance of full arguments by the parties. In view of the potential significance of the proposed new evidence, we consider that leave should be granted to the Defendants to rely on the documents in Item 23 for the purpose of their appeals, reserving the question of what weight (if any) ought to be accorded to them for consideration at the substantive hearing of the appeals.

(iii)  Items 1-15 (save for the Receipt in Item 10)

53.  In the Skeleton Argument of the 4^th to 6^th Defendants dated 29 June 2022, Mr Shieh makes submissions in respect of (i) the Receipt in Item 10, (ii) Items 16-22 and (iii) Item 23 only, and invited the Court to grant leave to the 4^th to 6^th Defendants to adduce those items of new evidence. Mr Fung submits that the 4^th to 6^th Defendants should be taken to have abandoned reliance on the remaining items of proposed new evidence, ie Items 1-15 (save for the Receipt in Item 10). Mr Shieh has not responded to this submission in the Reply Submissions of the 4^th to 6^th Defendants dated 16 August 2022.

54.  Items 1-15 (save for the Receipt in Item 10) consist of various payment records alleged to have been returned by the Dengta City PSB on 13 April 2021. The 1^st to 3^rd Defendants propose to rely on:

(1)  Items 1 to 12 to challenge the Judge’s findings regarding the underlying debts owed by Wong to Chen as particularised in the Debt Acknowledgement List[38];

(2)  Items 13 to 14 to show that Wong and Zheng went to Guangzhou, instead of Heilongjiong, on 11 January 2003, with a view to challenging Chen’s evidence that Wong “requested a further loan of RMB 700,000 from [Chen] to enable [Wong] to attend a meeting with his lenders to be held in Heilongjiang, Harbin on 11 January 2003” to enable the unfreezing a loan of US$300 million[39]; and

(3)  Item 15 to show that Kang went on a trip to Beijing on 14 June 2001. This item is relevant to the issue concerning the receipt by Chen of 5 pieces of blank letterheads signed by Wong, which we have already dealt with above in our discussion relating to the Receipt.

55.  For the reasons mentioned in §41 above, we are not satisfied that the 1^st to 3^rd Defendants have discharged the burden of showing that Items 1-15 could not have been obtained for use at the trial with reasonable diligence under Condition 1.

56.  In any event, we do not consider that Condition 2 is satisfied in respect of the evidence contained in those items.

(1)  In so far as Items 1 to 12 (said to be relevant to the underlying debts owed by Wong to Chen) are concerned, the critical consideration, in our view, is the authenticity of the Debt Acknowledgement List and 10/1/2003 Confirmation. If those documents were authentic, they constituted a clear and unequivocal acknowledgement of the debts owed by Wong to Chen. Further, the Judge did not merely rely on the Debt Acknowledgement List and the 10/1/2003 Confirmation to find the existence of the underlying debts. His finding was also based on other contemporaneous documents evidencing the debts[40]. We do not see that the evidence contained in the payment records, which relate to only a few (5 out of 18) and relatively small items of travelling expenses/salaries in the Debt Acknowledgement List, if admitted, would probably have an important influence on the Judge’s finding as regards the underlying debts owed by Wong to Chen.

(2)  In so far as Items 13-14 (said to be relevant to Wong and Zheng’s trip to Guangzhou on 11 January 2003) are concerned, it is clear from Chen’s witness statement that his understanding of Wong’s intended trip to Heilongjiang was based on what Wong had told him. Wong’s precise itinerary was not something that Chen was privy to. Whether Wong actually went to Heilongjiang on 11 January 2003, or on some other day, was a matter beyond Chen’s knowledge. Even if it can be proved as a fact that Wong and Zheng went to Guangzhou instead of Heilongjiang on 11 January 2003, we do not consider that this fact would probably have an important influence on the Judge’s findings regarding the meeting between Wong and Chen on 10 January 2003.

57.  In all, we are not prepared to to exercise our discretion to admit Items 1 to 15 as new evidence in the present appeals.

(iv)  Exhibit “ZRW-32”

58.  Tian Junzhe (“Tian”) was the person from whom Chen allegedly borrowed RMB 700,000 for the purpose of lending the same to Wong at the meeting on 10 January 2003 (see §12 above). Tian made a witness statement in 2014 and was named as a witness for Chen at the trial, but did not attend court to give evidence. Accordingly, his witness statement was expunged and did not form part of the evidence considered by the Judge[41].

59.  According to Zhang, the 4^th to 6^th Defendants’ lawyers in the PRC made contact with Tian on 26 January 2022 and managed to interview him in an office of the Beijing Public Security Bureau (北京市公安局東城分局東花市派出所) on the same day. During the interview, Tian apparently told the 4^th to 6^th Defendants’ lawyers that: (i) the contents of his witness statement made in 2014 were false and were manufactured by Chen, (ii) he never lent RMB 700,000 to Chen and in fact did not have RMB 700,000 to lend to him at that time, (iii) he signed the witness statement upon the request of his friend (Chen), (iv) the witness statement that he signed consisted of only 2-3 pages but the one submitted by Chen to the Hong Kong court was 6 pages long, and (v) he very much regretted having made the witness statement for Chen.

60.  The interview with Tian was recorded in a DVD-Rom which, together with (inter alia) a transcript of the interview (“the Tian Transcript”) and copies of some mobile messages exchanged between the 4^th to 6^th Defendants’ lawyer and Tian, form part of Exhibit “ZRW-32” now proposed to be adduced as new evidence by the 1^st to 3^rd Defendants in support of their appeal.

61.  Like Item 23, the proposed new evidence in Exhibit “ZRW-32” came into existence after the trial. Thus, the Ladd v Marshall conditions do not apply to the admission of Item 23 as new evidence. However, different considerations apply to the admission of Item 23 and Exhibit “ZRW-32”:

(1)  Chen was a key witness at the trial. His evidence was crucial to the conclusions reached by the Judge in the Judgment. On the other hand, Tian did not give evidence, and his witness statement was expunged by the Judge. Tian’s evidence was not relied upon by the Judge and formed no part of the Judge’s reasoning in the Judgment.

(2)  According to the Tian Transcript, he signed a witness statement for use in legal proceedings in Hong Kong merely upon the request of a friend. If, as claimed by Tian, he signed the witness statement without reading it, it would mean that he was prepared to sign a legal document without ascertaining its contents and thus without any positive belief as to the truth of the contents.

(3)  Further, Tian stated (at p14 of the Tian Transcript) that he was not prepared to give evidence in court to support what he had said orally. He will thus not be available for cross examination by Chen’s lawyers in Hong Kong proceedings.

62.  In our view, Tian’s credibility would obviously be in issue, and no weight could be given to his out-of-court interview, the veracity of which cannot be tested by cross examination. Accordingly, we decline to exercise our discretion to admit Exhibit “ZRW-32” as new evidence in the 1^st to 3^rd Defendants’ appeal.

63.  In passing, we note that the 4^th to 6^th Defendants have not applied for the admission of Exhibit “ZRW-32” as new evidence in support of their appeal. Even if they had made such an application, we would have rejected it for the same reasons.

DISPOSITION

64.  The following orders are made in respect of the 4^th to 6^th Defendants’ summonses:

(1)  no order be made in respect of the summonses dated 21 January 2022 and 31 January 2022;

(2)  leave be granted to the 4^th to 6^th Defendants to amend the December 2021 Summons as per the draft attached to the February 2022 Summons;

(3)  leave be granted to the 4^th to 6^th Defendants to adduce Item 23 as set out in the Amended Schedule annexed to the December 2021 Summons as amended as new evidence at the hearing of their appeal;

(4)  save as aforesaid, the December 2021 Summons (as amended) be dismissed.

65.  The following orders are made in respect of the 1^st to 3^rd Defendants’ summons dated 15 July 2022:

(1)  leave be granted to the 1^st to 3^rd Defendants to adduce Item 2(23) as set out in the Schedule annexed to that summons as new evidence at the hearing of their appeal;

(2)  save as aforesaid, the 1^st to 3^rd Defendants’ summons be dismissed.

66.  On the issue of costs, the Plaintiff has been largely successful in resisting the applications of the 1^st to 3^rd Defendants and the 4^th to 6^th Defendants. We order the 1^st to 3^rd Defendants and the 4^th to 6^th Defendants to pay 50% the Plaintiff’s costs incurred in relation to their applications for the admission of new evidence, with certificate for 2 counsel, to be assessed summarily. It appears from the Plaintiff’s costs statements that the bulk of his costs was incurred in relation to the 4^th to 6^th Defendants’ applications and prior to the 1^st to 3^rd Defendants’ taking out of their application on 15 July 2022. The 1^st to 3^rd Defendants and the 4^th to 6^th Defendants shall have leave to file their respective statements of objection (limited to 2 pages) to the Plaintiff’s costs statements within 14 days from the date of this judgment. Subject to any further directions as may be given, the Court shall thereafter assess the Plaintiff’s costs summarily.