Joe Zhixiong Zhou v. Saif Partners Ii L.P. and Another

HCCL 16/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO 16 OF 2016

(Transferred from High Court Action No 1551 of 2010)

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Before:  Hon Anthony Chan J in Chambers

Date of Hearing:  1 December 2017

Date of Decision:  1 December 2017

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D E C I S I O N

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1.This is a very late application by the Defendants for the introduction of expert evidence on the valuation of their Counterclaim at the 11-day trial scheduled to commence on 9 January 2018.

2.The trial dates were fixed back in September 2016, after a CMC which took place in July 2016 during which M Chan J gave directions for expert evidence on Cayman Islands law.  There was no suggestion of a need to have expert valuation evidence.  The present Summons was taken out on 25 October 2017, which was adjourned to today for argument.

3.The expert evidence in question relates to the valuation of a substantial business the investment in which, the Defendants say, was made at the persuasion of the Plaintiff.  Allegedly, due to various wrongdoings of the Plaintiff, that investment became worthless.

4.The subject matters of dispute in this action took place over 10 years ago.  It is quite clear that the valuation exercise, involving a substantial technology business in the Mainland which failed some 10 years ago, is far from straightforward. 

5.The explanation for this late application is that the Defendants were recently advised by senior counsel newly instructed on these matters on the necessity of the valuation evidence.  

6.The Defendants have been legally advised all along in these matters.  Their pleadings were settled by counsel.  Putting aside the contention of the Plaintiff that the proposed evidence sought to introduce a new unpleaded case (I should say that there is substance in the argument), it must be assumed that any lawyer handling this case would have considered the issue of evidence in support of the quantum of the Counterclaim. 

7.I am unable therefore to simply accept that the instruction of new counsel is a proper explanation of the lateness of the application.  There is no explanation, eg, as to whether advice on evidence was sought from previous counsel and, if so, whether it was the case that no application was made to adduce valuation evidence based on previous advice.  If the Defendants acted against previous advice, it would be a material consideration for the court in exercising its discretion in this application. 

8.The court is therefore faced with a situation where the serious delay has not been properly explained. 

9.As in all cases of delay, the Defendants rely on the interest of justice argument.  With respect, there are 2 sides to the balance of justice. The rules and exercise of case management function by the court are to ensure that the scale of justice is appropriately balanced. 

10.Although, sensibly, the parties are agreeable to the appointment of a single joint expert in the event that this application is granted, it cannot be seriously doubted that the trial dates would very likely be jeopardised if this application is to be allowed.  The parties are unable to agree on the expert issues, let alone who is to be appointed as the expert and the instructions to be given to him.  Inevitably, it will require some time for the court to resolve these matters before the expert can start to work. 

11.Further, there is a dispute whether the Defendants have made proper discovery of all the documents relevant and necessary for the valuation exercise.  It is not possible for the court to resolve such a dispute in this hearing, nor is it appropriate for the court to invest considerable resources to endeavour to do so in light of the nature and context of the arguments. What the dispute demonstrates is that it is simply unrealistic to expect that the trial would not be prejudiced if this application is allowed.  It is doubtful if the discovery dispute alone can be resolved before trial.

12.There is a piece of evidence adduced by the Defendants which suggests that a valuation report may be made available within 28 days.  It was a letter written by an expert proposed by the Defendants dated 26 October 2017.  This piece of evidence must be viewed in light of the coming festive season and the need to resolve the various disputes identified above.  I am unable to accept therefore that the valuation evidence will be in place before the trial.  It must also be pointed out that it would not be fair to distract the Plaintiff’s legal team from focusing on the trial.

13.This action was started in 2010.  Any further delay to the resolution of this action would constitute serious prejudice to the Plaintiff. Even if the Defendants offer to pay all the costs thrown away by an adjournment of the trial (they have not done so), it cannot be accepted without more that the prejudice would be adequately remedied.

14.As submitted by the Plaintiff, it will be open to the Defendants to try to persuade the trial Judge to order a split trial for the quantum of the Counterclaim.

15.In the premises, this application is declined and I shall hear the parties on costs.

Mr Barrie Barlow SC and Mr Chan Pat Lun, instructed by Reed Smith Richards Butler, for the Plaintiff

Mr H Chan (solicitor advocate) of Peter Yuen & Associates (in Association with Fangda Partners), for the 1^st and 2^nd Defendants