Re A Civil Matter Now Pending in United States District Court for The Western District of Washington At Seattle Under No 2:13-cv-1034 Mjp

CACV 410/2019

[2020] HKCA 766

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 410 OF 2019

(ON APPEAL FROM HCMP 1082/2017)

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JUDGMENT

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

1.By a judgment of 16 July 2019 (“the Judgment”), Recorder Yvonne Cheng SC (“the Judge”) set aside an examination order granted by Master Lai pursuant to two Letters of Request[1] issued by the United States District Court, Western District of Washington at Seattle (“the Federal Court”). The Judge also struck out the Ex parte Originating Summons issued by the Applicants.

2.After hearing submissions from counsel in the appeal brought by the Applicants against the Judgment, we reserved our judgment on 14 July 2020.  We now give our judgment in the appeal.

A.      Background

3.The Respondents in these proceedings were not parties to the substantive proceedings in the Washington Federal Court.  In those proceedings, the Applicants obtained judgment in the sum of US$100,738,980 against, amongst others, Prithvi Information Solutions Ltd (“PISL”) and Prithvi Solutions Inc (“PSI”).

4.The Applicants’ case is that, based on the balance sheet of PSI in its management accounts for 31 March 2013, there are receivables owed by some third parties to PSI: US$18.9 million by SSG Capital Partners I, LP (“SSG Capital”), an exempted limited partnership registered in Cayman Islands; and US$4 million by Value Team Corporation (“VTC”), a private company incorporated in the British Virgin Islands (“the Two Sums”).

5.The Respondents are officers of these two companies.

6.On 1 February 2016, the Applicants obtained an order from the King County Superior Court, State of Washington (“the State Court”) appointing the Applicants as collection agent to collect the receivables of PSI, including the Two Sums.  A similar order was again obtained from the State Court on 12 September 2016.  By another order of 16 October 2018, the State Court clarified that the court did not have jurisdiction over SSG Capital and VTC and it did not adjudicate on the issue if the Two Sums were owed by SSG Capital and VTC to PSI.  It was further held that the collection orders only place the Applicants in the shoes of PSI for collection purposes and such orders could be made even though the State Court has no jurisdiction over SSG Capital or VTC.  Thus, the State Court revised the collection order by stipulating that the Two Sums were alleged receivables.

7.As SSG Capital and VTC have no place of business in the State of Washington, neither the State Court nor the Federal Court has personal jurisdiction over SSG Capital or VTC. 

8.The collection orders were not garnishee orders. Whilst it is possible to have garnishee proceedings in Washington, the court must be able to exercise personal jurisdiction over the garnishees before such proceedings could be effective.  There is no evidence before us to suggest that the Applicants would be able to show either the Federal Court or the State Court has personal jurisdiction in respect of garnishee proceedings against SSG Capital or VTC. 

9.In the Letter of Request of 30 January 2018, the Federal Court set out the evidence to be obtained and the purpose of examination at paragraph 8 as follows:

“ a. Evidence to be Obtained or Other Judicial Act to be Performed (Article 3, d)):

Plaintiffs have been appointed as collection agents to collect accounts receivable owing to PSI to allow Plaintiffs to obtain funds to satisfy the Judgment. PSI’s financial books and records show, among other things, SSG Capital owes PSI $4,000,000 USD and Value Team Corporation owes PSI $18,900,000 USD (collectively “Receivables”).

Plaintiffs have discovered that Shyam Macheshwari, Andress Vourloumis and Wong Ching Him (“Witnesses”) are directors of SSG Capital and Value Team Corporation. These individuals reside and/or transact business in Hong Kong and have personal knowledge regarding the Receivables.

Plaintiffs desire, and this Court requests, a Court order to compel these Witnesses to appear in their personal capacities in Hong Kong to provide deposition testimony regarding the Receivables.

b. Purpose of the Evidence or Judicial Act Sought:

To allow Plaintiffs to obtain information regarding the Receivables that may enable them to collect the monies owed to PSI which can be utilized to apply against the $100,738,980.00 USD Judgment.”

10.Paragraph 10 of the Letter of Request identified the subject matter for examination:

“ The following are the areas of inquiry: (i) how and why the Receivables were created; (ii) whether the funds owing to PSI were received by Value Team Corporation / SSG Capital from another person or entity; (iii) whether the funds owing to PSI were transferred by Value Team Corporation / SSG Capital to another person or entity; and (iv) why Value Team Corporation / SSG Capital has not paid PSI / Plaintiffs.”

11.On the evidence, there are serious disputes by SSG Capital and VTC in respect of the Two Sums.  They said that instead of them owing monies to PSI, it was the other way round.  It is not necessary to go into the details of the dispute for present purposes.  It suffices to note that the transaction between SSG Capital and PSI was based on a Memorandum of Understanding of 8 September 2010 which contained a choice of law and forum clause providing that any dispute under the agreement shall be governed by the laws in Hong Kong and subject to resolution solely in any court of competent jurisdiction in Hong Kong.  Likewise, there were similar provisions in the Memoranda of Understanding between VTC and PSI dated 8 September 2010 and 20 December 2010.  Similar choice of law and forum clause also appeared in a settlement letter of 27 December 2013 between SSG Capital and PSI.  The Applicants disputed if those provisions were binding on PSI as the Memoranda were executed by the parent company of PSI, Prithvi Information Solutions Limited.   

12.The Judge summarized the parties’ respective case on the Two Sums at [6] and [7] of the Judgment,

“ 6. [The Applicants’] evidence is that PSI’s unaudited balance sheet as at 31 March 2013 states that the Receivables were owed by SSG Capital and VTC to PSI. Based on documents obtained by the Kyko Companies in an earlier Norwich Pharmacal application in HCMP 1938/2016, it was thought that US$4m of the Receivables was attributable to a Memorandum of Understanding between PISL and SSG Capital dated 8 September 2010, under which PISL agreed to pay SSG Capital a deposit of US$4m for the purpose of a restructuring of bonds issued by PISL; and that US$18.7m of the Receivables was attributable to two other Memoranda of Understanding between PISL and VTC dated 8 September 2010 and 20 December 2010, under which PISL agreed to pay VTC this amount as a deposit for restructuring. The Kyko Companies believed that the restructuring did not proceed, so that the deposits might have to be returned to PSI or PISL. They also believed that a substantial amount of the Receivables was remitted through the bank account of Privthi Solutions Asia Limited (“PSAL”), an affiliate of PISL and PSI.

7.  The evidence filed on behalf of the Individuals is that between 2009 and 2010, SSG Capital and VTC acquired bonds issued by PISL with a total face value of US$50m, with a view to achieving debt restructuring.  (The bonds were originally due to mature in February 2012, and if held to maturity, were to be redeemed by PISL at a premium.)  In 2010, SSG Capital and VTC entered into three Memoranda of Understanding with PSAL (not PISL) for the restructuring (“the MOUs”). The parties further executed addenda to the MOUs, pursuant to which PSAL paid the sums of US$4m to SSG Capital and US$18.7m to VTC as non-refundable deposits in consideration of the restructuring.  The restructuring was not completed and eventually PISL, PSAL and SSG Capital entered into a settlement agreement in respect of the bonds covered by the first MOU, whereby PISL and PSAL agreed to pay US$9.45m in full and final settlement of all amounts owed by them pursuant to these bonds, but the amount was not paid.  It is the SSG Group’s position that it was also the victim of PISL, PSAL and PSI’s fraud.”

B.  The Judgment

13.In the Judgment, the Judge held as follows:

(a)  The Applicants’ expert evidence on United States law was inadmissible by reason of non-compliance with Order 38 Rule 37C of the Rules of the High Court as the evidence did not contain the requisite expert declarations and the expert was unable to give such declarations (due to his position as the general counsel in the Applicants’ group of companies);

(b)  The requirement under Section 75(b) of the Evidence Ordinance was not satisfied because the evidence was not obtained for the purposes of civil proceedings which either have been instituted before the Federal Court or whose institution before that court is contemplated;

(c)  The proposed examination is a fishing exercise and the court was prohibited by Section 76(3) from making the examination order.

14.The Judge rejected the suggestion by the Respondents that the examination was to obtain evidence for ulterior purpose relating to proceedings commenced by the Applicants in the United States District Court for the Western District of Pennsylvania against SSG Capital, VTC and the Respondents. 

15.The Judge also expressed some views on material non-disclosure on the part of the Applicants when they obtained the ex parte examination order from the master.  She held that there was material non-disclosure in the following respects:

(a)  The non-disclosure of the possible defence of no civil proceedings;

(b)  The non-disclosure of the possible defence of fishing.

16.On the other hand, the Judge found there was no material non-disclosure in the following respects:

(a)  Washington courts had no jurisdiction over SSG Capital, VTC or the Respondents;

(b)  Unsuccessful attempts in taking out writs of garnishment in the State Court against SSG Capital and VTC;

(c)  Liabilities for the Two Sums being disputed instead of finally established;

(d)  Exclusive jurisdiction clauses in the Memoranda of Understanding;

(e)  Under the Memoranda of Understanding and settlement agreement, SSG Capital and VTC were owed money instead of owing money to PSI.

C.  Discussion

C1.   Overview

17.The Judge correctly pinpointed that the power to grant application pursuant to letters of request is set out in Part VIII of the Evidence Ordinance Cap 8.  For present purposes, it would be useful for us to set out Sections 75 and 76:

“ 75. Where an application is made to the Court of First Instance for an order for evidence to be obtained in Hong Kong and the court is satisfied –

(a) that the application is made in pursuance of a request issued by or on behalf of a court or tribunal (the requesting court) exercising jurisdiction in a country or territory outside Hong Kong; and

(b) that the evidence to which the application relates is to be obtained for the purposes of civil proceedings which either have been instituted before the requesting court or whose institution before that court is contemplated,

the Court of First Instance shall have the powers conferred on it by this Part.

76(1) Subject to this section, the Court of First Instance shall have power, on any such application as is mentioned in section 75, by order to make such provision for obtaining evidence in Hong Kong as may appear to the court to be appropriate for the purpose of giving effect to the request in pursuance of which the application is made; and any such order may require a person specified therein to take such steps as the court considers appropriate for that purpose.

(2) Without prejudice to the generality of subsection (1) but subject to this section, an order under this section may, in particular, make provision –

(a) for the examination of witnesses by any means, including by way of a live television link;

(b) for the production of documents;

(c) for the inspection, photographing, preservation, custody or detention of any property;

(d) for the taking of samples of any property and the carrying out of any experiments on or with any property;

(e) for the medical examination of any person.

(3) An order under this section shall not require any particular steps to be taken unless they are steps which can be required to be taken by way of obtaining evidence for the purposes of civil proceedings in the court making the order (whether or not proceedings of the same description as those to which the application for the order relates); but this subsection shall not preclude the making of an order requiring a person to give evidence otherwise than on oath where this is asked for by the requesting court.

(4) An order under this section shall not require a person—

(a) to state what documents relevant to the proceedings to which the application for the order relates are or have been in his possession, custody or power; or

(b) to produce any documents other than particular documents specified in the order as being documents appearing to the court making the order to be, or to be likely to be, in his possession, custody or power.

(5) A person who, by virtue of an order under this section, is required to attend at any place shall be entitled to the like conduct money and payment for expenses and loss of time as on attendance as a witness in civil proceedings before the Court of First Instance.” 

18.Having considered the submissions of counsel, we are of the firm view that the Judge’s decision to set aside the examination order and striking out the originating summons can be upheld on the basis of Section 76(3) of the Evidence Ordinance.  We are content with resting our dismissal of this appeal on this ground alone.

19.In light of our respectful disagreement with the Judge on the admissibility of the affirmation evidence of Mr Macyda, we shall refrain from reaching a final conclusion on the Judge’s decision based on Section 75(b).  We shall briefly explain our approach.

20.As regards non-disclosure, the Judge did not decide the application on such ground, see [62] of the Judgment.  Since the master had raised the issues of Sections 75(b) and 76(3) with solicitors for the Applicants and received further materials in light of the requisitions before making the ex parte order for examination, we do not in any event think it appropriate for this Court to dismiss the appeal on the ground of material non-disclosure.

C2.    Analysis under Section 76(3)

C2.1  The case law on impermissible discovery against non-party witness

21.Hence, we shall focus on Section 76(3) which in effect prohibits the making of an order which serves the purposes of pre-trial discovery against a non-party witness as opposed to the obtaining of evidence for use in a trial.  In this respect, Hong Kong has adopted the common law position highlighted in the English cases.  We have no pre-trial discovery against non-party witness other than those falling within the limited scope of Norwich Pharmacal discovery.

22.In Radio Corporation of America v Rauland Corporation [1956] 1 QB 618, the English Court of Appeal held that English courts would not execute letters rogatory issued by the United States for pre-trial discovery against persons not parties to a suit.  Devlin J drew attention to the wide power of pre-trial discovery in the United States (which English courts did not have) in these words at pp.643-644:

“ In the United States of America… there is a procedure … which allows interrogation not merely of the parties to the suit but also of persons who may be witnesses in the suit, or whom it may be thought may be witnesses in the suit, and which requires them to answer questions and produce documents. The questions would not necessarily be restricted to matters which were relevant in the suit, nor would the production be necessarily restricted to admissible evidence, but they might be such as would lead to a train of inquiry which might itself lead to relevant material.”

23.In Rio Tinto Zinc Corporation v Westinghouse Electric Corporation [1978] AC 547, the House of Lords held that similar constraint was imposed under Section 2(3) and (4) of the Evidence (Proceedings in Other Jurisdictions) Act 1975, which is in the same terms as our Section 76(3) and (4).  Lord Diplock set out the principle at pp.634G to H:

“ Subsection (3) applied to both oral and documentary evidence. It is this provision which prohibits the making of an order for the examination of a witness not a party to the action for the purpose of seeking information which, though inadmissible at the trial, appears to be reasonably calculated to lead to the discovery of admissible evidence. This is permitted by rule 26 of the United States Federal Rules of Civil Procedure. Under the procedure of the High Court of England, depositions of witnesses, either at home or abroad, may be taken before examiners for use at the trial, but the subject matter of such depositions is restricted to the evidence admissible at the trial. So the evidence requested in the letters rogatory can only be ordered to the extent that it is confined to evidence which will be admissible at the trial of the action in Virginia.”

24.It was further held that the court was not precluded from examining the true nature of a request by virtue of the statements in the Letters of Request on the purposes of the request: see Lord Wilberforce at pp.609G to 611C; Viscount Dilhorne at p.624F; Lord Fraser at pp.642H to 643E.

25.In the Judgment, the Judge also quoted from the judgment of Kerr LJ in In re Norway’s Application [1987] 1 QB 433 at 482C-F on the concept of “fishing”:

“ [Fishing] arises in cases where what is sought is not evidence as such, but information which may lead to a line of inquiry which would disclose evidence. It is the search for material in the hope of being able to raise allegations of fact, as opposed to the elicitation of evidence to support allegations of fact, which have been raised bona fide with adequate particularisation. In the present context fishing may occur in two ways. First, the “evidence” may be sought for a preliminary purpose, such as the process of pre-trial discovery in the United States. The fact that this is clearly impermissible for the purposes of the Act of 1975 is established in the Westinghouse case [1978] AC 547, and was equally so held by this court in relation to the Foreign Tribunals Evidence Act 1856 in Radio Corporation of America v. Rauland Corporation [1956] 1 Q.B. 618. This is irrelevant in the present context, since the “evidence” is required for the trial itself. But fishing is in my view also relevant in another sense in the present context, as McNeill J rightly indicated. It is perhaps best described as a roving inquiry, by means of the examination and cross-examination of witnesses, which is not designed to establish by means of their evidence allegations of fact which have been raised bona fide with adequate particulars, but to obtain information which may lead to obtaining evidence in general support of a party’s case.”

26.On the approach for determining if an oral examination is fishing in nature, Kerr LJ (with whom Glidewell LJ agreed, see p.491B to C) referred to the wide scope of the request to conclude that it went far beyond the elicitation of evidence and contained a great deal of impermissible fishing: see pp.482H to 483F.  Ralph Gibson LJ dissented.  Though he accepted that a witness could not be required to comply with the letter of request if it is irrelevant, or fishing, or speculative, or oppressive (see p.496F to H), he took the view that the law did not place a burden on an applicant to show that the questions to be asked would not go beyond what is relevant and necessary in the proceedings.  Referring to the judgment of Lord Denning MR and Lord Keith in Westinghouse, supra, Ralph Gibson LJ adopted the approach of Lord Keith that at the request stage the court should not examine the issues with excessive particularity for the purpose of determining in advance whether the evidence will be relevant and necessary, see p.498G to H.  Such issue, His Lordship opined, would have to be decided during the actual examination in light of the other evidence, see p.500E to G.    

27.These were said in the context of a case where the evidence which is sought from the witnesses was intended for use at the trial (see p.493A).  Subsequently, in the same subject matter, there was a second application based on a second letter of request and it came again before the English Court of Appeal and House of Lords in In re Norway’s Application (No 2) [1990] 1 AC 723.  In the Court of Appeal, on the approach on request for oral evidence, Woolf LJ at p.782C preferred the approach of Ralph Gilson LJ to that of the majority.  When the matter went to the House of Lords, Lord Goff alluded to the conflict of opinion and left the issue open.

28.Almost ten years later, in First American Corporation v Zayed [1999] 1 WLR 1154 at p.1163H to 1164A, Sir Richard Scott V-C (with whom the other members of the English Court of Appeal agreed) expressed his agreement with the approach of Woolf LJ and Ralph Gibson LJ discussed above.  His Lordship said:

“ If oral evidence is being sought for the purpose of use at trial and if there is good reason to believe that the intended witness has knowledge of matters in issue at the trial so as to be likely to be able to give evidence relevant to those issues, I do not understand how an application to have the intended witness orally examined can be described as ‘fishing’. It cannot be necessary that it be known in advance what answers to the questions the witness can give. Nor can it be necessary that the answers will be determinative of one or other of the issues in the action.”

29.But the learned Vice Chancellor, as he then was, was not deciding that fishing is generally permitted in respect of oral examination.  He explained at p.1164D to G that In re Norway’s Application [1987] 1 QB 433 was authority for the proposition that, as a matter of discretion, a request for oral testimony should not be acceded to if the intention were to obtain information rather than to obtain evidence for use at the trial.  At p.1165D to E, he summarized the test to be applied:

“ … the court should, in my opinion, ask first whether the intended witnesses can reasonably be expected to have relevant evidence to give on the topics mentioned in the amended schedule of requested testimony, and second whether the intention underlying the formulation of those topics is an intention to obtain evidence for use at the trial or is some other investigatory, and therefore impermissible intention.”

30.Then at p.1166D,

“ … In relation to oral testimony I do not think an objection of ‘fishing’ has substance except in a case in which the conclusion can be reached, whether from the terms of the request or from other sources, that the intention underlying the request is not one of obtaining evidence for use at trial. The width of a request may indicate the absence of that intention. But, equally, the width of a request may be an inevitable consequence of the complexities of the issues and of the witness’s involvement in them.”

And at p.1166F:

“ … If other material justifies the inference that the intention is mainly of an investigatory character, I think the request would have to be refused.”

On the impermissible use of letters of request to conduct investigation in the nature of United States pre-trial discovery, the Vice-Chancellor said at pp.1166H to 1167B:

“ It is clear, therefore, that, under the United States rules, the questioning of the intended witnesses can cover both the eliciting of admissible evidence and an investigatory search for information leading to a train of inquiry. The latter type of questioning would not be permitted in this country, save in a Norwich Pharmacal type of action …Section 2(2) of the Act of 1975 would, in my judgment, bar that type of questioning in an examination pursuant to a letter of request.”

31.Again, that was a case in which the evidence requested was intended to be used at the trial of an action: see p.1167B.

C2.2  Application to the facts of the present case

32.In the present case, the Judge found that the allegations of fact relied upon are not live allegations in the Federal Court proceedings.  The main action was concluded with a judgment whilst enforcement proceedings in which such allegations might be raised had not yet been instituted.  The purpose of seeking the evidence was not to assist the court to determine the allegation.  Instead it was for pre-trial discovery.  At [37] of the Judgment, the Judge referred to the alternative submission of Ms Cheung (who appeared for the Applicants at the court below) that after the examination of the Respondents the Applicants would plot a course for collection depending on the evidence so obtained.  The Judge therefore held that the proposed examination is a fishing exercise.

33.Mr Wong SC (appearing with Ms Cheung for the Applicants) submitted that the Judge erred in so finding as they were not seeking pre-trial discovery.  Instead they are seeking “discovery in the existing Washington Federal Court proceedings, post-judgment, in aid of execution”[2].  They seek evidence to support their following allegations of fact which have been raised bona fide with adequate particulars:

(a)  SSG Capital and VTC received monies under the Memoranda of Understanding;

(b) Such monies were owed by SSG Capital and VTC to PSI as receivables.

34.In his oral submissions, Mr Wong submitted that the purpose of the examination was to obtain evidence to see what assets of the judgment debtor (viz PSI) were available for enforcement and specifically to obtain more information on the Two Sums as receivables. 

35.Mr Wong further submitted that the Applicants are not pursuing a roving inquiry and the scope of examination as set out at paragraph 10 of the Letters of Request is specific, precise and related directly to the bona fide allegations.  There is sufficient ground for believing that the Respondents may have relevant evidence to give on the Two Sums.  In this respect, counsel submitted that the Judge failed to pay sufficient regard to the views of Judge Pechman who issued the Letters of Request and did not consider the same to be fishing.

36.Counsel submitted that the Judge erred in holding that the allegations of fact were not live allegations in proceedings in the Federal Court because she wrongly held that there were no civil proceedings in which the evidence would be used.  The Applicants’ case, which counsel said the Judge misunderstood, is that the proceedings in the Federal Court are still extant.  Under the U.S.  Federal Rule of Civil Procedure 69(a)(2), the Applicants as judgment creditors were entitled to obtain information which may enable them to collect monies which can be utilized to satisfy the judgment debt.  The Letters of Request were issued under such procedure, which the Judge erred in characterizing as standalone proceedings at [41] and [44] of the Judgment.

37.With respect, we are not persuaded by Mr Wong that the Judge fell into error in holding that the proposed examination should not be ordered by reason of Section 76(3).  Before we go into discussion on the specific circumstances in the present case, there are several points of general application which we must address in light of Mr Wong’s submissions. 

38.First, in his oral submissions Mr Wong repeatedly said that whether the application is fishing is a matter for the Federal Court.  He placed great emphasis on Judge Pechman’s decision to issue the Letters of Request as an indication that the Federal Court did not regard the exercise as fishing.

39.We cannot accept this submission.  Whilst we accept that Hong Kong courts must give due weight to the assessment of the requesting court on the question of necessity and relevance to the trial of the evidence to be procured[3], ultimately whether the request falls foul of Section 76(3) on account of fishing must be a matter for the judge in Hong Kong.  As the English authorities cited above clearly demonstrated, there were instances where the request would be rejected notwithstanding that a request had been issued by the foreign court.

40.This is particularly so when there are substantial differences in the permissible scope of discovery in the U.S. law and those permissible in Hong Kong.  Section 76(3) directs the courts in Hong Kong to consider if the request demands steps to be taken are steps which can be required to be taken by way of obtaining evidence for the purposes of civil proceedings in the court making the order (whether or not proceedings of the same description as those to which the application for the order relates).  If they are not, Section 76(3) precludes the making of the order for examination.  Thus, it is plain that the matter has to be tested by the courts in Hong Kong by reference to our laws instead of U.S. laws.  Hence, the fact that the procedure is permissible under U.S. laws, as contended by Mr Wong based on Federal Rule of Civil Procedure 69(a)(2), is not determinative of the issue at hand.

41.Second, as explained in the English cases cited above, for the purposes of Section 76(3) our courts would consider the nature and purpose of a request by reference to all relevant underlying materials and the circumstances leading to the request.  In other words, it is a matter of substance rather than form.  The contrast, as highlighted by Scott V-C in First American Corporation v Zayed, supra, is between the obtaining of evidence for use in proceedings and the procurement of information for investigatory purposes.  In the present context, the debate on whether the Letters of Request can be regarded as execution process in the extant proceedings in the Federal Court is again not determinative of the issue at hand since the question is not whether there are extant civil proceedings, but whether the examination is to obtain evidence for use in the requesting court to facilitate the determination of certain issues by that court. 

42.Third, since we are dealing with a request for oral examination, the discussion in the English cases on the proper approach is apposite.  In light of the judgment in First American Corporation v Zayed, supra, we would also prefer the approach of Ralph Gibson LJ and Woolf LJ.  In In re Norway’s Application, supra, Kerr LJ referred to two ways in which fishing could occur and based his decision in that case on roving inquiry.  In light of Ralph Gibson LJ’s dissent (which was subsequently endorsed by Woolf LJ and the Court of Appeal in First American Corporation v Zayed, supra), we would focus on the other way of fishing mentioned by Kerr LJ: viz “evidence” sought for a preliminary purpose. In our judgment, this is the same as the investigatory purposes which Scott V-C acknowledged as being impermissible.

43.Fourth, it follows from the above analysis that in the context of oral examination of a non-party witness, it is impermissible fishing if the evidence is not obtained for use of the requesting court to resolve any live issues before it.  Such objection can arise no matter the stage of the proceedings in the requesting court at which the request is made.  It can be pre-trial, and equally it can be post-judgment.  In respect of non-party witnesses, so long as the request is not for the purpose of obtaining evidence to be used by the requesting court for determining issues before it but to obtain information for investigation, the objection is engaged.  

44.On the facts and circumstances of the present case, it is crystal clear to us that the purpose of the proposed examination is investigatory as opposed to the obtaining of evidence for use in the Federal Court to assist it in the determination of any live issues.  The courts in Hong Kong are therefore precluded by Section 76(3) from acceding to the request. 

45.We have set out above the purpose of obtaining the evidence as stated in the Letter of Request of 30 January 2018.  There was no reference to the use of the evidence in any pending or contemplated adjudicative process in the Federal Court.  Instead, paragraph 8(b) referred to the Applicants obtaining “information regarding the Receivables that may enable them to collect the monies owed to PSI”. 

46.In the Letter of Request and the Motion and the Memorandum of 10 February 2017 filed by the Applicants in the Federal Court to support the application for the Letter of Request there was no suggestion that the collection process would engage any process of determination by the Federal Court in which the evidence requested would be relevant or necessary.  Instead, the basis of the application seems to be rested on the power to “compel discovery” from a “non-party in a foreign jurisdiction”[4].  Hence, giving due weight to the decision of Judge Pechman, there is nothing in such decision to demonstrate that the evidence is obtained for use in the resolution of some issues by the Federal Court.        

47.In the evidence filed in the present proceedings, including the evidence of Mr Macyda, there is nothing to suggest that the collection pursuant to the collection orders would involve any court process with the determination of any issues by the Federal Court.  To the contrary, Mr Kulkarni acknowledged at paragraph 18 of his affirmation of 21 December 2018 that the collection orders were not rulings by the State Court that the Two Sums were due from SSG Capital and VTC.  He further said:

“ Accordingly, the 1^st and 2^nd Collection Agent Orders place Kyko ‘in the shoes’ of PSI to collect the Receivables to the extent that they are owed. This explains why Kyko commenced the present Action in Hong Kong seeking to examine the Witnesses in relation to the Receivables, as opposed to simply proceeding with enforcement against SSG Capital or VTC.” (Emphasis added)

48.As mentioned above, after the issue of the Letter of Request of 30 January 2018 by the Federal Court, the State Court itself clarified by the order of 16 October 2018 that it did not purport to have jurisdiction over SSG Capital or VTC and it acknowledged that the issue of the liabilities of SSG Capital and VTC to PSI had to be determined by another court which has jurisdiction to do so.

49.It is clear from the clarification of the State Court that collection on the strength of a collection order is not a court process.  The Collection Orders merely authorized the Applicants to step into the shoes of PSI. 

50.Irrespective of the debate on whether the proceedings in the Federal Court are extant, it cannot be disputed that there is no pending court process in the Federal Court seeking the determination by that court of such issue.  Further, as observed by the Judge, there is no evidence to suggest that the Applicants could establish that the Federal Court has personal jurisdiction over SSG Capital and VTC.

51.In our judgment, the evidence clearly showed that the Applicants have yet to determine if they could issue garnishee proceedings against SSG Capital and VTC and if so in which jurisdiction.  In addition to the difficulty they have in respect of the Federal Court’s personal jurisdiction over these entities, they were unable to say if the Two Sums were actually due from SSG Capital and VTC to PSI in light of the disputes mentioned at [7] of the Judgment.  They therefore wished to seek further information before they plot out their next move[5].  Thus, Mr Kulkarni explained the absence of effort on the part of the Applicants to take immediate enforcement steps against SSG Capital and VTC in the way he did in paragraph 18 of his affirmation of 21 December 2018.  This was precisely the reason why the application for Letter of Request was made in the Federal Court on the basis of the collection orders instead of garnishee proceedings against SSG Capital and VTC.   

52.Had it been otherwise, we have difficulty in understanding the reason why the Applicants did not commence garnishment proceedings in the Federal Court and based their applications for Letters of Request on such proceedings instead of collection by them under the Collection Orders.

53.The course adopted by the Applicant was permissible in the U.S. under Rule 69 (a)(2) of the Federal Rules of Civil Procedure.  And as shown at p.5 of the Motion supporting the applications for Letters of Request[6], it was the basis on which it was applied for and on which Judge Pechman issued the Letters of Request.  The rule reads as follows,

“ Obtaining Discovery. In aid of the judgment or execution, the judgment creditor or a successor in interest whose interest appears of record may obtain discovery from any person – including the judgment debtor – as provided in these rules or by the procedure of the state where the court is located.”

54.As stated in the rule itself, and echoed in the Letters of Request and Mr Wong’s own skeleton submissions, the purpose is to obtain information from a non-party witness by way of post-judgment discovery in aid of execution. 

55.This is not a permissible procedure under Hong Kong laws.  Whilst we have a process of examination of judgment debtor under Order 48 of the Rules of the High Court, there is no procedure under our system for examination of non-party witness to aid the execution of judgment.  If a judgment creditor has sufficient ground to support the application for a garnishee order in respect of a debt due to a judgment debtor, the judgment creditor has to commence garnishee proceedings first before he can obtain directions under Order 49 Rule 5 for determination of the liability of the garnishee (including directions for discovery insofar as necessary).  There is no procedure for pre-garnishee proceedings discovery against either the garnishee or third party witnesses. 

56.Thus, the Judge was plainly right in finding that at the present moment there is no live issue in any court process in the Federal Court in which the requested evidence can be said to be relevant and necessary.

57.Mr Wong also alluded to the possibility of the Applicants to commence garnishee proceedings in the Federal Court in the future. In our judgment, this is not an argument open to him because, as we have seen, that was not the basis on which the present Letters of Request was applied for and the basis on which Judge Pechman issued the same.  Quite apart from the question of lack of personal jurisdiction, in an application for a writ of garnishment, the Applicants might have to face challenge based on the exclusive choice of forum clause in the Federal Court.  It is not a foregone conclusion that a writ of garnishment would be entertained by the Federal Court in these circumstances.  By reason of the way in which the application was made in the motion, Judge Pechman did not have the opportunity to address these issues before she granted the Letters of Request. 

58.Further, as the Judge observed at [60] of the Judgment, the Applicants had not indicated what, if any, action they intend to take.  In the event that a Letter of Request is issued based on action commenced in the U.S. against SSG Capital and VTC, there could be arguable implications (and we put it no higher than that) under Section 6(1) of the Protection of Trading Interests Ordinance Cap.471, which the Judge was unable to consider as the matter stood.

59.In our judgment, in view of these uncertainties and the different basis for the issue of the present Letters of Request, if the Applicants wish to rely on the use of the evidence of the Respondents in garnishment proceedings against SSG Capital or VTC, they should at least allude to such basis in their motion for application for Letters of Request so that the above issues would receive consideration by the Federal Court.

C3.    Admissibility of the evidence of Mr Macyda

60.The Judge held that the evidence of Mr Macyda was inadmissible due to the absence of expert declaration pursuant to Order 38 Rule 37C.

61.There are conflicting first instance decisions on the applicability of Rule 37C to expert evidence filed by way of affirmations as opposed to expert reports filed for trial pursuant to directions given under Order 38 Rule 36.

62.On the one hand, there are several authorities in the Court of First Instance holding that Rule 37C is applicable to proceedings based on affidavit or affirmation evidence: Harris J in The Joint and Several Liquidators of China Medical Technologies Inc v KPMG HCCW 435/2012, 24 February 2016; Deputy High Court Judge W Wong SC in Re Wan Hin & Co Ltd [2019] HKCFI 2749; Mimmie Chan J in Companies A, B, C v Companies D, E, F [2018] HKCFI 2240 and Foshan Nanhai Branch of Industial and Commercial Bank of China Ltd v Foshan Ruifeng Petroleum & Chemical Fuel Co Ltd [2019] HKCFI 708.

63.On the other hand, in the context of an application for leave to bring a statutory derivative action under Section 168BC of the Companies Ordinance, Anthony Chan J held in Re Loong San Investment Co Ltd [2014] 2 HKLRD 1116 that Rule 37C is not applicable in respect of evidence adduced under the exception in Order 38 Rule 36(2) which applies to evidence permissible to be given by affidavit.  Affidavit and affirmation evidence can be adduced under Order 38 Rule 2(3) “in any cause or matter begun by originating summons”.  Hence, the learned judge held that in the absence of contrary direction by the court, expert evidence contained in an affidavit which is admissible by Rule 2(3) is not subject to the expert declaration requirement under Rule 37C though he acknowledged that it is desirable for all expert reports used in legal proceedings to contain a declaration of duty to the court.  Anthony Chan J expressed the same view again in Regal Shining Ltd v Secretary for Justice [2014] 5 HKLRD 832 at [30].

64.Similar conclusion to the one held in Re Loong San Investment Co Ltd, supra, was reached by Anthony To J in Bank of China Ltd v Yang Fan [2016] 3 HKLRD 7 in the context of an application to continue a Mareva injunction.  The learned judge also alluded to the impracticality of applying the regime of Part IV of Order 38 to interlocutory proceedings.

65.In The Joint and Several Liquidators of China Medical Technologies Inc v KPMG, supra, Harris J gave consideration to the reasoning of Anthony Chan J in Re Loong San Investment Co Ltd, supra.  The application before Harris J was an application by liquidators to seek production of documents and examination of persons from the auditor of the company.  The learned judge disagreed with Anthony Chan J and held that the exception in Rule 36(2) should be construed narrowly to exempt the party from making an application for leave to adduce expert evidence under Rule 36(1).  It should not be extended to the operation of Rule 37C which, according to Harris J, applies mandatorily to expert evidence generally.  

66.Mr Wong urged us to adopt the reasoning of Anthony Chan J whilst Mr Mazoni SC (appearing with Mr D’Souza for the Respondents in this appeal) urged us to adopt the view of Harris J.

67.Neither side referred us to the judgment of the Court of Appeal (Cheung and Kwan JJA and Au-Yeung J) in Tang Chi Chung v Tang Sun Yip [2016] 1 HKC 528 in which the admissibility of expert evidence (without any expert declaration in accordance with Rule 37C, as an exhibit to an affirmation) in proceedings by way of originating summons was upheld. Though the primary reason was that there was no objection to admissibility at the court below, Au-Yeung J (with whom Cheung and Kwan JJA also agreed) also alluded to the exception in Rule 36(2) and that the evidence was disclosed voluntarily in holding that the objection to admissibility could not be sustained on appeal, see [12] to [15] of the judgment.

68.In light of our conclusion on Section 76(3) (which was reached after taking account of the evidence of Mr Macyda), we do not think we should invite further submissions in light of Tang Chi Chung v Tang Sun Yip, supra.  As presently advised, we are inclined to agree with the Court of Appeal and Anthony Chan J that in terms of the construction of Rules 36(2) and 37C, the prohibition against admissibility for lack of expert declaration under Rule 37C does not apply automatically to expert evidence set out in affidavits or affirmations.  Such evidence is not evidence “disclosed under these rules”. 

69.However, we are also in agreement with Harris J (and we do not think Anthony Chan J disagreed in this respect) that the requirement to observe the duty of an expert set out in the code of conduct under Appendix D applies to all legal proceedings.  As a matter of common law, this has always been the position, see The Ikarian Reefer [1993] 2 Ll Rep 68.  The expert declaration under Rule 37C only serves to highlight such duty as a matter of reminder.

70.Under common law, whilst there is no rigid rule prohibiting a person employed by a party from acting as his employer’s expert witness, such witness must be mindful of his duty towards the court.  In a case where such witness has demonstrably failed to have regard to his duty, the court can exclude his evidence, see Hong Kong Air Cargo Terminals Ltd v Commissioner of Rating and Valuation [2004] 2 HKLRD 702.   

71.Further, quite apart from the rules in Part IV of Order 38, admission of expert evidence is subject to the control of the court by way of case management directions, see Shenzhen Futaihong Precision Industry Co Ltd v BYD Co Ltd [2018] HKCA 408 at [3] to [13].  Thus, although evidence in an originating summons is generally adduced by way of affidavit or affirmation evidence, in appropriate cases where there are disputes on expert evidence the court can give directions to facilitate the effective and efficient disposal of the matter, including directions similar to those in terms of expert declaration under Rule 37C as a condition for admissibility.

72.In the present case, whilst we respectfully disagree with the Judge on the applicability of Rule 37C, there are legitimate concerns about Mr Macyda’s position as the Applicants’ expert:

(a)  He was apparently heavily engaged in the present dispute.  Apart from being employed as the general counsel by the Applicants, it is clear from the affirmation of Mr Kulkarni that the Applicants basically acted on the advice of Mr Macyda in the pursuit of the applications for Letter of Request and the present proceedings in Hong Kong;

(b)  In other words, Mr Macyda played the role of an advocate for the Applicants;

(c)  Further, Mr Macyda was put forward as the prime candidate to be appointed as the examiner if examination was ordered.  It would appear that he advocated for his own appointment as examiner;

(d)  Mr Wong seems to suggest that Mr Macyda felt that he was unable to give an expert declaration in light of his employment as general counsel by the Applicants.  As explained above, the mere fact of such employment would not disqualify him from acting as expert witness.  However, if he found difficulties by reason of potential conflict between the duties he owed to the court and the duties to serve the interest of his employer, this would be a good reason for not permitting him to act as expert witness. 

73.Be that as it may, we have taken his evidence into account.  For the reasons given above, we do not find his evidence assists the Applicants in overcoming the objection under Section 76(3).

C4.    Section 75(b): obtaining evidence for the purposes of civil proceedings

74.Mr Wong submitted that the Judge misunderstood the Applicants’ position on what constituted civil proceedings under Section 75 for present purposes at [35] to [37] of the Judgment.  Counsel submitted that the proceedings in the Federal Court continued to exist despite the entering of judgment in favour of the Applicants.  The Letters of Request were issued in the same set of proceedings under Rule 69(a)(2) of the Federal Rules of Civil Procedure, thus the discovery application was made in civil proceedings.  Counsel said the Judge erred in holding that Section 75(b) cannot encompass the very proceedings for discovery leading to the Federal Court’s request for evidence. Seeking information by way of discovery in aid of execution is the obtaining of evidence for the purposes of civil proceedings.   

75.In light of our disagreement with the Judge on the admissibility of Mr Macyda’s evidence, we are prepared to assume (without deciding) in favour of the Applicants that the discovery application is within the Federal proceedings and as such can be regarded as civil proceedings for the purpose of Section 75(b).

76.However, we are doubtful if the obtaining of evidence pursuant to the request is to obtain evidence for the use in the Federal Proceedings when it is only for seeking information to facilitate the plotting of the next course of action.  We are prepared to assume that under U.S. law, this would be so regarded in light of Rule 69(a)(2).  But it is not a matter of U.S. law alone.  In In re Norway’s Application (No 2), supra, it was held that jurisdiction to obtain evidence would only be established if the relevant proceedings were proceedings in a civil or commercial matter in both the requested jurisdiction and the requesting jurisdiction.   

77.As a matter of Hong Kong law, there is no collection procedure and we can see the force of the Judge’s observations at [44] of the Judgment.  The mere facilitation of the Applicants to act as collection agent does not qualify as civil proceedings in Hong Kong.

78.On the other hand, discovery procedure is a form of civil proceedings in Hong Kong though such discovery would not be permitted against non-party witnesses (other than the limited form of Norwich Pharmacal discovery).

79.The crucial issue, as we see it, is whether the use of the requested evidence has to be used as evidence in civil proceedings before one can satisfy the requirement in Section 75(b).  Though sub-section (b) itself only refers to “the purposes of civil proceedings” without specifying its intended use, the opening sentence in Section 75 describe the application as one for evidence to be obtained.  Can proceedings for the mere obtaining of information to facilitate the plotting of a course in the future which may or may not include further adjudicative steps on the part of the requesting court be proceedings in which such evidence will be relevant?

80.We have not received adequate submissions from counsel to enable us to answer this question.  Since it is not necessary for us to resolve this question in the present appeal, we will leave the issue open.

D.  Disposition

81.For the reasons given above, we dismiss the appeal with costs.  The Applicants shall pay the costs of the Respondents and such costs are to be taxed if not agreed with certificate for 2 counsel.

Mr Stewart Wong SC and Ms Elizabeth Cheung, instructed by Eversheds Sutherland, for the applicants

Mr Charles Manzoni SC and Mr Robin D'Souza, instructed by Jones Day, for the respondents