La Dolce Vita Fine Dining Co Ltd v. Zhang Lan

CACV 99/2018
and CACV 100/2018
(Heard together)

[2021] HKCA 26

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 99 OF 2018

(ON APPEAL FROM HCMP 585/2017)

________________________

________________________

________________________

CIVIL APPEAL NO 100 OF 2018

(ON APPEAL FROM HCMP 586/2017)

________________________

________________________

________________________

(Heard together)

Before: Hon Lam VP and Chu JA in Court

Dates of Written Submissions: 23 July, 28 August and 4 September 2020

Date of Judgment: 7 January 2021

___________________

JUDGMENT

___________________

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

1.These are two identical applications[1] brought by the Defendant for leave to adduce new evidence in her appeals against the judgment of 14 March 2018 (“the Judgment”) in which M Chan J (“the Judge”) found the Defendant guilty of contempt of court.

2.Having read the submissions lodged by the parties and bearing in mind the underlying objectives in Order 1A Rule 1 of the Rules of the High Court (Cap 4A), we consider it appropriate for these applications to be determined on paper without an oral hearing pursuant to Order 59 Rule 14A.

Background

3.The underlying dispute between the parties relates to an acquisition by the Plaintiffs of the majority shareholding interests in a company which holds the South Beauty chain of restaurants in Mainland China founded by the Defendant.

4.On 26 February 2015, the Plaintiffs obtained ex parte Mareva injunctions in aid of arbitrations then intended to be commenced by the Plaintiffs.  By an Order made on the same date (“the Asset Disclosure Order”[2]), the Defendant was required inter alia to inform the Plaintiffs in writing of all her assets of an individual value of HK$500,000 or more, whether in or outside Hong Kong, whether in her own name or not and whether solely or jointly owned, giving the value, location and details of all such assets.

5.On 13 March 2015, the Defendant served her Affidavit made pursuant to the Asset Disclosure Order, disclosing assets of her shareholding in a few companies, a bank deposit of some USD 1.2 million odd, 2 motor vehicles and various properties in Beijing: see the Judgment at [6].

6.On 14 March 2017, the Plaintiffs obtained leave to commence committal proceedings against the Defendant, claiming inter alia that the Defendant had failed to disclose all the assets owned and controlled by her which fall within the ambit of the Order.

7.After a 4-day trial commencing on 17 January 2018 (“the Contempt Trial”), in which the Defendant was represented by counsel but did not attend in person to be cross-examined, the Judge held that the Defendant was in contempt by reason of her breach of the Asset Disclosure Order. 

8.For present purposes, the Judge’s reasoning may be summarized as follows:

(1)  The Defendant was reported in an article published by Christie’s in 2015 (“the Christie’s Article”) to have stated in an interview with Christie’s that:

“ I don’t have any savings in the bank. My savings are my art collection. When I saw [the “Three Gorges” by Liu Xiaodong] at the Poly auction in Hong Kong, I was captivated. I could tell that the artist was incredibly innovative and unique. … I began collecting contemporary Chinese Art more than 20 years ago, but people didn’t know me as an art collector until I bought Liu’s piece …

My collection consists of 300 to 400 artworks.  Most have been bought and are stored abroad.  Chinese art accounts for 20% of my collection; the rest is Western art.  Most of it was bought at auctions, both commercial and charity auctions, with only a few pieces purchased through galleries … I prefer to keep my collection in professional storage facilities to protect it in the long term.” (original emphasis by the Judge)[3]

(2)  In relation to her reported assertion in the Christie’s Article that she had a collection of 300 to 400 artwork kept in professional storage facilities, the Defendant claimed in her Affirmation that it was based on an alleged “misunderstanding” on the part of the reporter and that she had ceased to own paintings with value of HK$500,000 or more “some time ago” and that she did not own any art that falls within the scope of the Asset Disclosure Order.[4] Observing that the Defendant impliedly admitted that she did own some artworks, the Judge found it incredible that she would have disposed of her entire art collection within a short period in 2015 or that all her artworks would be worth less than HK$500,000.[5] 

(3)  In relation to her reported assertion that she had bought the “Three Gorges” painting, the Defendant claimed in an Affirmation that it was “owned by a third party” and she no longer had any legal or beneficial interest in it.[6]  She also said in a subsequent Affirmation that she did not know “who owns, or owned” the said painting but it was not hers.  The Judge found that her denial of ownership had no evidential substantiation.[7] 

(4)  Whilst the Defendant sought to rely on her Affirmations to oppose the committal proceedings, she had only made general and vague denials of ownership of the artwork and has not attended the Court for cross-examination on these general denials.  On the contrary, there was some supporting evidence of the Defendant’s purchase of and payment for artwork, namely a remittance of US$545,000 in March 2014 from the Defendant’s account for purchase of “art collection”.[8] 

(5)  In all, the Judge found the Defendant’s denials in relation to her ownership of the “Three Gorges” painting and her artwork collection to be unbelievable.[9] 

(6)  Bearing in mind that the persuasive burden remains on the Plaintiffs, since the Defendant has failed to adduce sufficiently substantial evidence to raise a reasonable doubt as to her guilt and the evidence that she did choose to adduce was rejected as unbelievable, the Judge was satisfied that the Defendant’s breach of the Asset Disclosure Order had been proven beyond reasonable doubt.[10] 

9.On 11 April 2018, the Defendant filed her Notices of Appeal against the Judgment.  One of the grounds of appeal advanced is that the Judge erred in rejecting the Defendant’s denial that she owned the “Three Gorges” painting and her artwork collection as well as in holding that she was satisfied beyond reasonable doubt that the Defendant had failed to disclose assets owned by her of an individual value of HK$500,000 or more, in breach of her obligations under the Asset Disclosure Order.[11]

The present application and the new evidence

10.After no progress had been made in these appeals for almost two years, on 7 April 2020 the Defendant was directed to confirm whether she intended to proceed.  On 27 April 2020, the Defendant’s solicitors indicated to the Court that the Defendant intended to take out an application for leave to adduce new evidence in the appeals.  The Defendant was then directed to take out that application on or before 14 May 2020.

11.On 14 May 2020, the Defendant made the present application by issuing a Summons in each of the appeals.  The new evidence that the Defendant seeks leave to adduce are:

(1)  The Affirmation of Zhang Lan (i.e. the Defendant) dated 14 May 2020 (“the Defendant’s New Affirmation”), with exhibits;

(2)  The original Notarised Certificate dated 18 April 2018 (“the Notarised Certificate”); and

(3)  The Affirmation of Tian Jun (“Mr Tian”) dated 14 May 2020 (“Mr Tian’s New Affirmation”), with exhibits.

12.In the Defendant’s New Affirmation, she denied she had said that she previously owned the “Three Gorges” painting.  She reiterated that the “Three Gorges” painting did not and does not belong to her. 

13.Through her PRC lawyers, the Defendant asked one Ms Li Yalu (“Ms Li”) of Beijing Poly International Auction Co., Ltd. (“Poly Auction”) to provide evidence about the ownership of the “Three Gorges” painting in the form of a notarised document entitled “List of Entrusted Auction Objects” (“the Document”), which was exhibited to the Notarised Certificate.  The Document contains a handwritten note in which Ms Li indicated that she could not give the Defendant the details of the entrusting party of the “Three Gorges” painting because she was not able to obtain the entrusting party’s consent.

14.In Mr Tian’s New Affirmation, it was said that the Defendant had borrowed money from Mr Tian some time ago and when she made repayment to him, he asked her to repay him by remitting the sum of US$545,000 to J. J. Lally & Co. (“JJL”) as he was then purchasing two pieces of artwork from JJL.  Mr Tian exhibited two invoices dated 12 March 2014 issued by JJL for the said two pieces of artwork (“the Invoices”).

Legal principles

15.There is no dispute that the principles governing permission for adducing fresh evidence in appeals in the context of contempt of court proceedings are those summarized in China Shanshui Cement Group Ltd v Zhang Caikui [2019] HKCA 1207 at [19]-[22]. 

16.As proceedings for committal for civil contempt have penal consequences, it was held by the Court of Final Appeal in Kao Lee & Yip v Koo Hoi Yan (2009) 12 HKCFAR 830 at [20] that the appellate courts should apply the criminal rules relating to the admission of fresh evidence rather than the criteria laid down in Ladd v Marshall [1954] 1 WLR 1489.  Specifically:

(1)  The test stipulated in section 83V(1) of the Criminal Procedural Ordinance, Cap 221 is applicable: whether the admission of new evidence is necessary or expedient in the interests of justice.

(2)  Before receiving evidence under section 83V(1), all the conditions set out in section 83V(2) have to be satisfied, namely (i) the fresh evidence is likely to be credible; (ii) it would have been admissible in the court below; (iii) it is relevant to an issue in the appeal; (iv) there is a reasonable explanation for the failure to adduce it in the court below; and (v) the court is satisfied that it would afford a ground of appeal.  See Mahabobur Rahman v HKSAR (2010) 13 HKCFAR 20 at [13].

Discussion

17.As suggested by Ms Queenie Lau, the Defendant sought leave to adduce two categories of new evidence: (i) evidence regarding the ownership of the “Three Gorges” painting and (ii) evidence concerning the remittance of US$545,000 to JJL.

18.Dealing first with the new evidence regarding the ownership of the “Three Gorges” painting, Ms Eva Sit SC (leading Mr Danny Tang) submitted on behalf of the Plaintiffs that there is no reasonable explanation for the failure to adduce such evidence before the Judge.  The Defendant was aware that the Plaintiffs’ case at the Contempt Trial was that the “Three Gorges” painting belonged to her and was purchased by her at an auction organised by Poly Auction in 2006.  Indeed, the Defendant expressly addressed the question of its ownership in her evidence filed below[12].  Although the Notarised Certificate only came into existence after the Judgment, the matters covered in it occurred long ago and could have been obtained before the Contempt Trial.

19.In respect of the Defendant’s explanation that she had thought it sufficient to confirm in her Affirmation that the “Three Gorges” painting did not belong to her because she did not expect the Judge’s heavy reliance on the hearsay evidence in the Christie’s Article, Ms Sit relies on HKSAR v Akhtar Salim [2018] HKCFI 431 and HKSAR v Yee Wenjye [2017] 2 HKLRD 1182 and submitted that a litigant’s mis-judgment as to the need in the trial below to rely on the evidence which she now seeks to adduce on appeal is not a good reason to get a second bite of the cherry.

20.In her reply submissions, Ms Lau submitted that a decision not to adduce a certain piece of evidence before a Court is not necessarily a mis-judgment.  Counsel refers to the case of HKSAR v Muhammad Waqas [2019] 4 HKLRD 323 where the Court of Appeal allowed new evidence concerning the actual narcotic content of the mixture with which the appellant was charged on the basis of the practice of the Director of Public Prosecutions in not measuring the quantity of narcotic where the amount of the dangerous drug seized did not exceed one gramme. 

21.Whilst Ms Lau is correct that a decision not to adduce certain evidence before a Court is not necessarily a mis-judgment, the crucial issue remains if there is a reasonable explanation for not adducing such evidence at the hearing below.  Muhammad Waqas was a decision on the very special facts of that case and it is not an authority for exculpating a deliberate decision not to adduce evidence at trial when the need to have such evidence had been obvious.   

22.The Defendant was represented by very experienced leading counsel before the Judge.  It is also plain that the authority relied upon by Ms Lau as providing the reasonable explanation, Numeric City Ltd v Lau Chi Wing [2016] 4 HKLRD 812, was cited to the Judge as she referred to it at [12] of the judgment.  The effect of that authority, as summarized by the Judge, was that hearsay evidence was admissible for contempt proceedings.

23.Assessment of the weight to be accorded to hearsay evidence had to be made in light of the other evidence on the same issue.  At the trial, though the Defendant had denied ownership in her Affirmation, she chose not to attend court for cross-examination.

24.Since ownership of the painting was a seriously contested issue with important bearing on the trial, one would expect the Defendant to marshal all relevant evidence within her power on the issue.

25.The Judge addressed this issue at [83] to [93] of the judgment. It does not appear that there was any objection to the admissibility of the Christie’s Article.  Whilst the merit of the analysis by the Judge in those paragraphs would have to be debated in the substantive appeal (see Ground (4) in the Notices of Appeal), the Judge’s evaluation of the Defendant’s own evidence at [89] can hardly be regarded as exceptional.

26.In her Affirmation of 14 May 2020 supporting the present application, the Defendant deposed to the circumstances under which her assistant obtained the new evidence, in particular the Document.

27.But the Defendant did not explain why such effort could not or had not been made prior to the trial.  Nor did she put forward the explanation that there was a reasonable basis for such omission to do so even when she chose not to attend the trial for cross-examination.

28.In short, there is simply no evidential foundation for the explanation put forward by Ms Lau in submission.     

29.In the circumstances, we are not satisfied that there is a reasonable explanation for the Defendant’s failure to adduce the evidence regarding the ownership of the “Three Gorges” painting in the court below.

30.Further, we do not find the evidence relevant to the issue in the appeal.  In the Document, Ms Li did not state that the Defendant was not the owner of the painting.  Taking the handwritten note to their highest, it only stated that the party entrusting the painting to Ms Li did not consent to the disclosure of his/her identity and such person represented himself/herself to be the owner.  As such it was hearsay upon hearsay (with the source being unidentified) insofar as it purported to be evidence of ownership.

31.We agree with Ms Sit that the handwritten note raised more questions than providing answers.  For all we know, the party entrusting the painting could be the agent for the owner instead of the true owner.  Hence, the Document is not evidentially probative in terms of showing that the Defendant was not the owner of the painting.

32.The Court cannot accept the submission that one can infer from the handwritten note alone that the Defendant was not the owner of the painting.

33.Turning to the new evidence concerning the remittance of US$545,000 to JJL, in our judgment leave should likewise be refused because of the lack of reasonable explanation for the failure to adduce the same in the court below. 

34.The Defendant’s payment of US$545,000 to JJL has always formed part of the evidence relied upon by the Plaintiffs in the Contempt Trial.  In fact, the Defendant addressed this allegation by stating in her Affirmation filed below that “it is [Mr Tian] who bought the two artworks in New York from [JJL]” and “I paid him as a repayment of a loan”.[13] As such, there was no reason why the Defendant did not find it necessary to obtain Mr Tian’s evidence and the Invoices before the Contempt Trial.

35.Ms Lau submitted that it would have been disproportionate for the Defendant to specifically address the US$545,000 remittance and seek Mr Tian’s assistance.  However, for the reasons explained above, there is a lack of evidential foundation for such submission.

36.Further, US$545,000 is not a small amount bearing in mind the threshold of $500,000 in the Asset Disclosure Order.  Plainly, the remittance of US$545,000 was highly probative in the overall assessment on the allegation of artwork collections owned by the Defendant, see the discussion at the end of [89] in the judgment.

37.With respect, we cannot accept that it would have been disproportionate for the Defendant to address the remittance of US$545,000 with more concrete evidence at the court below.

38.Ms Lau also suggested that the Defendant had been confused by the Plaintiffs’ reference to a purchase price of US$645,000 rather than a remittance of US$545,000, but again there is no evidential support for the suggestion.  The response in her Affirmation of 25 October 2017 shows that there was no confusion on her part.

39.In the premises, we are not satisfied that there is a reasonable explanation for the Defendant’s failure to adduce the new evidence concerning the remittance of US$545,000 to JJL in the court below.

Disposition

40.For the reasons stated above, the Defendant’s application to adduce new evidence in these appeals is dismissed.  We dismiss the two summonses filed respectively in the two appeals.

41.We further order the Defendant to pay the Plaintiffs the costs of this application.

Ms Eva Sit SC and Mr Danny Tang, instructed by Clifford Chance, for the plaintiff in both cases

Ms Queenie Lau, instructed by Huen & Partners, for the defendant