Sunni International Ltd v. Kao Wai Ho Francis and Others

HCA 1884/2018
HCA 2380/2018
& HCCW 121/2013
[2021] HKCFI 2418

HCA 1884/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1884 OF 2018

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HCA 2380/2018

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2380 OF 2018

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HCCW 121/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 121 OF 2013

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Before:  Hon Ng J in Chambers (open to public)

Date of Hearing: 24 February 2021

Date of Judgment:  26 August 2021

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JUDGMENT

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Introduction

1.By summons dated 29 October 2020 (“Defendants’ Summons”) filed in HCA 1884/2018 (“HCA1884”) and HCA 2380/2018 (“HCA2380”) (collectively “HC Actions”), the Defendants apply to strike out the entire witness statement of Fung Chi Keung (“Fung”) dated 16 September 2020 (“Fung’s WS”).  Fung is the liquidator of Sunni International Limited, the Plaintiff in the HC Actions.

2.By summons also dated 29 October 2020 (“Alex Lo’s Summons”) filed in HCCW 121/2013 (“HCCW121”), Mr Lo Kin Fung (“Alex Lo”) applies to strike out paragraphs 45-73 of the witness statement of Madam Tsen Yun Lei (“Madam Tsen”) dated 2 October 2019 (“Tsen’s WS”).  Madam Tsen is the Applicant of a misfeasance summons dated 30 May 2018 (“Misfeasance Proceedings”) while Alex Lo is the Respondent thereto. At the hearing, Mr Scott SC confirms that he only seeks to strike out paragraphs 51 to 73 of Tsen’s WS.

3.The grounds for the striking out applications have been identified in the summonses and more particularly set out in Annexes 1 and 2 of Mr Scott SC’s skeleton submissions.  For ease of reference, they are reproduced and attached to this Judgment.  In summary, the grounds relied upon are that the witnesses have no personal knowledge of the matters stated therein (“Ground 1”), the statements contain (i) inadmissible hearsay evidence (“Ground 2”), (ii) commentary on documents (“Ground 3”), (iii) arguments, expressions of opinion or submissions of law (“Ground 4”), (iv) offensive and inflammatory language (“Ground 6”), and are unnecessarily prolix (“Ground 5”) and an abuse of the procedure (“Ground 7”). 

Background

4.The material background can be found in paragraphs 3 to 18 of a Judgment of this Court dated 12 January 2021 in the HC Actions as follows. 

“3. The Plaintiff is a private company incorporated in the BVI on 4 January 1994. Upon the petition by Pleasure International Limited (‘PIL’) on 3 May 2013 in HCCW 121/2013 (‘HCCW121’), the Plaintiff was wound up by Order of the Court on 15 April 2015 (‘Winding Up Order’) on the ground that it was unable to pay its debts.

4. According to the Re-Amended Petition in HCCW121, the shareholders of the Plaintiff included inter alia:

(1) PIL;

(2) Silverbay Group Limited (‘Silverbay’);

(3) Golden Jungle Limited (‘Golden Jungle’);

(4) Happy Nation Limited (‘Happy Nation’).

5. The debt owed by the Plaintiff to PIL arose out of a default judgment obtained in HCA 2042/2011 (‘HCA2042’) in the sum of over HK$2.91 million plus interest. Other plaintiffs in HCA2042, who also obtained default judgment against the Plaintiff in the following sums plus interest, were:

(1) Silverbay—HK$8.02 million;

(2) Golden Jungle—HK$0.81 million;

(3) Madam Tsen Yun Lei (‘Madam Tsen’)—HK$6.31 million; and

(4) Kui Yiu Ngok (‘Kui’)—HK$1.51 million.

6. In HCA1884 and HCA2380 commenced in August and October 2018, the Plaintiff contends that a substantial amount of its funds and assets had been misappropriated and siphoned off. It claims that the Defendants were either primarily responsible for the said misappropriations or were liable as accessories. Prior to the commencement of HCA1884 and HCA2380, on 30 May 2018, Madam Tsen issued a misfeasance summons against Lo Kin Fung (‘Alex Lo’) in HCCW121 (‘Misfeasance Proceedings’) who was also allegedly implicated in the said misappropriations. On 21 May 2020, Linda Chan J gave directions that all the aforesaid 3 proceedings be heard and tried together.

7. The proposed draft re-Amended Statement of Claim in HCA1884 runs to over 140 pages. The Statement of Claim in HCA2380 is almost 40 pages long. In very simple terms, the following is, as set out in the Plaintiff’s skeleton submissions, the material background to the 3 proceedings.

8. The Plaintiff was set up as a passive investment holding company for holding the listed shares in Imagi International Holdings Limited (‘Imagi’) (previously known as Boto International Holdings Limited) for 4 families viz (i) the Cheng family, now represented by Madam Tsen, (ii) the Law family, now represented by Madam Ho, (iii) the Kui family, and (iv) the Kao family, of which Francis Kao and his father Michael Kao are the 1st and 2nd Defendants in HCA1884. Under the so-called ‘4-Families Agreement’, the Plaintiff’s shares/interests in Imagi were not to be disposed of unless approved or agreed upon by all its shareholders.

9. According to the audited financial statements and the management accounts of the Plaintiff available to the Liquidator, up to at least 30 June 2009, the Plaintiff was still holding 585 million Imagi shares worth over HK$363 million and had substantial net equity of over HK$309 million. As a result of the rights issue by Imagi, the Plaintiff was further entitled to over 146 million of the ‘2009 Rights Shares’.

10. Francis Kao and Michael Kao, acting by themselves and with Alex Lo who was authorized to operate the Plaintiff’s 4 securities accounts (‘Securities Accounts’) and/or its 4 HSBC bank accounts (‘HSBC Accounts’), had:

(1) disposed of all the 146 million 2009 Rights Shares on 4 August 2009, generating proceeds of over HK$15 million, and all the 585 million Imagi shares between 27 July and 14 October 2009, generating proceeds of over HK$238 million; and

(2) dissipated all the listed shares and funds, purchased with or generated from the aforesaid disposals of the 2009 Rights Shares and Imagi Shares, held in the Securities Accounts, and all the funds in the HSBC Accounts.

11. While the sale of the 2009 Rights Shares had the prior approval of all shareholders and was in accordance with the 4-Families Agreement, the sale of the 585 million Imagi shares was carried out secretively and without the knowledge, approval or consent of the other shareholders and therefore in breach of the 4-Families Agreement.

12. Between 3 August and 8 September 2009, in a concerted manner,

(1) over 346 million Imagi shares were disposed of through 1 of the Securities Accounts which Michael Kao was the only person authorized to operate and another 1 of the Securities Accounts which Michael Kao, Francis Kao and Alex Lo were authorized to operate; and

(2) all the 2009 Rights Shares were disposed of through 2 of the Securities Accounts which Michael Kao and Francis Kao were both authorized to operate.

13. Further, despite over HK$254 million had been generated from the sale of the 2009 Rights Shares and the 585 million Imagi shares and the other shareholders’ repeated demands in 2009, 2010 and 2011, the Plaintiff did not repay its debts of around HK$20 million to the other shareholders and their associated persons including Madam Tsen and Kui. In contrast, the debt said to be owed by the Plaintiff to Michael Kao was fully repaid with interest in the total sum of about HK$13.8 million.

14. As a result of the Plaintiff’s refusal to repay the other shareholders and their associated persons, they commenced HCA2042 against the Plaintiff in 2011 and eventually obtained default judgment in December 2012. That resulted in the Plaintiff being wound up by the Court in April 2015.

15. In HCA1884, the Plaintiff seeks recovery of assets and funds which Francis Kao and Michael Kao had misappropriated through payments and transfers made to (i) Francis Kao himself, (ii) his associates viz the 3rd, 4th and 5th Defendants in HCA1884 or (iii) other third parties, for no apparent reason or business justification. The misappropriations took place by transfers or withdrawals from the Securities Accounts and/or HSBC Accounts. By so misappropriating the Plaintiff’s assets, Francis Kao and Michael Kao were acting in fraudulent breach of trust and fiduciary duties owed to the Plaintiff. The associates of Francis Kao, by receiving the misappropriated funds and assets, were accessories to such breach of trust. By the proposed re-amendment to the Amended Statement of Claim in HCA1884, the Plaintiff further avers that Michael Kao acted jointly with Francis Kao to defraud the Plaintiff and are liable for conspiracy to injure the Plaintiff by unlawful means.

16. The Plaintiff’s claims have been grouped under 12 heads and involve too numerous transactions to be recited here.

17. The subject matter of HCA2380 relates to at least 2 heads of the misappropriations in HCA1884:

(1) Misappropriation through the purchase of a yacht with the Plaintiff’s funds in September 2009 and registered in the name of the 1st Defendant in HCA2380 (‘Win Harvest’). The yacht was, after the winding up of the Plaintiff, sold by Francis Kao for €1 million in 2017 and the sale proceeds were paid to the 2nd Defendant in HCA2380 (‘Famewell’). The Plaintiff seeks recovery of and tracing remedies in respect of the sale proceeds from Famewell.

(2) At least HK$6 million which the Plaintiff paid to Win Harvest had been applied as partial payment for a Pagani Sports Car which was later sold for HK$14 million. The sale proceeds were applied by Win Harvest as partial payment for the so-called St Andrews Place Property in Fanling, New Territories which is still owned by Win Harvest. The Plaintiff seeks tracing and other remedies in respect of the St Andrews Place Property from Win Harvest.

18. The Amended Defences of the 1st to 5th Defendants in HCA1884 consist of over 130 pages, whereas the Defences of the 2 Defendants in HCA2380 run to over 40 pages.  Again putting it very simply, the Defendants contend that they should not be held liable for breach of trust or fiduciary duties and/or liable as accessories to the alleged breach of trust or fiduciary duties.  Amongst other reasons, the Defendants contend that the payments and transfers, which were alleged to be wrongful by the Liquidator, were intra-group transfers and/or legitimate business transactions made in the course of a restructuring scheme which took place since July 2009. In particular, Michael Kao retired from his directorship of the Plaintiff in July 2008, ceased to take part in its management and was not involved in the alleged misappropriations.  The Defendants also contend that the Plaintiff’s claims are time-barred.”

5.To recap, the Plaintiff alleges that Francis Kao and Michael Kao (“Kaos”) had acted in fraudulent breach of their duties to the Plaintiff for misappropriating its assets.  To the extent that the other Defendants in the HC Actions viz Win Harvest, Unicorn, Big Plan and Famewell had been the recipients of the monies or property misappropriated by the Kaos, they had acted in collaboration with the Kaos and are liable as accessories.  In the Misfeasance Proceedings, Madam Tsen alleges that Alex Lo is also implicated in the aforesaid misappropriations. 

6.As stated in Mr Scott SC’s skeleton submissions, the Defendants and Alex Lo contend that they should not be held liable for the claims advanced by the Plaintiff or Madam Tsen because:

(1)  The payments and transfers were intra-group transfers and/or legitimate business transactions made in the course of a restructuring scheme taking place since July 2009 (“Restructuring Scheme”).  There can be no breach of fiduciary duties in respect of such payments, transfer or transactions.

(2)  Michael Kao had retired from his directorship of the Plaintiff at the material time and was not involved in the alleged misappropriations.  Alex Lo did not take part in the management of the Plaintiff at the material time and in any event had discharged his duties as a signatory of the Plaintiff’s bank accounts.

(3)  There was no breach of fiduciary duties on the part of Francis Kao, Michael Kao and Alex Lo, and therefore Win Harvest, Unicorn, Big Plan and Famewell cannot be liable as accessories.

(4)  Further, save where fraud is alleged, the claims raised by the Plaintiff and/or Madam Tsen are time-barred.

Deliberation

7.As a general principle, a witness statement should cover only those issues on which the party serving it wishes that witness to give as evidence-in-chief.  It is not the function of a witness statement to provide a commentary on the documents in the trial bundle, to set out quotations from such documents, to engage in matters of argument or to deal with other matters merely because they arise in the course of the trial.  However, the rules as to witness statements and their contents are not rigid statutes and it is conceivable that in particular circumstances they may properly be relaxed in order to achieve the overriding objective in CPR r 1 of dealing with cases justly: JD Wetherspoon plc v Harris [2013] 1 WLR 3296 at [39] - [41].

8.There is an obligation on the parties preparing the witnesses’ statements to ensure that they contain no inadmissible evidence.  They must take care to omit any statements of information and belief, even if the grounds and sources thereof are given, or any expression of opinion, or any matter which is scandalous, irrelevant or otherwise oppressive: Hong Kong Civil Procedure 2021 para 38/2A/13.

9.Last but not least, the Court must be astute in furthering the underlying objectives of the CJR as set out in RHC O 1A r 1 as well as the primary aim, set out in RHC O 1A r 2(2), to secure the just resolution of disputes in accordance with the substantive rights of the parties.

Fung’s WS

10.Fung is the liquidator of the Plaintiff appointed in July 2015. 

11.Ex hypothesis, Fung, as liquidator, is a stranger to the Plaintiff’s affairs prior to its liquidation and would not have personal knowledge of the matters giving rise to the claims in the HC Actions, which took place prior to his appointment.  Yet, it is the function of Fung, as liquidator, to investigate the causes of the Plaintiff’s failure and the conduct of those concerned in its dealings and affairs.  It has been said that extraordinary powers have been conferred on the Court by legislation eg formerly s 221 of the Companies Ordinance, Cap 32[1], to enable the liquidator to perform such function:  The Joint and Several Liquidators of Kong Wah Holdings Ltd v Grande Holdings Ltd (2006) 9 HKCFAR 766 at [24].  Given a liquidator’s function to investigate the conduct of those concerned in a company’s dealings and affairs and the legislative powers to enable him to perform it, it seems extraordinary to suggest that somehow he is not allowed to testify in subsequent legal proceedings on the conduct and the result of his investigation in so far as those matters are relevant to the proceedings.

12.Hence, as a general observation, it seems to this court there is no reason why a liquidator cannot testify as to what he manages to discover in the investigation process, either from people with personal knowledge of the affairs of the company or from documents obtained from the company itself or from third parties. In practice, it is often the case that what a liquidator manages to discover is technically hearsay evidence. But there is no absolute bar to adducing hearsay evidence in civil proceedings: see s 47 Evidence Ordinance, Cap 8 (“EO”), subject to arguments on its weight.

13.Fung’s WS is 259 pages long and contains 435 paragraphs.  It contains 4 main sections viz Introduction, Overview of the Plaintiff, Misappropriations of the Plaintiff’s Assets and the Restructuring Scheme alleged by the Defendants. 

14.If the Defendants wish to strike out the entire statement, it is incumbent on them to satisfy this court that each and every of the 435 paragraphs of Fung’s WS falls foul of the Wetherspoon principle, is irrelevant or is otherwise inadmissible.  In support of the application to strike out the entirety of Fung’s WS, the Defendants rely on Grounds 1, 5 and 7. Whether Fung’s WS is an abuse of procedure ie Ground 7 really depends on the validity of the other grounds and cannot be considered independently.  In this court’s view, Grounds 1 and 5 are without merits and can be disposed of briefly.

15.As far as Ground 1 is concerned, Mr Chan SC submits that, as an all-embracing ground for striking out the entire statement, it has not been made out.  In this regard, Mr Chan SC points to a number of sample paragraphs in Fung’s WS which simply sets out the investigation he had carried out into the affairs of the Plaintiff.  They are paragraph 29 onwards (enquiries with members of the Plaintiff’s Committee of Inspection and an auditing firm CCIF CPA Limited), paragraph 37 onwards (enquiries with major banks in Hong Kong) and paragraph 48 onwards (enquiries with 4 securities companies viz First Shanghai, UOB, Fairwin and Emperor).  Mr Chan SC submits and this court agrees that these are obviously matters which Fung would be able to prove with his own personal knowledge since they are matters concerning his own investigation. 

16.As far as Ground 5 is concerned, Mr Chan SC submits that in considering the length of Fung’s WS, one has to bear in mind the number of heads of claims, the number of transactions involved as well as the nature of the Plaintiff’s claim and the Defendants’ defence. The complexity of the claims and the defence can be seen from the length of the pleadings in the HC Actions.  On any view of the matter, the HC Actions are a very heavy piece of litigation.  In these circumstances, it is entirely understandable that Fung considers that he needs to provide details of his investigation in support of the misappropriation claim and to dismantle the main defence of the “Restructuring Scheme”.  Fung’s WS is undeniably lengthy. A different drafter of Fung’s WS could conceivably have cut it shorter and made it more succinct. But it is inimical to the underlying objectives of the CJR to order the Plaintiff itself to re-draft Fung’s WS for the sake of making it shorter as it would only increase the legal costs involved and also would prevent the case from being dealt with as expeditiously as is reasonably practicable. All in all, this court is not persuaded that Fung’s WS is “unnecessarily prolix” such as to justify its striking out in the entirety.

17.Grounds 2 and 3 can be dealt with together. 

18.The “offending” examples given by Mr Scott SC include inter alia paragraphs 16 - 20, 76 and 221-2 of Fung’s WS. For ease of comprehension, extracts of some of those paragraphs are reproduced below:

“16. I have been told by the members of the Committee of Inspection[2] that back in the 1980s, Law Pun Leung, deceased (‘Mr. Law’), Cheng Ka Yun, deceased (‘Mr. Cheng’) and Michael Kao had started a plastic manufactory business through a company incorporated in Hong Kong in the name of Boto Company Limited (‘Former Boto’) then mainly for manufacturing artificial Christmas trees. Not long after the start of the business of Former Boto, Mr. Kui (Kui Yiu Ngok) also joined in as a shareholder.

17. The business of Former Boto was very successful. But, unfortunately, Mr. Cheng passed away in 1989 and Mr. Law also passed away in 1992. After their demise, their respective widow, i.e. Ms. Tsen (widow of Mr. Cheng) and Ms. Ho Pui Fong (‘Ms. Ho’) (widow of Mr. Law), became the persons around representing the respective interests of Mr. Cheng’s family and Mr. Law’s family in the business.

18. In about 1993, there was a plan for the listing of the businesses and group of companies of Former Boto. For that purpose, the Company was set up as a passive investment holding company for holding collectively the investments in the shares of the company to be listed for the 4 families of Mr. Law, Mr. Cheng, Michael Kao and Mr. Kui (collectively ‘the 4 Families’).

19. The listing materialized in 1997 with Boto International Holdings Limited being listed on the main board of the Stock Exchange of Hong Kong with stock code: 585. The name of the listed company has since 19 April 2004 been changed to Imagi International Holdings Limited (‘Imagi’).

20. I have also been told by the members of the Committee of Inspection that before the listing of Imagi materialized, there was an oral agreement among the 4 Families (‘the 4-Families Agreement’), inter alia, that

(a) The Company would be used as the vehicle for holding the shares of the 4 Families in the listed company collectively,

(b) The Company would be a passive investment company, like a sort of ‘trust’ company, for the shareholders of the Company to collectively hold their interests in the listed company,

(c) If any of the shareholders of the Company intended to sell its interests in the Company, it would first be offered to the other shareholders of the Company,

(d) Any disposition or even trading of the shares and/or interests in the listed company to be held by the Company must be approved or agreed upon by all of the shareholders of the Company beforehand,

(e) Dividends to be paid to the Company on the shares in the listed company were to be distributed to the shareholders of the Company according to their respective shareholdings in the Company, and

(f) The Company would not engage in other business activities than to hold the shares and/or interests in the listed company for the shareholders of the Company collectively.

…

76. However, I wish to point out that according to the members of the Committee of Inspection, the sale of the 585m Imagi Shares was undertaken without the prior knowledge or consent of PIL, SGL, GJL and Mr. Lam. Prima facie, the sale of the 585m Imagi Shares was contrary to the 4-Families Agreement. Nor have I been able to find among the records of the Company or even from the documents discovered by the Defendants any resolution, whether shareholders’ or director’s resolution, relating to the sale of the 585m Imagi Shares by the Company. This is in stark contrast to the sale of the 2009 Rights Shares, which was carried out with the consent given by all of the shareholders of the Company through the written resolution signed by all of them.

…

221. Firstly, from the documents discovered by Win Harvest, it can be seen that Win Harvest had purchased at least 2 residential properties between 2010 and 2012, namely, (1) a property in the ‘Beverly Hills’ in Tai Po (‘the Beverly Hills Property’) in 2010 at the price of HK$13.7 million, and (2) the St Andrews Place Property in 2011 at the price of HK$52,000,000. However, on top of the purchase price and the necessary conveyancing expenses, very substantial sums have been spent by Win Harvest on the fitting out of the 2 properties, apparently not for the benefit of Win Harvest, but for the use and benefit of Francis Kao.

…

(g) According to audited reports of Win Harvest, the properties were booked as ‘Property, plant and equipment’. The definition of ‘Property, plant and equipment’ are tangible items that: (a) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and (b) are expected to be used during more than one period. However, the Defendants seem to be alleging that the property was held for investment purposes. For accounting purpose, if the properties were held for investment, they should be booked as ‘Investment properties’, instead of ‘Property, plant and equipment’.

222. Secondly, from the documents discovered by Win Harvest, it also appears that the expenses for the Yacht have been paid for by Win Harvest, but the Yacht was apparently under the use of Francis Kao. Annexed hereto marked ‘FCK-10’ is a schedule summarizing the running expenses incurred on the Yacht as shown in the documents disclosed in Win Harvest’s list of documents and Philip Kao’s 2nd Affirmation in HCCW 121. Some of those expenses are also shown in the Win Harvest 2009 and 2010 Book Movement extracts discovered by Win Harvest …” (emphasis added)

19.What Ground 2 boils down to is that Fung is giving hearsay evidence as to what he learned from third parties including members of the Committee of Inspection.  Ground 3 is also about hearsay evidence since according to s 46 EO, hearsay means a statement made otherwise than by a person while giving oral evidence in the proceedings which is tendered as evidence of the matters stated. Here, what the Defendants are complaining in essence is that Fung is purporting to summarise what the authors purported to convey in those documents. 

20.But as s 47(1) EO provides, in civil proceedings, evidence shall not be excluded on the ground that it is hearsay unless—

(1)  a party against whom the evidence is to be adduced objects to the admission of the evidence; and

(2)  the court is satisfied, having regard to the circumstances of the case, that the exclusion of the evidence is not prejudicial to the interests of justice.

21.Mr Chan SC submits and this court agrees that given the nature of the Plaintiff’s claims in the HC Actions, the number of heads of claims and the transactions involved which are said to be supported by the documents obtained by Fung in the course of his investigation, some of which from the Defendants themselves, it is clearly necessary and conducive to the trial that what is considered to be relevant information as derived from the documents be extracted and highlighted in Fung’s WS. This is especially so when thus far there is no dispute on the authenticity of those documents.

22.This court of course accepts the Wetherspoon principle that normally it is not the function of a witness statement to provide a commentary on the documents in the trial bundle.  But in the case of a liquidator who is a stranger to the affairs of the company in liquidation, the rules as to witness statements and their contents may properly be relaxed in order to achieve the overriding objective of dealing with cases justly.  Otherwise, the only alternative available is for the liquidator to put volumes and volumes of documents before the court and ask the court itself to search for something relevant to the claim or the defence, as the case may be.  This is hardly conducive to the underlying objective of the CJR to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings.

23.To conclude, it is this court’s view that exclusion of Fung’s WS on Grounds 2 and 3 by taking a “broad brush approach” at this pre-trial stage of the proceedings is indeed prejudicial to the interests of justice.  As a matter of prudence, the matter should be left for determination by the trial judge.

24.As for Ground 4, some of the “offending” examples given by Mr Scott SC in court eg paragraphs 99 - 100, 173 and 329 - 330 are indeed expressions of Fung’s opinion or submissions of law.  As for Ground 6, the “offending” examples given by Mr Scott SC are also expressions of Fung’s opinion eg paragraphs 73(f), 82, 96 and 97 which the Defendants may find offensive since they are critical of the Defendants for being inter alia untruthful, uncooperative, evasive, obstructive etc.

25.Insofar as Fung’s WS contains expression of his opinion on the Defendants’ conduct personally perceived by him or on the contents of the documents personally examined by him, in the course of being a liquidator, such statements of opinion on any relevant matter, if made as a way of conveying relevant facts personally perceived by him, is admissible as evidence: Re Jinro (HK) International Limited, unrep, HCCW 1352 of 2001, 26 July 2002 at [23]-[24] , Kwan J (as she then was); Lawrence v Kent County Council [2012] EWCA Civ 493 at [23] - [25].

26.Further, as Barma J (as he then was) explained in Re Linea Trading Company Limited, unrep, HCCW 350 of 2004, 11 July 2005 at [4(5)], the court may take one of three approaches to an affidavit in which there is scandalous, irrelevant or oppressive matter:

(1)  It may decline to strike the matter out, on the basis that it is capable of excluding such material from its mind when deciding the issues which arise for decision; or

(2)  It may think it appropriate to strike out some or all of the material complained of; or

(3)  It may, in an extreme case, order the entire affidavit to be taken off the court file.

27.In the present case, even if some of the “offending” paragraphs under “Ground 4” and “Ground 6” are inadmissible opinion evidence, this court will still decline to strike them out at this stage.  As Barma J (as he then was) rightly points out, Judges are quite capable of excluding these materials from their mind and in practice they often do when the occasion arises.  It seems to this court inimical to the underlying objectives of the CJR to order the Plaintiff to cross out one or two expressions or sentences here and there in the “offending” paragraphs so as to strictly comply with the Wetherspoon principle, the reason being it would likewise increase the legal costs involved and also would prevent the case from being dealt with as expeditiously as is reasonably practicable.  In this regard, the Defendants have not taken it upon themselves to apply the blue pencil approach to cross out what they regard as offensive in Fung’s WS.  Rather, they take the short cut of inviting this court to apply a broad brush approach and strike out the entire so-called “offensive” paragraphs listed in their Annex I.  In this court’s view, that approach at this pre-trial stage of the proceedings is not conducive to securing the just resolution of disputes in accordance with the substantive rights of the parties.

28.In the premises, this court rejects all 7 Grounds and the Defendants’ application fails.

Tsen’s WS

29.As this court mentions earlier, Mr Scott SC confirms that he only seeks to strike out paragraphs 51 to 73 of Tsen’s WS, consisting of section “II.  Investigation of the assets of the Company by the Liquidator” and section “III.  This application against Lo”.  In his skeleton submissions, Mr Scott SC submits that many of the problems in relation to Fung’s WS apply to the offending paragraphs in Tsen’s WS with equal if not more force.  In Annex II, he relies on the same 7 grounds for striking out Tsen’s WS with the relevant paragraphs identified. 

30.As a preliminary observation, since Mr Scott SC’s submission is that the problems in relation to Fung’s WS apply at least equally to the offending paragraphs in Tsen’s WS and since he is relying on the same 7 grounds for striking out Tsen’s WS, logically, once this court decides those matters against him in relation to Fung’s WS for the reasons given, that should prima facie also determines his application in relation to Tsen’s WS, unless there is something materially different between Fung’s WS and Tsen’s WS in terms of details, which this court cannot find. 

31.In support of the application to strike out the entirety of paragraphs 51 to 73 of Tsen’s WS, the Defendants rely on the same Grounds 1, 5 and 7.  As far as Ground 7 is concerned, whether Tsen’s WS is an abuse of procedure depends on the validity of the other grounds and cannot be assessed independently.  As far as Ground 1 is concerned, it seems to this court that this ground, as an all-embracing one for striking out the entire statement, has not been made out.  This is because there are paragraphs in Tsen’s WS in which she is clearly able to testify by reference to her own personal knowledge.  Examples given by Mr Li SC include parts of paragraphs 58(a), 58(a)(ii), 59(c)(iii), 59(g)(vi) & (vii), 59(o) and 60.  This court agrees.  As for Ground 5, this court reiterates the point that whether Tsen’s WS is or is not unnecessarily lengthy or prolix really depends on how complex Madam Tsen’s pleaded case against Alex Lo is.  For the present purpose, the only sure guidance which can be obtained is from the pleadings in HCCW121, in particular the Points of Claim and Points of Defence which are quite lengthy, albeit not as lengthy as the pleadings in the HC Actions.  Given the Misfeasance Proceedings are separate proceedings against Alex Lo from the HC Actions brought by the Plaintiff against the other Defendants and that the evidence filed in the HC Actions would not entirely cover what Madam Tsen wishes to adduce against Alex Lo, this court is not persuaded that Tsen’s WS is “unnecessarily prolix” such as to justify the striking out of the entire “offending” paragraphs. 

32.As far as Grounds 2 and 3 are concerned, the complaint is that Madam Tsen has referred to documents and/or information provided by or relayed to her by Fung or her solicitors and she has made some comments on those documents.  The relatively small number of “offending” paragraphs have been set out in Annex II.  Since the objection is in essence that Madam Tsen is giving hearsay evidence as to what she learned from third parties or is purporting to set out what she perceives as the effect of those third party documents, for reasons given in paragraphs 19-23 above, this court is similarly of the view that exclusion of the “offending” paragraphs in Tsen’s WS on Grounds 2 and 3 by taking a “broad brush approach” at this pre-trial stage of the proceedings is prejudicial to the interests of justice.  Instead, the matter should be left for determination at trial at which stage the parties may well find the more practicable and fruitful course to take is to concentrate on arguments on weight. 

33.As for Ground 4 and Ground 6, it is true that parts of the “offending” paragraphs given in Annex II contain Madam Tsen’s expression of opinion, some of which the Defendants may find offensive.  Just to give 2 obvious examples at paragraph 59(k)(viii) regarding the purchase of a luxury yacht and 59(l) regarding the purchase of 3 Lamborghini cars as follows:

“ (viii) None of the Creditors (who were also members of the COI) had any idea why the Company, being a passive investment holding company as stated hereinabove, would buy the Yacht. Further, why would the Company pay for the Yacht when it came to be registered in Win Harvest’s name? Where is the Yacht now? Who is its current owner? ... Not only Francis Kao did not deliver up the Yacht, he even sold it and pocketed the money! This is blatant theft under the daylight!

(l)  There was one payment of HK$8,093,644.00 to a ‘Interbenz Autohaus HK Company’ (‘Car Payment’).  It was charged to Francis Kao for the purchase of 3 Lamborghini cars at the consideration of GBP634,000.00. … The COI was informed by Simon Fung that, upon enquires made by Simon Fung to Francis Kao regarding this transaction, Francis Kao claimed that the said 3 Lamborghini cars were purchased as investment items using the Company's fund and were then transferred to Big Plan. Ultimately, one of cars was sold by Big Plan for HK$1,710,000 in 2010. Another one was transferred by Big Plan to and registered under Win Harvest in March 2010, which was later being traded in for a Mercedes Benz sports car in November 2010. The third car was being transferred by Big Plan to and registered under Win Harvest in November 2013. However, Francis Kao never revealed at all the whereabouts of these cars. Again, why would the Company buy lavish sports cars and in fact 3 such cars? Most importantly, where are the cars now? These cars are clearly assets of the Company, but so far neither Francis Kao nor Lo had ever disclosed the whereabout of them, nor had he or Francis Kao deliver them up to Simon Fung. Blatantly this is nothing more than Francis Kao/Lo making use of the Company’s money as their own and for their own benefit.”

34.For reasons already given earlier in relation to Fung’s WS, Judges are quite capable of excluding these expressions of opinion or offensive remarks from their mind and in practice they often do when the occasion arises.  It is not conducive to the underlying objectives of the CJR to order the Plaintiff to cross out one or two expressions or sentences here and there in the “offending” paragraphs so as to strictly comply with the Wetherspoon principle, especially when the Defendants themselves have not taken it upon themselves to apply the blue pencil approach to cross out what they regard as “offending”.

35.For the above reasons, this court rejects all 7 Grounds and Alex Lo’s application also fails.

Disposition and costs order nisi

36.The Defendants’ Summons is hereby dismissed.  There be an order nisi that costs of and occasioned by the summons be to the Plaintiff, to be taxed if not agreed, and paid by the Defendants forthwith, certificate for 2 counsel.

37.Alex Lo’s Summons is hereby dismissed.  There be an order nisi that costs of and occasioned by the summons be to Madam Tsen, to be taxed if not agreed, and paid by the Defendants forthwith, certificate for 2 counsel.

Mr Edward Chan, SC and Mr Lee Tung-ming, instructed by Anthony Siu & Co, for the Plaintiff in HCA 1884/2018 and HCA 2380/2018

Mr John Scott, SC, Mr Lincoln Cheung and Mr Terrence Tai, instructed by Chiu & Partners, for the Defendants in HCA 1884/2018 and HCA 2380/2018 and the Respondent in HCCW 121/2013

Mr C Y Li, SC and Mr Chan Chun Sang, instructed by Lau, Chan & Ko, for the Applicant in HCCW 121/2013

Annex I: Grounds for Striking Out Fung WS 

Annex II: Grounds for Striking Out §§45-73 of Tsen’s WS