Re Li Xiaoming

CACV 546 /2019

[2022] HKCA 142

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 546 OF 2019

(ON APPEAL FROM HCB NO 6083 OF 2018)

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J U D G M E N T

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

1.On 15 November 2019, Deputy High Court Judge William Wong, SC made a bankruptcy order against Li Xiaoming (“the debtor”). The debtor’s appeal against the judge’s decision was dismissed by this court at the conclusion of the hearing on 25 May 2021. Our reasons were handed down on 31 May 2021 (“CA Reasons”)[1]. By a notice of motion dated 22 June 2021, the debtor seeks leave to appeal to the Court of Final Appeal from our judgment of 25 May 2021.

2.The questions said to be of great general or public importance are stated as follows:

Question 1:

(a) Whether all the criteria stipulated in Ladd v Marshall [1954] 1 WLR 1498 are applicable in a matter (such as an application to the judge to recuse himself at a particular hearing) which was determined by the judge in correspondence with the applicant without hearing the other party, and on the basis of information which was privy only to the applicant and the judge himself, such that no formal evidence was required to be filed before the judge; and

(b) If the answer to (a) above is in the negative, which of the criteria stipulated in Ladd v Marshall are applicable; and

(c) In any event, whether, in considering an application to adduce fresh evidence in an appeal in relation to the aforesaid matter, the appeal court has any discretion to dispense with any of the said criteria stipulated in Ladd v Marshall.

Question 2:

3.Whether, in relation to a document which, on its true construction as found by the Court, constitutes a person’s personal guarantee of a third-party debt, and which had been a matter of interpretation as to which the parties reasonably differed, the same should be taken into account as a factor or significant factor in assessing whether economic duress was exercised on such party when he entered into a subsequent personal guarantee of the said debt.

4.The debtor also seeks leave to appeal on the “or otherwise” limb, but only in respect of Question 2, contending that the answering of this question in the negative would “significantly upset the evaluation of the various factors going to the Judge’s assessment of arguability of the economic duress issue”.

Background

5.The factual background of this matter was summarised by the Court of Appeal (Kwan VP and Yuen JA) in its judgment dated 10 June 2020 ordering the debtor to give security for costs of the appeal[2], set out in §2 of the CA Reasons. The factual background relating to the debtor’s recusal application was summarised in §§10 to 13 of the CA Reasons.

6.The debtor appealed against the CFI Decision on three grounds: (1) the recusal ground; (2) the no personal guarantee ground; and (3) the economic duress ground.

7.The debtor contended that the judge was wrong in refusing to recuse himself from the proceedings as he had previously retained the judge (in his capacity as Senior Counsel) in a separate matter, in the course of which the judge had allegedly acquired information pertaining to the debtor’s financial affairs. It was argued that this gave rise to apparent bias as well as the possibility of “reverse bias”.

8.We rejected the recusal ground on the basis of the lateness of the recusal application and because it was unsubstantiated. The debtor had not, until he made his 2^nd affirmation in these appeal proceedings (on 7 April 2021, for which he sought leave to adduce as additional evidence on appeal), sought to provide any explanation for his omission to apply for recusal earlier when he had known in May 2019 that the bankruptcy petition was to be heard by the judge in November 2019. We considered his explanation de bene esse and found it wholly unacceptable. The debtor also did not file any evidence at the hearing before the judge to show that the judge had received extraneous information in the “separate matter” in which the judge had previously advised the debtor as counsel such that his knowledge might reasonably give rise to an apprehension of bias.  The letter of his former solicitors to the court on 1 November 2019 (three working days prior to the hearing before the judge) only put forward a bare claim of apparent bias which we held was wholly inadequate for a proper recusal application.  We agreed with the petitioner that the recusal application was an abuse of process and the recusal ground must fail (§§9 to 20 of the CA Reasons).

9.We addressed the debtor’s attempt to salvage the recusal ground by making a late application for leave to adduce further evidence on appeal. We noted there was no explanation why that summons of 8 April 2021 was only issued a year and a half after the notice of appeal was filed on 28 November 2019, and ultimately dismissed the summons on the sole ground that it was hopelessly late (§§21, 22 and 25 of the CA Reasons).

10.For completeness, we also rejected the debtor’s assertions that his application satisfied the criteria in Ladd v Marshall, which assertions were not relied on by the Senior Counsel then acting for the debtor, who contended instead that one of the conditions in Ladd v Marshall (namely, that the evidence could not have been obtained with reasonable diligence for use at the hearing below) need not be complied with as “this is a rare case” (§§23 to 25 of the CA Reasons).

11.As to the “no personal guarantee ground”, we rejected the debtor’s contention that the judge was wrong to find there was sufficient contemporaneous documentary evidence which supported the petitioner’s case that the debtor had personally guaranteed the relevant liabilities of the debtor’s company, Prosper Huge Ltd[3]. We agreed with the judge that the capacity in which the debtor signed the subsequent documents (ie the 2014 Supplemental Agreement and the 2015 Supplemental Agreement) is immaterial (§§26 to 33 of the CA Reasons).

12.On the “economic duress ground”, the arguments on appeal were in respect of the judge’s assessment of the evidence, applying the legal principles relating to economic duress which were not in dispute. We saw no reason to interfere with the judge’s evaluation of the evidence or his exercise of discretion in making the bankruptcy order, having rejected the starting premise that the debtor had assumed no personal liability prior to the execution of the Settlement Agreement (§§34 to 37 of the CA Reasons).

Question 1: the applicability of Ladd v Marshall

13.Mr Paul Lam, SC submitted on behalf of the debtor[4] that the applicability of Ladd v Marshall to an appeal against a judge’s refusal to recuse himself is a “procedural issue” which is of great general or public importance. He argued that there is a discretion to depart from the Ladd v Marshall criteria in exceptional or special circumstances and the present case is special because the judge failed to give reasons why he refused the recusal application on 4 November 2019. Without the admission of new evidence, the appeal court would not be able to determine whether the judge’s refusal to recuse is correct as the relevant information was privy only to the debtor and the judge. He suggested that the only fair, sensible and realistic way is for the appeal court to consider the matter afresh as if it were the judge and allow the debtor to adduce evidence to support his recusal application, no matter how late and how informal his recusal application was.

14.We refuse to grant leave to appeal on Question 1 for these reasons.

15.We dismissed the summons to adduce new evidence on appeal on the sole ground that the application to this court was hopelessly late (the lateness pertained to the measures taken in the appeal proceedings), even though we had also considered and rejected the debtor’s contention that it would not be necessary to comply with one of the requirements in Ladd v Marshall (the lateness pertained to the measures that should have been taken in the court below) where there are exceptional circumstances.

16.Even though the proposed appeal from our dismissal of the summons to adduce new evidence on appeal may not be considered an interlocutory appeal as the dismissal was made in the context of a substantive appeal, it is rare and exceptional for leave to appeal to the Court of Final Appeal to be granted on procedural issues. It was held in respect of interlocutory appeals that leave will generally be refused unless it can clearly be seen that: (1) the proposed appeal genuinely raises a question of law of great general or public importance; (2) the result of the appeal would indeed turn on how that question is answered; and (3) such result is likely to make a significant contribution to the just disposal of the litigation. (CSAV (Hong Kong) Group v Jamshed Safdar (2007) 10 HKCFAR 629 at §1) We think the same principles should apply here. None of the above requirements are satisfied.

17.The question as formulated is plainly not one of great general or public importance, as it is clear that it is premised on the particular circumstances of the present situation – that the recusal application was determined by the judge in correspondence with the applicant on information privy to the judge and the applicant. Fact-sensitive complaints relating to the specific circumstances of the case, or questions which cannot be answered in the abstract without relying on the facts, are not questions of great general or public importance.

18.As mentioned above, we dismissed the appeal against the judge’s refusal to recuse himself for reasons unrelated to the new evidence sought to be adduced on appeal. There is no suggestion that those reasons are plainly wrong. Accordingly, the result of the appeal does not turn on how Question 1 is answered.

19.Lastly, as we did not consider any of the debtor’s grounds of appeal from the judge’s decision to be reasonably arguable, it is difficult to see how the result of the proposed appeal could have any impact on the question whether a bankruptcy order should be made against the debtor.

Question 2: relevant consideration to the issue of economic duress

20.Turning to Question 2, it is not entirely clear from the formulation of this question as to what the debtor contends (by reference to the words “the same”) should be taken into account as a factor or significant factor in assessing whether economic duress was exercised. It would appear from Mr Lam’s submissions[5] that the factor is the debtor’s subjective belief that he had not assumed personal liability to guarantee the liabilities of Prosper Huge Ltd under the Guarantee at the time he entered into the Settlement Agreement.

21.However, this proposition was not argued before the judge or on appeal before this court by any counsel who appeared for the debtor at the time. We do not agree with Mr Lam that this proposition as formulated in Question 2 was raised or argued (properly or at all) in the paragraphs of the debtor’s affirmations or the skeleton arguments of the debtor’s former counsel as identified in the reply submission of Mr Lam. We are inclined to think that the objection in Flywin Co. Ltd. v Strong & Associates Ltd (2002) 5 HKCFAR 356 at §38 applies such that the debtor is barred from taking the point for the first time on appeal to the Court of Final Appeal.

22.It appears to us that Mr Lam is merely rehashing the arguments urged before the judge and this court concerning the point that the debtor did not sign the Guarantee in his personal capacity. We do not think the question as formulated is of great general or public importance as it is premised on particular facts alleged by the debtor. The judge had found the debtor’s allegations incredible and not capable of being believed[6]. Besides, no authority is cited by Mr Lam in support of his proposition that provided it is “reasonably plausible”, the subjective belief of the debtor that he had not assumed personal liability should be taken into account in this particular context. 

23.We refuse to give leave to appeal for Question 2.

24.Mr Lam did not develop his arguments why leave to appeal should be granted on the “or otherwise” limb. We do not propose to deal with this and would leave this for the consideration of the Appeal Committee if the application should be renewed to the Court of Final Appeal.

Conclusion and costs

25.The notice of motion is dismissed with costs to the petitioner. Having considered the petitioner’s statement of costs for summary assessment, we allow in full the amount claimed at $82,291.98.

Mr Nicholas Oh, instructed by Li & Partners, for the Petitioner (Respondent)

Mr Paul Lam SC, Mr Alex Fan and Ms Joanne Szeto, instructed by Jones Day, for the Debtor (Appellant)