Re Alain, Kunpa, Formerly Known As Aranbanphotkun, Pratthana

CACV 569/2020

[2022] HKCA 834

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 569 OF 2020

(ON APPEAL FROM HCB NO. 7046 OF 2019)

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D E C I S I O N

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The Court :

I.  Application to adduce new evidence

1.This is an application by the Debtor for leave to adduce new evidence in support of her appeal against a bankruptcy order made by Deputy High Court Judge MK Liu (‘the Judge’) dated 28 September 2020. This application is opposed by the Petitioner.

2.Having considered the documents and submissions of the parties, we took the view that it is appropriate to determine the application on paper without an oral hearing.

II.  Background

3.The Petitioner entered into a tenancy agreement with a company called Global Agriculture Limited (‘tenant’) for the letting of a property located in Discovery Bay, Lantau Island (‘the property’). The Debtor entered into a guarantee agreement with the Petitioner, guaranteeing due payment of rent and other payment obligations by the tenant under the tenancy agreement.

4.On 1 March 2017, the Debtor defaulted in the payment of rent to the Petitioner.

5.On 13 November 2017, the Petitioner obtained summary judgment in HCA 1473/2017 against the Debtor for the following relief :

1)  Vacant possession of the property;

2)  Arrears of rent from March to November 2017;

3)  Interest on the arrears of rent at 2% per month from date of writ (21 June 2017) until payment; and

4)  Mesne profit at $200,000 per month with interest at 2% per month, until delivery of vacant possession.

6.On 2 October 2019, the Petitioner issued a statutory demand against the Debtor. The statutory demand was not met and the Debtor had raised no objections to the statutory demand.

7.On 14 November 2019, the Petitioner presented the petition for bankruptcy against the Debtor.

8.On 16 September 2020, the Petitioner recovered vacant possession of the property.

9.On 28 September 2020, the Judge made the bankruptcy order against the Debtor. The Debtor was represented by Mr. L of a firm of solicitors. The hearing on 28 September 2020 was the third hearing of the petition. The two previous hearings were held on 21 August 2020 and 7 September 2020.

10.The outstanding sum owing by the Debtor at the time of the summary judgment was $1,775,068.90. As the Debtor was still in possession of the property, mesne profit at $200,000 continued to incur thereafter together with interest. The Debtor made three partial repayments totalling $2,803,090. The statutory demand was issued after the third partial payment by the Debtor. The amount outstanding at the time of the petition was $5,013,496.49 made up of mesne profit of $4,215,487.97 and interest on mesne profit of $798,008.52. At the time of the bankruptcy order, the outstanding amount due by the Debtor was $7,939,797.86 made up of mesne profit of $6,041,789.34 and interest on mesne profit at $1,898,008.52. The details are set out in the 3^rd affirmation of Chan Chun On (‘Chan’) of the Petitioner dated 24 September 2020.

11.On 23 October 2020, the Debtor filed a Notice of Appeal against the bankruptcy order. The Debtor was then acting in person.

12.On 23 April 2021, Messrs. Huen & Partners (‘Huen’) filed a Notice to Act for the Debtor.

13.On 11 May 2021, Huen filed a Supplementary Notice of Appeal which raises three grounds of appeal. The first ground deals with the incompetence of the Debtor’s former solicitor. The second and third grounds deal with the error of the Judge.

14.On 16 July 2021, by way of summons and affirmation, the Debtor applied for leave to adduce further evidence in the form of the affirmation of the Debtor which dealt with the issue of lawyer’s incompetence.

III.  Allegation of incompetence of former lawyer

15.Three matters are relied upon in the Supplementary Notice of Appeal on the allegation on lawyer’s incompetence :

1)  Mr. L failed to adduce an affirmation evidencing the Debtor’s updated repayment proposal and to reply to the 3^rd affirmation of Chan despite the Debtor’s instructions and demands.

2)  Mr. L acted contrary to the Debtor’s instructions and demands to invite the Court to adjourn the hearing for at least three hours until 12 noon.

3)  Mr. L failed to report to the Court ‘the circumstances and matters happened prior to and on 28 September 2020 about the Debtor leading the Court erred in failing to take into account all the circumstances before turning to the making of the bankruptcy order against her.’

16.The Debtor stated in her affirmation that upon receipt of Chan’s 3^rd affirmation in the late afternoon of Friday 25 September 2020, she instructed Mr. L to prepare an affirmation 1) stating that her indebtedness was not $7.9 million but only about $5.3 million and 2) formulating an updated repayment proposal. This was refused by Mr. L who claimed that there was insufficient time to prepare her affirmation given the hearing was to be held on the following Monday on 28 September 2020.

17.The Debtor said that she would obtain a fund of $5 million from her business partner in Beijing who would remit the money to the company of which she is the sole shareholder by the end of day on 28 September 2020.

18.The Debtor said :

‘ 14. On the morning of 28 September 2020, unlike the previous petition hearings heard before Masters and Judges that I were all present in Court, I was absent for that hearing. The reason being that I went to Main Branch of Hang Seng Bank in Central on that morning to wait for the remittance of the said HK$5 million to repay the indebtedness due to the Petitioner and to fulfil my updated proposed repayment proposal. I had also told my Previous Handling Solicitors for the said arrangement and instructed him to adjourn the matter for a few hours to wait for the remittance of HK$5 million to me.

15. As stated above, knowing that the Main Branch of Hang Seng Bank starts business at 9:00 a.m., I arrived at the Main Branch of Hang Seng Bank in Central at around 8:30 a.m. Soon after arriving at the Main Branch, I was given to understand the remittance of the said HK$5 million would be available by noon on the same day. I therefore made a number of phone calls to Mr. L of my Previous Handling Solicitors on the morning of 28 September 2020 to reinforce my instructions to urge him to invite the Court to adjourn the bankruptcy petition for 3 hours until noon, so that by then, the HK$5 million remittance would arrive in GEP’s bank account and that the first condition of my updated proposed repayment schedule would be fulfilled.

16. At around 10:30 a.m. on the same day, Mr. L of my Previous Handling Solicitors called me on phone to inform me that Deputy High Court Judge MK Liu had already made a bankruptcy order against me, so that even if the said HK$5 million was to be remitted to me to repay the indebtedness, it would be of no significance, since upon the making of the bankruptcy order, all assets in the name of myself would be vested in the Official Receiver. I therefore desperately told my business partner in Beijing to cease remitting the HK$5 million to my bank account.

17. To my disappointment, Mr. L of my Previous Handling Solicitors had failed to address the Court concerning the above, causing the Court to be unable to consider all the circumstances, including but not limited to the reasonable prospect of being able to pay on my part before making the bankruptcy order.

......

20. Given the matters surrounding and happened as stated in paragraphs 11‑18 above, I then immediately called Mr. L of my Previous Handling Solicitors on 28 September 2020 to give updated instructions concerning my proposed updated repayment proposal in opposing the bankruptcy petition against me:-

(5) An initial sum of HK$2.4 million to be paid to the Petitioner within the day of 28 September 2020;

(6) The remaining balance of the indebtedness, i.e., HK$2,909,270.05 to be paid within 1 month thereafter.’

19.The Debtor had managed to obtain a transcript of the hearing before the Judge. What happened at the hearing was that counsel for the Petitioner first informed that the Judge that he was told that a cashier cheque of $2.4 million was ready in Court that day. Presumably, Mr. L had informed him of this. Mr. L then informed the Judge that :

‘ I just received instructions from my client that she is arranging the funds and that she is waiting for the fund to be transferred into the bank account after 3 pm today, so...’

‘ The initial payment would be HK$2.4 million and she’s awaiting the transferring of the funds at 3 pm today to the bank account.’

20.When questioned by the Judge that the $2.4 million was not sufficient to repay the judgment debt, Mr. L said the $7.9 million was disputed and the amount should be $5 million and the Debtor was prepared to pay the $5 million. He said :

‘ For the 5 million, our initial payment is 2.4 million and then we can - - this is part of our repayment proposal. After payment of this 2.4 million, the debtor would arrange payment for the balance within one or two months. So..’

21.Mr. L asked for an adjournment for one week so that the Debtor could repay the $2.4 million within the day and to negotiate with the Petitioner for another repayment proposal for the balance of the debt.

22.The Judge then adjourned the hearing for Mr. L to take instructions. Mr. L returned to Court and informed the Judge :

‘ I just received written instructions from the debtor. Her repayment proposal is - - now is that she would make an - - a payment of 5.3 million within one week. The fact that - - the reason why it is 5.3 million is because there’s a dispute in the amount owed by the debtor to the creditor. The creditor just filed an affirmation on last Friday which we received by fax in - - at about 5 pm. So we take - - we took urgent instructions from the debtor. According to the debtor’s own calculation, the amount she owed should be in the region of 5.3 million only instead of 7.9 million.’

23.The application to adjourn was objected by the Petitioner and counsel proceeded to explain the calculation of the debt of $7.9 million and inform the Judge that the Debtor had reneged on her two earlier promises to pay $2.4 million. The Judge held :

‘ In my judgment, even according to the debtor’s case, the debtor is indebted to the petitioner for at least HK$5.3 million. In the absence of any evidence showing that the debtor has the ability to repay 5.3 million to the petitioner within this week, I do not think the repayment proposal made by the debtor as a reasonable proposal.’

IV.  Our view

1)  Delay and Ladd v Marshall requirements

24.It is well established by Ladd v Marshall [1954] 1 WLR 1489 that leave to adduce further evidence on appeal will only be granted (1) if it is shown that the evidence could not have been obtained with reasonable diligence for use at the trial, (2) if the further evidence is such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive, and (3) if the evidence is such as is presumably to be believed.

(1)  Delay

25.Before we deal with the three requirements of Ladd v Marshall, we will deal with issue of delay. Mr. Chan for the Petitioner referred to Practice Direction 4.1 [37] which provides that ‘a party seeking to adduce new evidence on appeal must apply as early as practicable.’ Mr. Chan argued that the Court may dismiss an application to adduce new evidence on appeal on the ground of delay alone, even if the conditions in Ladd v Marshall are satisfied. Mr. Chan argued the present application was issued nine months after the Notice of Appeal was filed and the Debtor had not given an explanation for the delay.

26.We are not prepared to take this matter into account. The Debtor was only legally represented again on 23 April 2021 and the allegation of lawyer’s incompetence was raised in the Supplementary Notice of Appeal of 11 May 2021. The present application was issued on 16 July 2021. The delay at most is about two months. While no explanation was given by the Debtor about this two months’ gap, considering the events that had occurred in the timeframe, we are prepared to accept counsel’s submission that it was after the Debtor had instructed counsel and obtained counsel’s advice that the present application was made.

(2)  Requirement 1 : The new evidence could not have been obtained with reasonable diligence

27.In view of the development of events on 28 September 2020, we are prepared to accept that the first requirement is satisfied. Mr. Chan does not take any issue with the first requirement. He only challenged the second and third requirements.

(3)  Requirement 2 : Evidence has important influence on the outcome of the case?

28.Litigation is not a game. Given the hearing for the petition had already been adjourned twice, the Court would most unlikely grant a further adjournment unless there was concrete evidence of the proposal for repayment and the availability of fund. The Debtor was aware of the statutory demand that was served on her. Even if, according to her, the amount was $5.3 million, she had not paid up this sum before the hearing of the petition. There was a gap of almost a year between the service of the statutory demand and the hearing on 28 September 2020 and whatever proposal she would make could well have been made before that date. Moreover, although she said that she had offered in her 1^st affirmation dated 21 August 2020 to repay $2.4 million within three weeks and in her 2^nd affirmation dated 4 September 2020 to repay $5,309,270.05 which is her only indebtedness as follows : (i) $2.4 million be paid on or before 21 September 2020; and (ii) the remaining balance of $2,909,270.05 be paid within two months thereafter, i.e. on or before 20 November 2020, she had in fact by then already reneged on her promises to repay the $2.4 million on 10 September and 21 September 2020.

29.This being the situation, the grounds of incompetence of lawyer relied on by her are that Mr. L had not prepared an affirmation setting out 1) the amount in dispute and 2) the proposal for repayment. As to 1), as apparent from the transcript, the Judge was prepared to consider the amount of the indebtedness on the basis of the Debtor’s calculation of $5.3 million. He, however, refused to adjourn the petition further because he was of the view that the proposal to repay was not a reasonable one and no evidence was produced to show that the Debtor was ready and able to repay the $5.3 million within that week. As to 2), the Debtor herself accepted in [11] of her affirmation that since the remittance of $5 million could only be confirmed in the morning of 28 September 2020, there could not have been sufficient time anyway for her to make an affirmation setting out her updated repayment proposal :

‘11. Further and/or alternative to my Previous Solicitors’ incompetence and/or negligence and acting contrary to my instructions, given that information regarding the remittance of HK$5 million to me could only be confirmed in the morning of 28 September 2020 from my business partner in Beijing, there could not have sufficient time for me to make an affirmation in evidencing my updated repayment proposal.’

30.Hence the alleged omission by Mr. L would not have any important influence on the outcome of the case. In any event, Mr. L had applied for an adjournment of the case.

(4)  Requirement 3 : Evidence not credible

31.We are of the view that the Debtor has also not satisfied the third requirement. Her evidence is simply not credible. What Mr. L informed the Court at the hearing after Mr. Chan said he was told a cashier cheque of $2.4 million addressed to Court but not to the Petitioner was already in Court are as follows :

i)  The Debtor would initially repay $2.4 million and she was awaiting for the transfer of the funds at 3 pm that day. The balance of the $5 million debt would be paid within one or two months.

ii)  This was then changed when he said that he had written instruction that the Debtor would make a payment of $5.3 million within a week. He then asked for an adjournment of the hearing for one week.

32.While the Debtor said she had given various oral instructions to Mr. L, she had not denied in her affirmation that Mr. L was instructed by her to tell Mr. Chan about the cashier cheque or what Mr. L said in Court was not in accordance with her instructions. She had obtained the transcript of the hearing as early as January 2021 and was in a position, at the latest when she was legally represented by Huen, to know what had transpired at the hearing. She was clearly in a position to address this point. Further, if, as she said, the whole of the $5 million was to arrive within that day, then why was Mr. L instructed to say that she would pay $2.4 million first? It was also most unusual that she would ask her partner not to remit the money when she was informed by Mr. L that a bankruptcy order was made. If indeed the money was to be remitted to Hong Kong that day, the Debtor could, upon receipt of the money, ask the Judge to reopen the matter by producing evidence that the money had been received. Even now, no repayment has been made by the Debtor. Given the nature of the application and the serious nature of her allegation of lawyer’s incompetence, the Debtor must put forward evidence that is credible. This she has failed to do so.

(5)  Residual discretion/exceptional circumstances

33.Based on what we have discussed, we also do not see how the present application falls within the category of circumstances which are wholly exceptional, or where strong public interest exists, or that the Debtor is able to cogently show that exceptional circumstances exist, or that it would be an affront to one’s sense of justice not to admit such evidence, in order for us to exercise our powers not to apply Ladd v Marshall or to apply Ladd v Marshall in a modified form: HKCP 2021 at [59/10/12].

V.  Conclusion

34.For the above reasons, we decline to admit the new evidence in the appeal and the Summons is dismissed.

VI.  Costs

35.We order the Debtor to pay the Petitioner’s costs of this application.

Ms Lilian Ip and Ms Cyndi Ho, instructed by Huen & Partners, for the Debtor

Mr Jack Chan, instructed by C.O. Chan & Co., for the Petitioner