Pan Sutong v. Bank of China Ltd (T/A Bank of China Ltd Shenzhen Branch)
Read the full judgment text of CACV 247/2022 on BabelCite. This Court of Appeal judgment was delivered on 9 August 2023 before Kwan VP, Chu VP.
Civil procedure – stay of proceedings – case management – fresh evidence on appeal – whether to stay new evidence applications pending determination of related application under rule 99L of the Bankruptcy Rules (Cap 6A) – Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) – winding-up petition and statutory demand based on guarantees for defaulted term loan of RMB 656 million from BOC to Tianjin Huading – overlap of evidence and arguments – balance of convenience – Re Chime Corporation Ltd [2005] HKCFI 196 – Ladd v Marshall [1954] 1 WLR 1489 – whether non-remittance of earlier loans to GE could affect enforceability of guarantees – Pan/Proman Non-Remittance Argument versus Seashore Non-Remittance Argument – only one of three loan agreements common to both sets of proceedings – independent assessment by appellate court – prejudice – absence of prejudice insufficient to grant stay – opportunistic but not so bad to justify indemnity costs – costs assessed at HK$250,000 – hearing bundles running to over 2,000 pages containing unnecessary documents criticised – Order 1A rule 1 and rule 3 of the RHC – PD 5.4 – directions for determination of new evidence applications on paper – Stay Applications dismissed.
Legal issues: Whether to stay fresh evidence applications pending resolution of Rule 99L application · Costs of the stay applications
Outcome: Stay Applications dismissed.
Cited by 2 cases · Cites 4 cases
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CACV 246 & 247/2022, [2023] HKCA 964 On appeal from [2022] HKCFI 1450 (Heard together) CACV 246/2022 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO 246 OF 2022 (ON APPEAL FROM HCSD NO 28 OF 2021) ________________________ BETWEEN
________________________ AND CACV 247/2022 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO 247 OF 2022 (ON APPEAL FROM HCCW NO 215 OF 2021) ________________________
________________________ (Heard together)
________________________ J U D G M E N T ________________________ Hon Kwan VP (giving the Judgment of the court): 1.We have before us two applications taken out by Pan Sutong (“Pan”) and Proman International Limited (“Proman”) respectively to stay their applications (“Stay Applications”) to adduce fresh evidence on appeal until the resolution of a summons taken out by Seashore Global Group Limited (“Seashore”) pursuant to rule 99L of the Bankruptcy Rules, Cap 6A (“Rule 99L Application”). 2.The substantive hearing of the Rule 99L Application is due to take place before Linda Chan J (“the Judge”) on 29 August 2023. It is regrettable that we are not able to attend to the Stay Applications earlier. 3.Having considered the written submissions, we consider it appropriate to determine the Stay Applications on paper without an oral hearing. Background 4.The relevant background matters are taken largely from the judgment of the Judge in HCSD 28/2021 (application of Pan to set aside a statutory demand) and HCCW 215/2021 (creditor’s petition to wind up Proman) on 18 May 2022 (“Judgment”)[1]. 5.Pan founded, owned and controlled 2 groups of companies known as the “Goldin Group” and “Matsunichi Group”.
6.On 21 April 2022, the Judge heard these two applications:
7.The two applications concerned the following agreements:
8.The Subject Loan was due on 14 April 2021 but was not paid by Tianjin Huading. On 22 April 2021, BOC served a statutory demand on Proman requiring it to pay RMB 691,978,062.29, being the principal of the Subject Loan and interest accrued up to 22 April 2021. On 17 June 2021, BOC served the SD on Pan, requiring him to pay RMB 696,424,582.60, being the principal of the Subject Loan and interest up to 28 May 2021 (“the Debt”). 9.At the hearing before the Judge, Pan and Proman advanced three grounds to contend that there was a bona fide dispute to the Debt:
10.By the Judgment on 18 May 2022, the Judge held that Pan and Proman failed to raise any bona fide dispute in respect of any of the grounds mentioned above. The Judge therefore made a winding-up order against Proman, dismissed Pan’s application to set aside the SD and authorized BOC to present a bankruptcy petition against him forthwith. Subsequent proceedings 11.On 20 June 2022, Pan and Proman each filed a Notice of Appeal in respective of the SD Proceedings and the Winding-up Proceedings (respectively, “SD Appeal” and “Winding-up Appeal”). 12.On 28 June 2022, Pan and Proman each took out a summons to adduce further evidence for their respective appeals (“1st New Evidence Application”). 13.On 5 July 2022, BOC filed a Respondent’s Notice in the SD Appeal and the Winding-up Appeal. 14.On 8 July 2022, Pan was adjudicated bankrupt in HCB 6548/2021 on the petition brought by another creditor. 15.On 11 August 2022, the Official Receiver, as provisional trustee of the bankrupt, chaired a general meeting for creditors of Pan (“Creditor’s Meeting”). Seashore attended the Creditor’s Meeting as one of Pan’s creditors. A majority of creditors (including BOC) resolved to appoint RSM Corporate Advisory (Hong Kong) Ltd (“RSM”) as the trustee-in-bankruptcy. Seashore voted for another candidate. 16.On 30 August 2022, Pan and Proman each took out another summons to adduce further evidence for their respective appeals (“2nd New Evidence Application”). 17.On 7 October 2022, being dissatisfied with the outcome of the Creditor’s Meeting, Seashore took out the Rule 99L Application to challenge the Official Receiver’s decision (as Chairman of the Creditor’s Meeting) to admit BOC’s proof of debt for voting purposes. The present applications for stay 18.On 31 August 2022, the Registrar of Civil Appeals made a direction that the 1st and 2nd New Evidence Applications would be dealt with together unless otherwise directed by the Court of Appeal. 19.After a direction was made by the Registrar on 7 December 2022 that Pan and Proman would need to apply by summons if they wished to seek a stay of the New Evidence Applications, the Stay Applications were taken out by Pan and Proman on 21 December 2022. 20.The chief argument raised by Pan and Proman in support of the Stay Applications is that there is an overlap between the evidence and arguments raised in the New Evidence Applications and the Rule 99L Application. 21.To properly analyze this argument, it is necessary to set out briefly the nature of the aforesaid applications. However, as neither of those applications are before this court for substantive argument, we shall only set out what is necessary to properly understand this judgment. New Evidence Applications 22.We first set out the fresh evidence that Pan and Proman wish to adduce for the SD Appeal and the Winding-up Appeal. 23.In respect of the 1st New Evidence Application, Pan wishes to adduce fresh evidence to advance two key points. 24.First, Pan wishes to adduce the expert opinion of華萍 (“Ms Hua Ping”). On 12 May 2022, Seashore commenced legal action in the Tianjin No. 1 Intermediate People’s Court against Tianjin Huading and BOC to set aside the 2020 Loan Agreement (“Seashore PRC Action”), on the basis that the agreement violated Articles 538 to 539 of the PRC Civil Code. Ms Hua Ping opined that if Seashore is successful in setting aside the 2020 Loan Agreement, the Pan Guarantee should not be enforceable under Hong Kong law. 25.Second, Pan seeks to adduce documentary evidence in respect of a proposed restructuring plan of the “Tianjin 117 Project”, a major asset held by the wholly-owned subsidiary of Proman. Pan argues that if Proman is wound up or if a bankruptcy order is made against him, it would have a significant impact on the intended restructuring and ultimately lead to substantial loss to the creditors. 26.Concerning the 2nd New Evidence Application, Pan wishes to adduce the following evidence:
27.Pan argues that the action in the PRC Writ and the Seashore PRC Action are substantially the same and hence the opinion of Ms Hua Ping would be equally applicable in both actions as they give rise to the same legal issues. 28.The ZL Memo set out the investigation and analyses conducted in around July 2022 in which ZL concluded it is very likely that the three loans pursuant to three loan agreements were never remitted by BOC to GE. These loan agreements have been referred to as: (1) “2018 圳中銀戰借字第045號” between GE and BOC dated 20 September 2018 (“No. 45 Loan Agreement”), (2) “2018 圳中銀戰借字第046號” between GE and BOC dated 20 September 2018 (“No. 46 Loan Agreement”) and (iii) “2019 圳中銀戰借字第041號” between GE and BOC dated 29 September 2019 (“No. 41 Loan Agreement”). 29.The non-remittance of the loans pursuant to the No. 45 Loan Agreement, No. 46 Loan Agreement and No. 41 Loan Agreement was further analyzed by Ms Wu. Her findings and conclusions are contained in the Wu Affirmation, in which she opined that if the loans under the No. 45 Loan Agreement, No. 46 Loan Agreement and No. 41 Loan Agreement were never remitted, BOC would not have an actionable claim under the 2020 Loan Agreement or the relevant guarantees.(“Pan/Proman Non-Remittance Argument”) 30.BOC has made submissions on the merits of the New Evidence Applications. As we are not dealing with the New Evidence Applications, we shall refrain from expressing our views. In any event, nothing in the present judgment turns on those submissions. Rule 99L Application 31.At the Creditor’s Meeting, RSM was voted to be appointed as the trustee-in-bankruptcy. The Official Receiver also admitted a total sum of HK$110,776,772,771.84 as proof of debt. The proof of debt of BOC amounted to HK$56,042,244,073.47 (“BOC’s POD”). 32.Seashore’s proof of debt had amounted to HK$19,283,314,208.7 and it had voted for Deloitte Touche Tohmatsu (“Deloitte”) to be appointed as the trustee-in-bankruptcy. 33.Seashore made the Rule 99L Application seeking: (1) a declaration that BOC was and is not entitled to vote in respect of the full BOC’s POD; (2) the setting aside of the appointment of RSM as trustee of Pan’s property; (3) the appointment of Deloitte in RSM’s place; and (4) alternatively, a fresh creditors’ meeting is to be convened. 34.The Rule 99L Application is supported by the affirmation of Seashore’s director, Sun Wei Yung Kevin, dated 7 October 2022 (“Sun 1st Affirmation”). 35.In gist, Seashore challenges the sums contributing to BOC’s POD that originated from Pan’s personal guarantee for loans extended by BOC to (1) MD; (2) GE; (3) Tianjin Huading; and (4) Goldin Tianjin. The loans under challenge include:
36.Seashore alleges that the MD Loans and the GE Loans were not advanced and that MD and GE were never in receipt of such loans. Hence, no indebtedness could be created under the MD Agreements and the GE Agreements. By extension, and according to the expert opinion obtained by Pan on PRC Law, Tianjin Huading would not be indebted to BOC as the Huading Agreements were made to obtain loans to repay the alleged debts created by the MD Loans and GE Loans. Similarly, the Goldin Agreements were also entered into for loans to repay the alleged debts created by MD Loans and GE Loans. Therefore, Seashore argues that if MD and GE were not indebted to BOC in the first place, then Goldin Tianjin would not be liable to BOC. It would follow that Pan would not be liable as guarantor for Goldin Tianjin. (“Seashore Non-Remittance Argument”) 37.In support of the Seashore Non-Remittance Argument, Seashore has filed a legal opinion from Zhong Lun Law Firm, which contains the same factual and legal points raised in the ZL Memo and Wu Affirmation. 38.The Rule 99L Application first came before the Judge on 1 December 2022, it was adjourned to 29 August 2023 for further arguments. 39.The parties have made submissions on the merits of the Rule 99L Application. Seashore’s submissions and BOC’s submissions before the Judge for the hearing in December 2022 were even included in the bundles for the present applications. It is undesirable to express our views on the Rule 99L Application which is to be ruled upon by the Judge. In any event, nothing in the present decision turns on those submissions or the merits of the Rule 99L Application. Legal Principles 40.In effect, Pan and Proman are seeking a temporary stay of the SD Appeal and the Winding-up Appeal until the disposal of the Rule 99L Application. 41.In such circumstances, the correct approach is to consider the balance of convenience and fairness as between the parties. The Court should exercise its discretion in such a manner to ensure that its procedures are used in a logical, fair and cost-efficient manner. This is ultimately a question of case management. (Re Chime Corporation Ltd [2005] HKCFI 196 at §14) Discussion 42.Pan and Proman essentially argue that as a matter of case management, it is appropriate to stay the New Evidence Applications because the Judge’s reasoning in determining the Rule 99L Application would be of value to this Court in its determination of the New Evidence Applications. 43.The basis of the Stay Applications is explained in the 4th Affirmation of Pan dated 5 January 2023, which in turn relies on matters set out in the Sun 1st Affirmation. 44.Pan and Proman argue that in view of the overlap of the evidence and arguments in the Rule 99L Application and the New Evidence Applications, the Judge’s ruling in the Rule 99L Application would be of “reference value” to this Court in deciding the New Evidence Applications. In particular, the Judge’s reasoning in the Rule 99L Application would assist this Court in assessing whether the second and third criteria of Ladd v Marshall [1954] 1 WLR 1489 (the new evidence would probably have an important influence on the outcome of the SD Appeal and the Winding-up Appeal; and such new evidence is apparently credible) are satisfied. 45.As rightly submitted on behalf of BOC, there is no “overlap” between the Rule 99L Application and the 1st New Evidence Application as the two sets of applications involve different evidence and contentions. Also, the Rule 99L Application is distinct from the first part of the 2nd New Evidence Application, ie the admissibility of the PRC Writ and related correspondence. Pan and Proman have tacitly admitted this, as their reply submissions only go so far as to say that this Court can benefit from the reasoning of the Judge in assessing “a key part of the 2nd New Evidence Applications”. 46.Taking Pan and Proman’s arguments to the highest, while the Pan/Proman Non-Remittance Argument and the Seashore Non-Remittance Argument may be similar, for the most part such arguments cover entirely different loan agreements as only No. 41 Loan Agreement featured in the present proceedings and the Rule 99L Application. 47.Thus, in our view, any “overlap” is very limited. 48.More importantly, the argument of Pan and Proman ignores the fact that regardless of whether the Rule 99L Application was taken out or not, this Court will conduct an independent assessment of the New Evidence Applications. It is not argued before us, and neither do we see, there is any novel point of law that this Court would benefit from the Judge’s decision or reasoning in the Rule 99L Application. 49.Pan and Proman also argue there is no or little prejudice to BOC if the Stay Applications were granted as (1) the Rule 99L Application will be heard on 29 August 2023 so any stay of proceedings would be short; (2) Pan was already adjudged bankrupt in a petition brought by another creditor in HCB 6548/2021; and (3) there is no stay of execution in respect of the winding-up order against Proman. 50.However, a lack of prejudice per se is not a reason to allow the Stay Applications. 51.On the arguments before us, we are not persuaded that temporarily staying the New Evidence Applications would further the goals of ensuring that procedures are used in a logical, fair and cost-efficient manner. We therefore dismiss the Stay Applications. Costs 52.We order Pan and Proman to pay the costs of BOC in the Stay Applications. BOC seeks a total sum of $536,104 for the costs of the Stay Applications. 53.BOC also seeks indemnity costs on the basis that the applications are wholly without merit. 54.We decline to award costs on an indemnity basis. These applications are opportunistic and apparently made for tactical reasons, but the litigation conduct of the losing parties is not so bad to justify punishing them with indemnity costs. 55.Having considered the statement of costs of BOC, we find the charges proposed for the solicitor’s professional work and communications excessive and we are not inclined to allow fees for two counsel. We assess reasonable costs to BOC at HK$250,000. Postscript 56.We cannot leave this without saying something about the inclusion of patently unnecessary documents in the application bundles for the Stay Applications, which ran to over 2,000 pages. This is most unsatisfactory and is not conducive to the Court’s task in dealing with applications on paper as expeditiously as is reasonably practicable. 57.It should not be necessary to remind practitioners of their duty under Order 1A rule 3 to assist the court in furtherance of the underlying objectives set out in Order 1A rule 1. 58.An important responsibility in assisting the Court is to prepare hearing bundles properly. PD 5.4 provides guidance and paragraph 4 specifically states that “Hearing bundles should contain only the documents relevant to the particular application or appeal and to which parties will need to refer in the course of their respective submissions”. (emphasis added) 59.Despite the above, we find quite a number of the affirmations and exhibits therein filed on behalf of BOC to be clearly unnecessary: the affirmation of Niu Tao dated 8 August 2022 and the affirmation of Jiang Deyuan (姜德源) dated 8 August 2022 (both were made to oppose the 1st New Evidence Application); the 2nd affirmation of Niu Tao dated 20 October 2022 (made to oppose the 2nd New Evidence Application). Our observation is reinforced by the fact that the written submissions of BOC did not even refer to the contents of these affirmations. 60.Nor do we see the need for including in the hearing bundles the submissions of Seashore and BOC in the Rule 99L Application and the transcript of the hearing before the Judge on 1 December 2022. 61.The Notices of Appeal were filed on 15 June 2022. There has been undesirable delay in fixing a date to hear the appeals due to the outstanding New Evidence Applications. 62.It seems to us that the bundles lodged for the Stay Applications could be deployed for the New Evidence Applications with perhaps only a few adjustments. As things now stand, we are minded to determine the New Evidence Applications on paper without an oral hearing. 63.We give the following directions on the conduct of the New Evidence Applications:
Mr Lai Chun Ho, instructed by Charles Chu & Kenneth Sit, for the Applicant in CACV 246/2022 and the Company in CACV 247/2022 (Applicants) Mr Bernard Man SC and Mr Thomas Wong, instructed by King & Wood Mallesons, for the Respondent in CACV 246/2022 and the Petitioner in CACV 247/2022 (Respondents) |
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