Giant Harvest Ltd v. Nan Hai Corporation Ltd and Another

HCA 2072/2018, HCA 2560/2018, HCA 2632/2018

[2024] HKCFI 2829

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 2072 OF 2018, 2560 OF 2018 AND

2632 OF 2018

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(by original action)

(by counterclaim)

(consolidated by the Order of Master Ho dated 5 December 2018)

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D E C I S I O N

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INTRODUCTION

1.It has often been said that one of the foundations of the rule of law is that “all are equal before the law”. The present case is a good illustration of this.

2.No matter how famous or rich a person is (in this case the person behind the appellant is one Mr Yu Pun Hoi (于品海) (“Yu”) who certainly was or is such a person); or how many distinguished counsel the parties can afford to engage (in this case there are 3 eminent senior counsel involved on both sides); and how much money is at stake (in this case the sum in dispute broadly speaking is at around US$38 million), the court will endeavour to apply the same legal principles and rules to the facts and evidence presented by the parties in the case and will try to “safeguard the law and administer justice without fear or favour, self-interest or deceit” as stated in our judicial oath.

The Appeal

3.This is the hearing of the appeal of the 1^st defendant Nan Hai Corporation Limited (南海控股有限公司) (“D1”) and the 2^nd defendant True Vision Limited (美視角有限公司) (“D2”) (by original action) and the plaintiff (by counterclaim) (collectively “Nanhai Parties”)[1] by way of notice of appeal filed on 8 July 2024 from the Order of Master Kay Seto (“the Master”) made on 24 June 2024 (“the Order”). The Master dismissed the summons taken out by Nanhai Parties dated 30 January 2024 (“the Summons”).

4.By the Summons, Nanhai Parties are seeking leave (collectively, “the Applications”) to:

(a)  Amend the Re-Re-Amended Consolidated Defence and Counterclaim as per the draft annexed to the Summons (“the Proposed D&CC Amendment”)[2];

(b)  File a supplemental witness statement of Yu (“Yu’s WS”) as revised in Annex C of Nanhai Parties’ skeleton submissions lodged with the court on 20 September 2024 (“Nanhai Parties’ Submissions”); and

(c)  File the supplemental list of documents containing documents (13 items, which are exhibits YPH-1(3), (4), (5), (6), (7), (9), (10), (11), (12), (13), (14), (15) and (17)) annexed to Yu’s WS (“the Proposed List of Documents”)[3].

5.The plaintiff (by original action) and the 1^st and 2^nd defendant (by counterclaim) are Giant Harvest Limited (鉅滿有限公司) and Orange Sky Golden Harvest Entertainment (Holdings) Limited (橙天嘉禾娛樂(集團)有限公司) (collectively “OSGH Parties”). OSGH Parties resisted the Applications on the grounds of delay, new evidence, inadmissibility and irrelevance.

BACKGROUND

Parties’ Respective Pleaded Case

6.According to the written submissions prepared by Mr Bernard Man SC and Mr Anthony Chan SC, counsel for the OSGH Parties (“OSGH Parties’ Submissions”), the parties’ respective pleaded case can be briefly summarized as follows:

(a)  By a Share Purchase Agreement (股份購買協議) dated 25 January 2017 (“SPA”), Giant Harvest agreed to sell the entire shareholding in City Entertainment Corporation Limited (橙天嘉禾影城有限公司) (“the Company”) to Nan Hai. The Company further held 92.59% of the equity in Orange Sky Golden Harvest Cinemas (China) Company Limited (橙天嘉禾影城 (中國)有限公司) (“Orange China”), which controlled and operated 76 cinemas in the Mainland: See re-amended statement of claim (“RASOC”) §§2.1-2.2;

(b)  Under the SPA, the consideration for the sale of the shares was payable in broadly 3 instalments: RASOC §§6.5-6.10, 13.3;

(c)  It is common ground that on 28 July 2017, completion took place and the shares were transferred to (and are still held by) True Vision: RASOC §13.1; RRADCC §11(1);

(d)  However, despite having taken the assignment of the shares, Nanhai Parties failed and/or refused to pay the third and last instalment of the purchase price in the sum of US$37 million odd, which remains unpaid: RASOC §§6.4-14, 17-34, 37; and

(e)  OSGH Parties also claim for the return of RMB¥3.01 million (“Settlement Sum”) wrongfully withheld by Nanhai Parties. The Settlement Sum arose out of the settlement with the landlord of a cinema known as “Shenzhen Yabao”. The tenant for this cinema was Orange China but this project was excluded from the sale under the SPA (“Shenzhen Yabao Damages Issue”): RASOC, §§12, 40-45.

7.Nanhai Parties counterclaim for compensation arising from OSGH Parties’ alleged breaches of (a) the SPA concerning obligations to sign certain cinema leases; and (b) other representations, warranties and undertakings.

8.As submitted by OSGH Parties’ counsel, for present purposes, this court needs only be concerned with the first counterclaim, which may be briefly summarized as follows:

(a)  Clause 8 of and Schedule 6 to the SPA provide that if the lease (“MIXC Lease”) with 華潤 (深圳) 有限公司 (“HR”) for a cinema known as “MIXC Cinema” were not signed, True Vision would be entitled to claim compensation in the sum of RMB¥380 million. But subject to any deduction representing the agreed commercial value of the “Substitute Cinemas”, calculated in the manner identified in Schedule 5 to the SPA, whose lease the OSGH Parties are able to sign: See re-re-amended consolidated defence and counterclaim (“RRADCC”) §34A;

(b)  Nanhai Parties contend that Giant Harvest had failed to extend the MIXC Lease because (“MIXC Lease Extension Issue”): (a) it failed to exercise its option to renew under cl.2.5 of the MIXC Lease; and (b) it failed to tell 華潤（深圳）有限公司 (“HR”), the landlord, that Nan Hai was willing to pay rent which exceeded market value: See rejoinder §§7(1)(2);

(c)  Nanhai Parties further contend that the OSGH Parties are not entitled to deduct the agreed commercial value of “Shenzhen Xinghui” and “Shanghai Xinghui” cinemas even though the leases had been signed because the cinemas failed a condition precedent – said to be included in Schedules 5 and 6 to the SPA either on a proper construction or by implication – that required the cinemas must (a) meet, or alternatively be capable of meeting, all applicable Mainland laws and regulations for the purpose of being operated as a cinema and/or (b) be objectively capable of achieving the agreed annual box office revenue (約定年票房) stated in Schedule 5 to the SPA. See RRADCC §§51-52, 55-57;

(d)  Nanhai Parties also allege that OSGH Parties are not entitled to deduct the agreed commercial value of the “Beijing Great Wall Cinema” even though Giant Harvest had entered into a lease (“Beijing Great Wall Cinema Lease”) because it contained a clause which, according to Nanhai Parties, required payment of a fixed minimum annual rental amount in contravention of Schedule 5 to the SPA: RRADCC §54;

(e)  Consequently, Giant Harvest would be required to pay a compensation amount of RMB¥380 million: RRADCC §47; and

(f)  In terms of the Settlement Sum, Nanhai Parties deny they are obliged to repay the same notwithstanding they had signed the “SPA Confirmation” where clause 8 provides that any income and compensation from the settlement in respect of Shenzhen Yabao, which obviously includes the Settlement Sum, would be enjoyed by Giant Harvest. Alternatively, Nanhai Parties say they are entitled to deduct RMB¥875,000 as corporate tax liability: RRADCC §30G.

Relevant Procedural History

9.The history of the present actions, which were commenced 6 years ago in September 2018, has been canvassed in the 3^rd affirmation of Chung Sing Fook Rudy (“Chung 3^rd”) §14, the accuracy of which is not disputed by Nanhai Parties. OSGH Parties’ counsel has highlighted the following events in OSGH Parties’ Submissions which I would respectfully adopt (with appropriate modifications made by me where appropriate):

(a)  On 9 June 2020, Nanhai Parties filed 5 witness statements, including the witness statements of Yu Xin (于欣) (“YX”) and Chen Tao (陳濤) (“Chen”) (“YX’s WS” and “Chen’s WS” respectively), pursuant to Master Kot’s order on 26 May 2020;

(b)  On 28 August 2020, Master Winnie Tsui (as she then was) dismissed Nanhai Parties’ Summons for leave to adduce expert evidence on, inter alia, Mainland fire and safety regulations in the context of the dispute between the parties (“Nan Hai Expert Summons”). On 29 March 2021, Deputy High Court Judge MK Liu dismissed Nanhai Parties’ appeal;

(c)  On 3 January 2022, Master Hui extended the deadline for any further interlocutory application(s) to 21 February 2022. On the same day, ie 3 January 2022, Master Hui adjourned the case management conference (“CMC”) scheduled for 23 February 2022 to 13 July 2022;

(d)  On 13 June 2022, Nanhai Parties appointed Messrs Ho Tse Wai & Partners (“HTW”) to act in place of Messrs Linklaters as their solicitors;

(e)  On 7 July 2022, Nanhai Parties applied for a time extension to take out interlocutory applications (if so advised). The main reason given in the supporting affirmation was that HTW only came on board recently and needed to get up to speed;

(f)  On 8 July 2022, Nanhai Parties filed a timetabling questionnaire (“the Questionnaire”). Section F3 stated that “subject to counsel advice”, Nanhai Parties “may” tender Yu as witness and file his witness statement;

(g)  In Yu 1^st §11, Nanhai Parties further explained the reason for the answer in Section F3 of the Questionnaire, viz: that in July 2022, HTW advised and Nanhai Parties agreed preliminarily that if their witnesses cannot attend the trial – and Nanhai Parties could not confirm their attendance at that stage – Yu should put in a witness statement to “make up for the deficiency” in Nanhai Parties’ evidence;

(h)  On 13 July 2022, Master Hui, having considered the materials mentioned in subparagraphs (a)-(g) above, dismissed Nanhai Parties’ summons for an extension of time to take out interlocutory applications (if so advised), and gave leave to set down this case for a 14-day trial; and

(i)  On 28 September 2022, the registrar of the High Court fixed the present actions for trial from 7-10, 13-17, 20-24 January 2025 before The Hon Ng J. On 7 November 2022, a notice confirming the same, as well as an additional date fixed on 24 February 2025 for oral closing submissions, was issued to the parties.

DISCUSSION

10.Mr Alan Leong SC, leading Mr Chan Hei Ching, for Nanhai Parties at this appeal (who had also represented the same parties at the hearing of the Summons before the Master below), at the outset of their submissions, informed the court that they do not dispute that there was delay on the part of his lay clients. They also do not shy away from the fact that their lay clients are now seeking for an indulgence from the court to allow them to introduce new evidence 3 months prior to the commencement of a 14-day trial that was fixed by Master Hui at the CMC back in July 2022, some 27 months ago.

11.Without doing injustice to Mr Leong SC’s eloquent submissions on these 2 important issues, I shall briefly sum up his main points on these matters as stated Nanhai Parties’ Submissions hereinbelow.

Delay

12.According to Mr Leong SC, Nanhai Parties do not dispute there has been delay in making the Applications but they claim to have sufficiently explained the delay. In his submission, there is no allegation that Nanhai Parties were acting mala fides or there was deliberate fouling of the Rules of the High Court (“RHC”) and the principles set out under the Civil Justice Reform (“CJR”).

13.Mr Leong SC further submits that delay alone is not determinative. Notwithstanding CJR and active case management, according to him, the court’s primary duty is still to admit all relevant, admissible, and probative evidence to secure the just resolution of disputes in accordance with the substantive rights of the parties.

14.In his submission, it is for OSGH Parties to particularize and substantiate that they would, because of the court granting the Applications, suffer real prejudice that is not capable of compensation by costs (as opposed to cliché generic allegations of unspecific, unparticularized general assertions of prejudice) that would render a fair trial not possible. He submits that they have not done so.

15.Had OSGH Parties done so, Mr Leong SC says that Nanhai Parties are ready to modify their application to remove such prejudice.

16.Further, Mr Leong SC submits that dismissing the Applications in their entirety will end up with Nanhai Parties suffering from a serious inequality of arms, which almost pertains to declaring a premature defeat of Nanhai Parties at the trial. While OSGH Parties have Mao Yimin (“Mao”), Fiona Chow (“Chow”) and Zhong Liangzi (“Zhong”), all frontline participants in negotiations and implementation of the SPA, to give evidence, Nanhai Parties have none to call in rebuttal. Thus, Nanhai Parties at trial will practically be left to put OSGH Parties to strict proof of their case.

17.Mr Leong SC reminds me that our court system is adversarial in nature. It should not be a light matter for the court to exclude clearly admissible, relevant and probative evidence. He says Yu should have his day in court. He says no doubt Yu will be cross-examined harshly by OSGH Parties challenging his delay in coming forth as a witness. However, it is quite different for him to be barred completely from attending court just because he had chosen to leave it to his frontline personnel YX and Chen, according to Mr Leong SC.

18.Further, according to Mr Leong SC, OSGH Parties witnesses Mao, Chow and Zhong have always been prepared to meet the case of Nanhai Parties. Whether such evidence is coming from YX and Chen or from Yu, they will just stand their grounds and state their case as it always has been.

19.Last but not the least, according to him, the Summons was taken out in January 2024. He says the court has so far heard nothing from these witnesses themselves saying how they would be prejudiced in giving evidence in January if Yu’s WS is admitted.

New Evidence

20.According to Mr Leong SC, the parties, as well as the court, are clear about issues at the crux of this case that really matter at trial being, viz. (a) the meaning of “約定年票房” in Schedule 5, SPA; (b) who was responsible for failure to renew the MIXC Lease; and (c) could OSGH Parties set off the worth of any Substituted Cinemas against the agreed Compensation Damage of RMB¥380 million and, if so, how much.

21.For the contention of new evidence, OSGH Parties asked the Master to compare what had been covered by the “lost witnesses” in their original statements to Yu’s WS, and to disallow as new evidence matters not already said by YX and Chen. Mr Leong SC submits that it was a wrong approach.

22.Rather, according to Mr Leong SC, the proposed contents of Yu’s WS should be tested for admissibility, relevance, and probative value against those 3 crucial live issues identified by the parties as stated above. He submits that Yu’s WS clearly passes such a test. Further, as demonstrated by Annex A to his Skeleton (which compared and highlighted the contents of Yu’s WS against the witness statements of OSGH Parties’ witnesses), OSGH Parties witnesses already had their own stories to tell in refutation of what Yu has to say.

Legal Principles Involved

23.The legal principles are not in serious dispute between the parties in this case. Leading counsel on both sides however have cited different cases to the court in support of their respective clients’ case and their propositions.

24.Out of respect to counsel and the hardwork they have put in their submissions, I shall briefly sum up their respective position on law below before I make my findings on the matters which the court has to determine in this appeal.

Applicable legal principles regarding appeal from a master’s decision

25.It is trite that an appeal from a master’s decision is a hearing de novo, in that it is dealt with by way of an actual rehearing of the application which led to the order under appeal and the judge treats the matter as though it came before him for the first time. The judge would give the weight it deserves to the previous decision of the master, but he is in no way bound by it. The judge in chambers is in no way fettered by the previous exercise of the master’s discretion. Fresh points may be raised before the judge which were not raised or taken before the master. See Hong Kong Civil Procedure 2024, Vol 1 (§§58/1/2 and 58/1/5).

Applicable legal principles regarding pleadings amendments

26.Nanhai Parties submit that the Court of Appeal in Honey Bee Electronic International Ltd v Golden Lucky Co Ltd [2007] 3 HKLRD 524 (HKCA) (per Cheung JA and Andrew Chung J) states the guiding principles on amendment to pleadings in §11 as follows:

"Principles on amendment

11. It is sufficient for the purpose of this appeal to identify the following principles on amendment:

First, it is a guiding principle of cardinal importance on amendment that generally speaking, all such amendments ought to be made "for the purpose of determining a real question in controversy between the parties to any proceedings…" per Jenkins LJ in GL Baker Ltd v Medway Building and Supplies Ltd [1958] 1 WLR 1216 at p.1231.

Second, leave is readily granted, in respect of application to amend made before the trial or hearing, on payment of the costs occasioned, unless the opponent would be placed in a worse position than he would have been if amendment had been served in the first instance, see Hong Kong Civil Procedure 2008, Vol.1, p.368 para.20/8/10/." (emphasis added)

27.In Honey Bee, the Court of Appeal (at §§10 & 17) took the view that the discretion was wrongly exercised and that although there was “no doubt delay” but that would not itself be sufficient to dismiss the amendment. Prejudice to the defendant was not shown.

28.In Topwell Corp Ltd v Kwan Kam Kee [2014] 5 HKLRD 1, the Court of Appeal (per Kwan and Lam JJA) found that the judge below, in refusing the amendment, “had exercised his discretion on a misunderstanding of the law and a misapprehension of the facts and was in disregard of principle. His exercise of discretion was plainly wrong and must be set aside.” (§38).

29.The Court of Appeal in Topwell Corp (in addition to applying Honey Bee) further elaborated as follows:

“31. The Judge however placed great weight on the absence of explanation from the 2^nd defendant why he had only applied for leave to amend in December 2012.

32. Even in the absence of explanation from the 2^nd defendant, and looking at the relevant circumstances with common sense, we think the Judge was plainly in error to draw the inference that there was "deliberate delay" on the part of the 2^nd defendant in seeking an amendment. The conclusion he reached that the 2^nd defendant had acted with "deliberate delay" carries with it an implicit finding of bad faith. A finding of this kind is not to be lightly made (Honey Bee Electronic International Ltd v Golden Lucky Co Ltd [2007] 3 HKLRD 524 at [18]; HKSAR v Lee Ming Tee (2003) 6 HKCFAR 336 at 362FG).

…

39. The principles in Ketteman v Hansel Properties Ltd [1987] AC 189 at 212F-H on the exercise of discretion to allow or refuse an amendment of pleadings remain good law after the CJR, see Li Shiu To v Li Shiu Tsang (unrep., HCA 416/2003, [2012] HKEC 1153) (14 August 2012), Deputy Judge Lok, [14]-[16]. Having said that, in the exercise of discretion, the Court must of course have regard to the underlying objectives in O.1A of the RHC or of the RDC, so it cannot be assumed that once the principles in Ketteman are satisfied, the amendment would be allowed. The Court would need to balance all relevant factors to decide how its discretion should be exercised, if the application is made in circumstances offending one or more of the underlying objectives. In this particular case, a pertinent consideration in giving effect to the underlying objectives is that the Court "shall always recognise that the primary aim in exercising the powers of the Court is to secure the just resolution of disputes in accordance with the substantive rights of the parties" (O.1A r.2(2) of the RDC).”

30.In Ketteman v Hansel Properties Ltd [1987] 1 AC189, the House of Lord (per Lord Brandon at p 212F-H) laid down the principles under which the court exercises its discretion to allow or refuse amendments to pleadings (which was approved by the Court of Appeal in Topwell Corp as remain good law after the CJR). The principles can be summarized into 4 prepositions:

(i)  first, all such amendments should be made as are necessary to enable the real questions between the parties to be decided;

(ii)  second, amendments should not be refused solely because they have been made by the honest fault or mistake of the party applying for leave to make them: it is not the function of the court to punish parties for mistakes which they have made in the conduct of their cases by deciding otherwise than in accordance with their rights;

(iii)  third, however blameworthy (short of bad faith) may have been a party's failure to plead the subject-matter of a proposed amendment earlier, and however late the application for leave to make such amendment may have been, the application should, in general, be allowed, provided that allowing it will not prejudice the other party; and

(iv)  fourth, there is no injustice to the other party if he can be compensated by appropriate orders as to costs.”

31.On the other hand, on the issue of delay, Mr Man SC submits that the overarching principle governing late applications to amend pleadings and file and serve new evidence is summarized in Converge Design and Construction Co Ltd v Mount Kelly International Ltd [2020] HKCFI 2433 §2 (Mimmie Chan J) where the learned judge stated the following:-

“The courts have emphasized on repeated occasions that CJR is about early preparation for trial, in order to achieve the objectives of the Rules. It needs no further reminder that delay itself is a ground to refuse a late application, either for discovery, or for the introduction of new pleadings and evidence, when trial is imminent. The onus is on the applicant to justify its delay and to show good reason for leave to be granted. Whilst delay is to be weighed against the probative value and relevance of the pleadings and the evidence sought to be introduced, it need not be emphasized further that the primary aim in the Court’s exercise of powers is to secure the just resolution of disputes in accordance with the substantive rights of the parties. Such just resolution of disputes requires due consideration of the time occasioned by last minute applications to introduce amendments to the pleadings and/or evidence on the eve of trial. Prejudice is inevitably caused, in the disruptions in the preparation for trial, by the need to consider the new evidence and the need to respond thereto, coupled with the need to locate witnesses at the last minute to consider and if necessary, respond to the new evidence, and the last-minute distraction from the proper focus and of the due preparation for trial. This is actual prejudice” (emphasis supplied).

32.For late applications to serve additional witness statements in particular, OSGH Parties submit as follows:

(a)  The burden is on the applicant to give good explanation for the delay. Change in the legal team and/or counsel is not a valid reason. It is incumbent on those advising a party at each and every stage on pleadings, discovery and the filing of witness statements to have due regard to the party’s pleaded case, the evidence required for ultimate trial, the party’s readiness for trial and to pay due heed to the duty to comply with the directions made by the court. It is no excuse that new or the same counsel instructed late in the day of trial (on a party’s own choice) saw the need to improve the evidence at the last minute. See Converge Design, §5;

(b)  The contents of any statement evidence must be admissible and must be confined to matters of fact rather than opinion: Order 38, rule 2A(8) of the RHC; Ho Wai Tung v Ho Fung [2020] 4 HKLRD 508, §§36-38 (Marlene Ng J);

(c)  Similarly, a lay witness as to fact cannot give opinion on an expert subject upon which competency to form an opinion can only be acquired by special study and skilled experience: Ho Wai Tung, §38;

(d)  Nor is a witness permitted to advance arguments or make submissions, which might be expected of an advocate rather than a witness of fact, or to give commentary of facts which he has no direct knowledge and of which he cannot give direct evidence: JD Wetherspoon plc v Harris [2013] 1 WLR 3296 at §§39 & 41 (Sir Terence Etherton C) ; Converge Design, §6;

(e)  It is not the function of witness statements to argue with opposing witnesses, or to offer commentaries on the evidence, and it is not the proper conduct of litigation to have rounds of statements for “point-by-point” rebuttal of the opposing witness statements: Converge Design, §7; Ho Wai Tung, §42; and

(f)  It is incumbent on the applicant to ensure the contents of the witness statement is not a mixed bag of admissible and inadmissible evidence. This is a pertinent factor in deciding whether or not to grant leave to serve a late witness statement: Ho Wai Tung, §41.

33.A late application for lists of documents and discovery may be refused on the ground of delay alone, without a “good and credible explanation” on affidavit as to why the documents were not disclosed earlier: Converge Design, §9.

34.It is submitted by Mr Man SC that the making of late disclosure is an obligation and does not require leave. It is the use of the late disclosure as evidence that requires leave; whether the court should grant such leave is governed by the aforesaid principles. See Hollander, Documentary Evidence in Hong Kong (2^nd ed.), §§8-011-8-013.

35.At this juncture, I would like to briefly deal with the several authorities replied on by Mr Leong SC on this issue and why I do not consider that they are applicable to our present case:

(a)  Honey Bee, supra involved as amendment to the statement of claim that the agreement for delivery of machines from the PRC were void for illegality and/or infringement of public policy, Cheung JA (and the CA) granted leave to amend because “no trial has been fixed yet”, and the judge at first instance failed to consider “this important fact” (§12);

(b)  Topwell Corp Ltd, supra at the time the defendant sought to amend its defence to include a plea of adverse possession, there was question of “milestone dates being affected since the action was not even set down for trial” (§5(2);

(c)  Excel Courage, supra in that case the amendment to the defendant’s pleadings and admitted a supplemental witness statement took place more than 10 months prior to the trial, Godfrey Lam J (as he then was) and not 3 months like our case. The learned judge emphasised the trite principle that the court’s indulgence and magnanimity in allowing late amendments is strictly qualified by two conditions: (1) that the other party is not prejudiced; and (2) no milestone date should be disturbed (§§28-29);

(d)  Keiron Peter Arch Rochester v Glory Sky Precious Metal Ltd [2023] HKCFI 2536, a critical consideration for Wilson J in allowing the application to adduce further witness statements in that case was that (1) it was made before the trial was set down, and was made more than 2 years before trial; (2) any criticisms on the further witness statements could be dealt with by cross-examination; and (c) there was little risk of disruption of the trial dates (§§23-25). All factors which are not applicable in the present case.

(e)  Although in both Hong Lok School Ltd v Chow Sai Yiu [2003] 2 HKLRD 782 (DHCJ Lam) and Chan Cheung Ming Jacky v Siu Sin Man (formerly known as Siu Kit Ling) [2014] 5 HKLRD 89 (Court of Appeal) the court allowed the plaintiffs to adduce evidence right before or during the trial, both counsel for the defendant in those cases conceded that there was “no prejudice” caused to their clients: See §8 per DHCJ Lam; and §42 per Lam V-P as he then was) respectively.

36.Thus, with respect, I do not consider the cases cited by Mr Leong SC are that helpful nor have they in my view assisted Nanhai Parties’ case in the Applications. I think it is worth reminding ourselves that for applications like the present one where there has been serious delay and where a party is seeking the court’s indulgence to allow it to admit new evidence and/or new supplemental or substituted witness statements close to the trial dates, they are all fact-sensitive. The circumstances of each case are different and therefore the considerations fall upon the court to consider and determine are different. What happened in other cases therefore in my view are of limited value only in the exercise of the court’s discretion in deciding whether to grant the indulgence or not in another case.

FINDINGS OF THE COURT

37.In my judgment, the Master was absolutely correct in dismissing the Summons.

38.There are several strong and compelling reasons why in my view the Summons should be dismissed. They included: (i) inordinate and unexplained or unexplainable delay; (ii) inclusion on new and inadmissible evidence; and (iii) other related reasons.

(i) DELAY

39.First, let me start by saying that I do not accept most, if not all, the purported reasons / explanations put forward by Nanhai Parties through their counsel regarding the delay. No matter how well and how eloquent they have been dressed up and put forward by their lawyers, in my judgment, delay is delay. This is particular pertinent when looking through the prism of the underlying objectives of the CJR. In the context of conducting civil litigation in Hong Kong these days, a party who has repeatedly delayed in pursing his/her claim or in defending the matter (as in the case of Nanhai Parties in this case) should not expect any mercy or indulgence from the court. This is in particular so when some milestone dates events like a trial or pre-trial review (“PTR”) have been fixed and the party asking for the indulgence from the court wants to or force the court or his opponent to either adjourn or vacate such dates. The rule of thumb is that the closer to such milestone dates events the less likely that the court is willing to exercise its indulgence or discretion in favour of the party who has been causing the delay.

40.With greatest respect to Nanhai Parties’ counsel, their purported explanations of the delay in my view came “too little, too late and too poor”.

41.In this regard, I entirely agree with Mr Man SC for OSGH Parties that the present appeal is the latest attempt by Nanhai Parties to “re-make” their case a little more than 3 months before trial. This is after many years of inertia and inaction. The PTR in this case will take place on 15 October 2024, ie the day after this decision is going to be handed down. At the time when the parties appeared before me to argue this appeal, it was merely 3 weeks away from the date of the PTR. However, the Nanhai Parties had more than 27 months to consider their position and made the Applications. Yet they had failed to do so.

42.I agree with Mr Man SC that the court and OSGH Parties have been placed in this invidious position solely because of Nanhai Parties’ unexplained or unconvincing reasons for the delay. Although I am fully aware that this court is not bound by the Master’s decision (nor her reasoning), it is trite that this court will give the weight it deserves to that decision. In my judgment, the Master was plainly correct to have reached the view (6 months before trial) that the Summons was hopeless and prejudicial to the OSGH Parties, it follows that there is all the more reason for this court to reach the same view, given the 14-day trial is only 3 months away now.

43.I further agree with Mr Man SC that Nanhai Parties’ submission in this regard[4] is erroneous in law:

(a)  Though there is no rigid rule, delay of itself is a ground to refuse late applications for amendment of pleadings and to file evidence. The burden is on the applicant to (a) provide cogent justification for the delay (b) show good reason for allowing the application (c) ensure the proposed amendments and new evidence are properly permissible according to the relevant law;

(b)  It is not the law (as Nanhai Parties appear to suggest) that any late application would be allowed unless the respondent can demonstrate prejudice. It is also not the law that the applicant should be permitted to “modify their application to remove such prejudice” after hearing from the respondent. To me, this is like putting the cart before the horse. At any rate, I agree with Mr Man SC that the irreparable prejudice to OSGH Parties if this appeal were allowed is obvious. They do not have to particularize them. The burden is not on them to prove that. They are on Nanhai Parties to explain the delay;

(c)  The obligation is fairly on the applicant to get their application in order. If their application is inexplicably late and faulty (for example, the proposed amendments lack necessary particulars or the new evidence is inadmissible or irrelevant), they only have themselves to blame. It must be for them to then formulate a proper application, rather than for the court or the other party to blue-pencil the drafts for them;

(d)  Indeed, Nanhai Parties’ latest attempt to “edit” Yu’s WS (a) is no answer to the criticisms made by the OSGH Parties; and (b) causes further prejudice to the OSGH Parties as they have to respond to yet another “new case”; and

(e)  In respect of Nanhai Parties’ suggestion that they will be prejudiced if the appeal were dismissed, the law is clear. Change of legal teams, or alleged errors by the legal teams, is not a good reason for late applications. More egregiously, in this case, Nanhai Parties’ present solicitors have indicated more than 2 years ago they may want to take out interlocutory applications (including to file and serve a witness statement from Yu). Insofar as any prejudice is caused to Nanhai Parties by not being allowed to run a new pleaded case and rely on new evidence, I agree with Mr Man SC that they will have to bear those consequences.

44.In addition to the above, I think to say that there were inordinate delay on the part of Nanhai Parties in this case perhaps is an understatement. As the following procedural history of the actions set out by Mr Man SC and Mr Chan SC in their submissions has shown, not only there was delay, I think there were conscious and deliberate efforts on the part of Nanhai Parties in “dragging their feet” throughout the present proceedings.

45.As Mr Man SC has rightly pointed out in OSGH’s Submissions, the Summons was issued on 31 January 2024, which was:

(a)  Around 16 months after the trial dates had been set down on 28 September 2022;

(b)  Around 18 months after Nan Hai had indicated in the Questionnaire that they may file and serve Yu’s WS on 8 July 2022 to “make up for the deficiency” in Nanhai Parties’ evidence caused by nonattendance of witnesses and for Master Hui to have dismissed Nanhai Parties’ application for extension of time to take out interlocutory applications on 13 July 2022; 

(c)  Around 19 months after Nanhai Parties had changed solicitors on 13 June 2022; and

(d)  Close to 4 years after Master Kot had ordered the exchange of witness statements on 26 May 2020, which parties did on 9 June 2020.

46.I entirely agree with ratio of Mimmie Chan J stated in §2 of Converge Design that substantial delay in itself is “actual prejudice”. In my view, this alone is a strong enough reason for this court to dismiss the appeal.

47.Further, given that Master Hui had already dismissed the application to extend time for issuing further interlocutory applications on 13 July 2022 after Nanhai Parties had indicated that they might adduce evidence from Yu, there is no reason in my view why this order should be reversed by §1 of the Summons. There was no appeal against that order, and there is no material change of circumstances in favour of Nanhai Parties. I agree with Mr Man SC that without §1, the entire Summons must fail.

48.In addition, I consider that OSGH Parties would suffer substantial prejudice if the appeal were allowed at this late stage as we are little more than 3 months away from trial. As Mr Man SC has stated in his submissions, if the appeal were to be allowed, OSGH Parties would be placed in an impossible position (which in my view cannot be compensated by costs) because within those 3 months, on top and instead of the usual pre-trial preparations, they would be distracted, hampered, and forced to (a) consider and respond to the voluminous new evidence by applying to file further witness statements; (b) jog their 3 witnesses’ memory as to events going back to 2016 and 2017 on matters hitherto unraised; (c) possibly find new witnesses; (d) consider whether and if so what further discovery need be given or sought; (e) consider Nanhai Parties’ amended pleaded case and implications; and (f) amend their pleadings.

49.In my judgment, all the above listed matters amount to real, substantial and actual prejudice. I so find that OSGH Parties will suffer such prejudice if the appeal were to be allowed.

Failure to provide any good and convincing explanation for the delay

50.Given Nanhai Parties are seeking the indulgence of the court at a very very stage of the present actions, I agree with OSGH Parties that it behoves them to come up with a detailed and good explanation as to the inordinate delay in the Summons.

51.Sadly, in my judgment, Nanhai Parties have failed miserably to explain why the Applications to amend pleadings and disclose further documents should not and could not have been made earlier, much earlier.

52.Regarding the application to amend the pleadings, it is in my view beyond any shadow of doubt that Nanhai Parties should and could have applied for them months if not years ago. In my judgment, the Master was clearly correct in dismissing this very belated attempt to do something that they could have done months or years ago.

53.As for the belated application to file and serve Yu’s WS, I agree with OSGH Parties’ submission that the reason given for the delay is that Nanhai Parties only confirmed YX and Chen were unable to attend trial or give evidence via video-link by the second half of 2023: See Yu 1^st, §§13-19; Yu 2^nd, §7.

54.I agree with Mr Man SC that their explanation is plainly unsupported by their own account of the facts and therefore the late application to file and serve Yu’s WS should be refused by this court as well.

55.Hence, purely based on the delay alone, I would dismiss the Summons.

(ii) NEW AND INADMISSIBLE EVIDENCE

New Evidence

56.First and foremost, I do not agree at all with Nanhai Parties’ counsel’s very bold submission that “Yu’s WS can be likened to a statement supplemental to those of Yu Xin and Chen Tao that serves to give NH Parties the chance to fill in gaps in the earlier statements or to answer the statements of OSGH Parties.”: See §16 of Nanhai Parties’ Submissions.

57.With greatest respect to their counsel, nothing could be further from the truth.

58.As graphically demonstrated by Mr Man SC and Mr Chan SC at the appeal hearing, by using a yellow colour to highlight on the new matters/evidence raised by Yu in his 26-page/159-paragraph draft witness statement, one can immediately see that about 90% of the contents of that document would fall within this category.

59.They are not, in my view, matters just to “fill in the gaps” of the evidence of the two witnesses originally intended to be called by Nanhai Parties to testify at the trial as submitted by Mr Leong SC. They appear to me to be entirely new evidence which are substantially different from those contained in the other two witnesses’ witness statements.

60.I agree with Mr Man SC that the application to adduce Yu’s WS should be dismissed given the unusual large amount of new evidence (ie evidence not found in Nanhai Parties’ 5 existing witness statements) that it seeks to introduce. Out of 159 paragraphs, 142 paragraphs contain new evidence. It is thus clear to me and I so find that Yu’s WS was not designed to “fill in the gaps” of YX’s and Chen’s witness statements. In truth and in substance, I find it is designed to replace the other 2 other witnesses’ statements. In my judgment, this must not be allowed so close to the trial, otherwise it will only (i) make a mockery of the pre-trial case management process introduced under the CJR; and (ii) derail the trial which of course is one of the most important milestone dates in the whole proceedings.

Inadmissible Evidence

61.I would further dismiss the Applications on the ground that Yu’s WS in my view has contained inadmissible evidence.

62.As rightly pointed out by OSGH Parties’ counsel in their submission, Yu’s WC contained: (a) inadmissible non-expert opinion evidence or speculation; (b) inadmissible opinion evidence on expert subjects; or (c) irrelevant evidence: See Ho Wai Tung §§36-38.

63.I agree with Mr Man SC that the difficulty in severing the “admissible” and “inadmissible/ irrelevant” is a strong factor which tilts towards dismissing Summons §2 entirely: See Ho Wai Tung §41.

(iii) OTHER REASONS

64.I further agree with OSGH Parties’ counsel that there are two further reasons why the Summons should be dismissed.

65.First, since Nanhai Parties are seeking the court’s great indulgence, they should have been forthcoming to both the Master and this Court and explain all relevant matters with sufficient detail.

66.In this regard, on 6 June 2024, OSGH Parties’ solicitors wrote to HTW stating that on 26 March 2024, Yu was bankrupted and ceased to be a director of Nan Hai, which is the ultimate owner of True Vision (“June 6 Letter”). HTW were asked to confirm, inter alia, whether (a) Yu had authority to make Yu 2^nd at the point of filing Yu 2^nd,[5] which postdated 26 March 2024; and (b) Yu has given or is still giving instructions on the present actions and the Summons after 26 March 2024.

67.However, only on 17 June 2024 did HTW respond to OSGH Parties’ solicitors, stating that the board of directors of Nanhai Parties have authorized Yu to make Yu 2^nd on their behalf. I agree that this does not answer, or satisfactorily answer, the first or any of the questions posed to HTW. Nor have Nanhai Parties sought to give satisfactory answers after the Order and for the purpose of the present appeal. Nor have they given any in their latest skeleton submissions.

68.In my view, full answers to the questions posted in the June 6 Letter are plainly relevant to the present applications as they concern, inter alia, whether Yu is still giving instructions after he was made bankrupt and ceased to be a director of Nan Hai and, if so, whether he has any justification in continuing to give instructions. These matters go fundamentally to the question of whether the Summons was and the appeal is properly pursued, and whether Yu will likely attend court after all if he has ceased giving instructions.

69.Second, the present situation is especially unsatisfactory as Nanhai Parties have not been able to confirm to this court that they will not make further applications to adduce additional witness statements.[6] Given (a) Nanhai Parties’ modus operandi as manifested in the application below and the appeal; and (b) there is no certainty that their remaining witnesses will give evidence, the likelihood of further applications cannot be ruled out entirely. I agree with Mr Man SC that allowing this appeal would embolden Nanhai Parties, and make it more difficult for the court to refuse further applications being made on similar basis as the present. In the age of CJR, such practice should not be encouraged or condoned by the court.

CONCLUSION

70.For the above reasons, I will uphold the Order made by the Master and would dismiss Nanhai Parties’ appeal with costs in favour of OSGH Parties.

71.As I have mentioned to the parties at the end of the appeal hearing on 25 September 2024, I will deal with the costs of this appeal by way of summary assessment and on paper.

72.Having studied the statement of costs submitted by OSGH Parties, I hereby summarily assess the costs of the OSGH Parties at HK$850,000. I order that such costs to be paid forthwith by Nanhai Parties.

73.It remains for me to thank counsel on both sides for their very helpful submissions in this appeal and to their solicitors in preparing the appeal bundle in such meticulous and orderly manner.

Mr Alan Leong SC leading Mr Chan Hei Ching, instructed by Messrs Ho Tse Wai & Partners for the 1^st and 2^nd Defendant (by original action) and the Plaintiff (by counterclaim)

Mr Bernard Man SC leading Mr Anthony Chan SC, instructed by Messrs Kennedys, for the Plaintiff (by original action) and the 1^st and 2^nd Defendants (by counterclaim)