Lim Yi Shenn v. Wong Yuen Yee and Others

HCA 1323/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1323 OF 2010

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J U D G M E N T

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1.This is an appeal from the decision of Master A Ho dismissing the defendants’ application made on 24 May 2012 to adduce expert evidence on various matters concerning the market practice of the Hong Kong Stock Exchange.

2.There are already two interlocutory decisions from masters in these matters, one from Master R Lai on the plaintiff’s application for specific discovery dated 5 December 2011 the one under appeal. The material facts of this case had been set out in Master Lai’s decision in some detail.  I hope I can be forgiven for being brief in this judgment.

3.In this action, the plaintiff seeks to recover his loss in connection with the purchase of shares in the 3^rd defendant (a listed company).  He alleges that under an oral investment agreement he negotiated with the 1^st and 2^nd defendants, who were and are the Chairman and CEO of the 3^rd defendant, certain representations were made to him and in reliance on which he invested about HK$20 million in buying the shares of the 3^rd defendant.  Two of the plaintiff’s fundamental allegations are of particular relevance for purpose of this appeal.

4.Firstly, it is alleged that instead of selling to him new shares, contrary to the representations made by the defendants the plaintiff was sold the shares of the 1^st defendant under a “top-up placement”.  The net result was that the 3^rd defendant was unable to raise the funds needed to put into effect the business plans discussed with the plaintiff.

5.Secondly, it is alleged that the plaintiff was told that there were other independent investors committed to subscribing for the shares in the 3^rd defendant.  As it turned out, the investors lined up for the purpose were not independent.  The consequence was that the scheme that was deployed by the defendants to raise funds for the 3^rd defendant was disapproved by the Securities and Futures Commission and resulted in deficiency in the funds ultimately raised.

6.The defendants deny the alleged representations.  In particular, they say that they had no knowledge as to the identity of the investors because the matter was handled exclusively by two placing agents.  Further, it made no difference whether the shares acquired by the plaintiff were new shares or not.

7.I have no difficulty accepting the applicable law submitted by Mr Mak, who appeared for the defendants (see Annabelle Kin Yee Lee & Ors v Lee Wing Kim & Anr, unrep, HCA 9522/97 at para 16 and Wong Hoi Fung v American Intl Assurance Co (Bermuda) Ltd & Anr [2002] 3 HKLRD 507 at 511I to 512A), which is not disputed by Mr Suen who appeared for the plaintiff.  In short, the evidence in question has to be admissible and relevant.  However, like Master Ho, I have difficulty seeing how the proposed evidence will assist the court in the proper adjudication of these matters.

8.With respect, I find the contentions of the defendants as to why the proposed evidence is relevant wanting in particulars. It is imperative for the defendants to identify with reference to the pleadings the material facts under dispute and how expert evidence will assist the court in coming to a fully informed decision on those matters.  The defendants have failed to do so.

9.In truth, most of the defendants’ contentions converge upon a single proposition – that the proposed evidence will assist the court in assessing the credibility of the plaintiff’s evidence.  For example, it is said that evidence of market practice will assist the court in seeing whether the representations alleged by the plaintiff are inherently likely.  I must say that the court is well experienced in judging the credibility of witnesses, and it is not sufficient to tip the balance in favour of adducing expert evidence unless it can be demonstrated with specificities how the assessment exercise will be hampered in the absence of such evidence.

10.Apart from lacking in such specificities, I am unable to see the relevance of the proposed evidence in respect of the plaintiff’s allegation that he was supposed to be sold new shares as opposed to the shares of the 1^st defendant under the investment agreement.  That allegation is denied.  Further, it is pleaded in the Re-re-amended Defence that the plaintiff acquired the shares in question through one of the placing agents and that “it was the plaintiff’s own decision to agree to and to purchase the said shares in the 3^rd defendant in reliance of his own judgment” (para 12 of Re-re-amended Defence).  Hence, it will be a factual issue to be determined by the court and evidence of market practice over top-up placement is irrelevant.

11.As regards the point that new shares or existing shares made no difference to the plaintiff, it is not a matter the determination of which will require expert evidence.  Mr Mak has fairly accepted so in the course of his submissions.  Insofar as the loss and damage are concerned, the burden is on the plaintiff to prove his case.  As explained by Mr Suen, the plaintiff’s case is that he would not have acquired the shares in question in the absence of the alleged misrepresentations.  The disposal of the shares in mitigation of his loss resulted in loss of over HK$15 million, which constitute the lion part of the plaintiff’s claim.  I am unable to see, and it certainly has not been demonstrated to me, how market practice evidence will assist the court here.

12.On the issue of whether the defendants knew of the identity of the other investors, I agree with Mr Suen that, firstly, it is a matter of credibility of the plaintiff’s evidence.  Secondly, even if there was in existence a market practice whereby the identity of the investors was supposed to be kept from the defendants, on the indisputable evidence of this case such practice was not adhered to.  In the premises, market practice evidence is again irrelevant.

13.Last but not least, I should mention that the defendants’ application to adduce expert evidence was not made within the time stipulated in an order by Master Ko dated 15 December 2011 which imposed a cut-off date for interlocutory applications, namely, 3 May 2012.  Whilst I see no reason to disagree with Master Ho in declining to reject the defendants’ application on the ground of delay in light of the circumstances of this case, it must never be forgotten that such an order is to be complied with and infringement will not be tolerated without adequate reason.  Tolerance for one side is prejudice to the other.  It is the duty of the court to uphold the integrity of the system by ensuring due compliance of its orders.

14.For these reasons, I dismissed the appeal with costs to the plaintiff.

Mr Jenkin Suen, instructed by Tsang & Lee, for the plaintiff

Mr Bernard Mak, instructed by Tso Au Yim & Yeung, for the 1^st, 2^nd and 3^rd defendants