Taihan Electric Wire Co Ltd and Another v. Lee Chi Yuen Arctic and Others

HCA 454/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 454 OF 2013

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REASONS FOR DECISION

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1.This is an application by the 1^st, 4^th to 7^th defendants (collectively “the defendants”) for an order requiring the deponent of the 2^nd plaintiff (“TGH”) to attend court for the purpose of cross-examination at the hearing of the TGH’s application for a Mareva injunction.

The legal principles

2.The jurisdiction to order cross-examination on affidavit is a matter of discretion which is unfettered.  The test is: “Would the making of an order result in justice being achieved; conversely, if an order were not made, would there be injustice?”  See Yau Chiu Wah v Gold Chief Investment Ltd & anr [2002] 2 HKLRD 832 at para 14, Ma J (as he then was); Grand Empire Holdings Ltd v Marco International (HK) Ltd, unrep., HCA 14891/1999, 7 December 1999 at para 2, Burrell J.

3.As accepted by the plaintiff, ordering a pre-judgment cross-examination on affidavit is rare, and requires good and sufficient reason for the application in all the circumstances: Wenta Seng Yuen v Pak Yiu Yuen [1984] HKLR 431 per Fuad JA at 436E-H.

4.What constitutes good and sufficient reason must be considered in the “light of the purpose of the proceedings” for which such need is said to have arisen: Andrew Wykes Waters v Malahon Credit Co Ltd, unrep., HCSD 24/2001, 27 February 2003, Deputy Judge To (as he then was), paras 9 and 11 upheld on appeal CACV44/2003, unrep., 8 October 2003.

5.In the context of an injunction, the discretion to order cross-examination is to make the injunction more effective, not to enable material to be obtained with a view to impugning the defendant’s credit, for issuing contempt proceedings against him for breach of the injunction or for eliciting material to be used against the defendant at trial.  Where the cross-examination would deal with the same issues as those at trial, exceptional circumstances had to be shown: Yau Chiu Wah v Gold Chief Investment Ltd & anr.

6.The power to order cross-examination of a deponent is more often exercised where a final order is to be made or where the substantive relief sought has an element of finality.  For example:

(i)  Where there is an issue as to the motive or truthfulness of the account of a deponent: Re Smith and Fawcett Ltd [1942] Ch 304 at 308 per Lord Greene MR.

(ii)  In an application for ancillary relief whereunder the husband deposed to the fact that he was unable to produce the accounts of his partnership: Wenta Sung Yuen v Park Yiu Yuen.  Hunter JA made clear that it was essential to acknowledge that matrimonial proceedings for financial relief are rather different from the ordinary run of cases.

(iii)  Where a defendant’s affirmation has failed to comply with a disclosure order made under a Mareva injunction: Yau Chiu Wah v Gold Chief Investment Ltd.

(iv)  In an application to set aside a statutory demand: In Andrew Wykes Waters v Malahon Credit Co Ltd, the court observed that it was never the function of the court to conduct a mini trial on affidavit and make findings of fact.  All that it had to do was to consider all the evidence and see if the applicant has raised a genuine triable issue that the debt is disputed on substantial as opposed to trivial or frivolous grounds. To allow cross-examination will be to take an inquiry to a depth which is unnecessary and would only add to unnecessary costs.

(v)    In an application for appointment of provisional liquidators arising out of the wife’s attempt to enforce judgment obtained against the husband in matrimonial proceedings for ancillary relief.  Dianoor International Ltd v Aiyer Vembu Subramaniam, unrep., HCA 806/2008, 29 September 2010 at paras 18-20.

7.The court may consider the delay and expense that will arise as a result of the need to cross-examine a deponent. 

Background

8.The facts of this case have been set out in my decision dated 15 April 2013 when I dismissed an application for an interim injunction sought ex parte on notice.  Just to recap, between 2008 and 2011 fraud was perpetrated on the plaintiff (TGH, P2 in the present case), resulting in loss to them of about US$36m.  TGH commenced action in 2011 (the 2011 action) against, amongst others, Lau, relying on the assistance of the 1^st defendant (“Lee”) in the present case.  An injunction was sought against Lau, in which application Lau has filed various affirmations.  After Lau was acquitted of criminal charges, he entered into a settlement agreement with TGH, whereby TGH agreed not to enforce the judgment entered against Lau in return for his giving evidence in favour of TGH.

9.By this action (“the 2013 action”), the plaintiffs (now only TGH) sues various defendants (including Lee[1]) in conspiracy to defraud and to injure, constructive trust on the grounds of knowing receipt and dishonest assistance, conversion of property and breach of contract.  TGH only proceeds against the 1^st, 3^rd-7^th defendants now.  TGH relies on the evidence of Lau this time.  The 2011 action and injunction exist in parallel.  The loss of the plaintiffs in both actions are similar.

The grounds for the defendants’ application

10.Mr Zimmern submits that the circumstances of the present case are unusual, if not exceptional.  The grounds for the application are that:

(i)     Lau is the person providing the plaintiffs with the evidence to found the 2013 action and to seek to raise a good arguable case in the Mareva application.

(ii)    Yet Lau is a self-confessed fraudster who has lied under oath. Within the 2013 action, Lau’s affidavits completely contradicted the evidence he gave under oath in the 2011 action. There can be little doubt that he has lied on oath in either action.

(iii)   Further, Lau might have been financially motivated to give evidence in this case, in view of his contractual obligation under the settlement agreement.

(iv)    It now appears that Lau may not be willing to provide an affirmation in reply or give evidence at the trial.

11.The defendants therefore seek leave to cross-examine Lau at the hearing for a Mareva injunction on 4 September 2013 (“the hearing”).

12.The 2013 action is subject to a strike out application for abuse of process that is set down to be heard in November this year. 

Application of the legal principles

13.To order cross-examination for the purpose of ground (i) is to seek to cross-examine Lau on the merits of the claim, the same issues as those at trial: Yau Chiu Wah v Gold Chief Investment Ltd & anr.

14.To order cross-examination for the purpose of ground (ii) is to discredit Lau, potentially to lay the foundation for perjury or to elicit material to be used against TGH at the trial: Yau Chiu Wah v Gold Chief Investment Ltd & anr.

15.To order cross-examination for the purpose of ground (iii) is to question the deponent’s motive: Re Smith and Fawcett Ltd.  In cases involving fraud, conspiracy, and dishonest assistance, someone’s motives and good faith will always be questioned.  I agree with Mr Hughes, counsel for the plaintiff, that Re Smith v Fawcett is not an authority for the proposition that where a party is seeking an interlocutory injunction, a deponent should be ordered to attend for cross examination simply because the other party has questioned the motive or good faith of the deponent.

16.To order cross-examination for the purpose of ground (iv) is unnecessary. If Lau refuses to provide an affidavit in reply, it means that the plaintiff may not be able to contradict the version put forth by the defendant or fail to show a good arguable case.  The indication that Lau will not give evidence at the trial is something further into the future.  It does not affect the situation at the hearing that the plaintiff would seek an interim injunction based on the facts then known to the court.

17.At the hearing, all that is required is for the plaintiff to show a good arguable case under American Cyanamid v Ethicon Ltd [1975] AC 396.  A court acts on affidavit evidence alone even though there may be cross-allegations or the affidavit evidence is sometimes conflicting.  The court does not have to make positive findings of facts.  This must be the position given that an application for an injunction most often happens at the early stage of an action when discovery is not complete and pleadings may even need to be amended at a later stage. 

18.The hearing is for interlocutory relief, which is not a final order by nature.  None of the grounds put forward constitute special circumstances that would justify departure from the general rule that an injunction hearing is based on affidavit evidence.  There is no risk of injustice if Lau is not cross-examined on his affidavits.

Delay

19.This is almost a last minute application made 9 days before the hearing, which has been set down for one day.  There was no estimation from the defendants’ side on how long the cross-examination will take.  I doubted if the hearing time would have been sufficient just for the legal arguments.  (Note: this doubt was proved to be well-founded as it turned out that the hearing before me on 4 September overran until 5:30 pm.)

20.That aside, there was no reason why this application should not be made earlier:

(i)     The defendant has had Lau’s affirmations since March and April 2013;  Lau’s questionable motive, if any, would have been apparent from his very first affirmation;

(ii)    The substantive hearing of the plaintiff’s summons for injunction has been fixed since 15 May 2013;

(iii)   The plaintiff’s skeleton submission was due to be filed and served on the day after (30 August) the hearing of this summons for cross-examination.

21.A late application of this sort is unwarranted.  It diverts counsel’s attention away from his preparation for hearing of the injunction.  It does not reflect proper management of a summons.  Such an application should be dismissed by its sheer lateness in filing.

22.I dismiss the application for cross-examination of Lau.  On a nisi basis, costs should be to the plaintiff to be summarily assessed on the papers on 30 September 2013.  No attendance is required. The plaintiff shall file and serve its statement of costs by 17 September 2013.  The 1^st and 4^th to 7^th defendants shall file and serve their grounds in opposition by 24 September 2013.

23.I thank Mr Hughes and Mr Zimmern for their assistance.

Mr Sebastian Hughes, instructed by Jones Day, for the 2^nd plaintiff

Mr Richard Zimmern, instructed by Smyth & Co, for the 1^st, 4^th‑7^th defendants

Mr William Leung, instructed by Eversheds, for the 3^rd defendant