Gannon Vietnam Company Ltd and Another v. Robert Paul Greene

HCA 584/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 584 OF 2012

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REASONS FOR DECISION

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1.This is the plaintiffs’ application to adduce new evidence in the appeal against the decision of Master A Ho on 23 July 2013. In hearing on 8 October 2013, I dismissed the plaintiffs’ application and I now give my reasons.

BACKGROUND

2.The 1^st plaintiff is a limited company incorporated under the laws of Vietnam, and the 2^nd plaintiff is a limited company under the laws of Hong Kong.  The 1^st plaintiff is a wholly-owned subsidiary of the 2^nd plaintiff.

3.The defendant was a former director of the 2^nd plaintiff.  He is and was at all material times a resident in the United States.

4.On 18 May 2011, the defendant and one Mr Walker Blocker (“Blocker”) commenced proceedings in the United States against Gannon International Ltd, The Gannon Pacific Company, the plaintiffs and one Mr William Franke (“Franke”).  Blocker was a former board member of the 1^st plaintiff, whilst Franke is the Chairman and the Chief Executive Officer of the 1^st plaintiff and a director of the 2^nd plaintiff.

5.From about October 2011, the 1^st plaintiff commenced various proceedings against Blocker and his wife in Vietnam.  The 1^st plaintiff’s allegation was that Blocker and his wife had created fictitious resolutions of the Board of Directors of the 1^st plaintiff, enabling them to receive bank loans and to distribute the proceeds to Blocker’s wife.

6.On 11 April 2012, the plaintiffs issued the writ of summons herein (“the Writ”) against the defendant.  The plaintiffs claims, inter alia, the following relief under the Writ:

(i)   a declaration that the Supplemental Loan Agreement dated 25 July 2010 purportedly signed by the defendant on behalf of the 2^nd plaintiff and Blocker on behalf of the 1^st plaintiff is invalid, null and void and of no legal effect and/or entered into by the defendant on behalf of the 2^nd plaintiff with no actual or apparent authority and is therefore unenforceable as against the 2^nd plaintiff;

(ii)   an order that the resolutions of the Minutes of Meeting of the Board of Management of the 1^st plaintiff passed on 31 March 2010 be set aside, or alternatively, a declaration that the resolutions are invalid, null, void and of no legal effect; and

(iii)   damages for fraudulent misrepresentation and/or fraudulent misstatement in procuring the 1^st plaintiff to draw down the loan in the sum of VND60,000,000,000 from Eximbank.

7.The plaintiffs made an ex parte application for leave to serve the Writ outside jurisdiction.  During the course of the application, the plaintiffs amended the Writ by adding a claim of damages for deceit and/or fraudulent misrepresentation in respect of the Supplemental Loan Agreement.

8.On 22 June 2012, Master J Chow granted leave to the plaintiffs to issue the concurrent amended writ of summons (“the Concurrent Amended Writ”) and to serve the same out of jurisdiction.

9.On 7 February 2013, the defendant took out a summons to set aside the Writ and the Concurrent Amended Writ (“the Setting Aside Summons”).  The Setting Aside Summons was heard before Master A Ho on 17 July 2013, and the learned Master ruled the application in favour of the defendant on 23 July 2013.

10.On 30 July 2013, the plaintiffs filed the notice of appeal (subsequently amended on 21 August 2013) against the decision of Master A Ho, returnable before me on 8 October 2013 with an estimated time of one day.  On 6 September 2013, the plaintiffs took out a summons for leave to adduce new evidence in the appeal proceedings (“the New Evidence Summons”).

11.The return date of the New Evidence Summons was 17 September 2013 with an estimated time of 15 minutes.  As I could not dispose of the application within such a short period of time, I adjourned the New Evidence Summons for argument before me on 8 October 2013.   To avoid unnecessary costs that may be wasted in the case that leave is to be granted for adducing fresh evidence in the appeal, and that delay is not a serious prejudice to the defendant, I agreed with the plaintiffs’ suggestion and vacated the substantive hearing of the appeal originally scheduled to be heard on 8 October 2013.  I therefore only had to deal with the New Evidence Summons on that day.

LEGAL PRINCIPLES FOR LEAVE TO ADDUCE NEW EVIDENCE IN AN APPEAL AGAINST MASTER’S DECISION

12.The appeal against a master’s decision is made pursuant to O 58 of the RHC which is conducted by way of a rehearing.  Under O 58 r 1(5), no further evidence (other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made) may be received on the hearing of an appeal under that rule except on special grounds.

13.There is no disagreement between the parties about the following trite principles relating to admission of new evidence in an O 58 appeal as stated in §58/1/3 of Hong Kong Civil Procedure 2013:

“Order 58, r.1(5) was introduced to curb the undesirable practice before the Civil Justice Reform when parties sought to adduce a further round(s) of evidence on appeal after an unfavourable decision from a Master. Rule 1(5) aims at effecting a change of culture so that parties should prepare their application properly prior to the hearing before a Master. The spirit of this rule will be defeated if a party is allowed to revert to the pre-CJR practice: Bank of China (Hong Kong) Limited v. Certain Aim Ltd (unrep., HCMP 1272/2007 (October 4, 2010) per Deputy High Court Judge Au-Yeung (at para. 17).

The phrase ‘special grounds’ is the same expression as in RHC O. 59, r.10(2) and requires the conditions laid down in Ladd v. Marshall [1954] 1 W.L.R. 1489 to be satisfied: Fortis Insurance Company (Asia) Limited v. Lam Hau Wah Inneo (unrep., HCA 1840/2009 March 30, 2010), per Fok J., as he then was (at para.16), decision on the refusal to admit fresh evidence affirmed by the Court of Appeal: Fortis Insurance Company (Asia) Ltd v. Lam Hau Wah Inneo (unrep., CACV 86/2010 October 28, 2010), per Kwan JA (at paras 12-16). See also Chan Yau v. Chan Calvin & Another (unrep., HCA 666/2007 May 15, 2009), per Sakhrani J. (at para. 21).

The Ladd v. Marshall conditions are:-

(a) that the evidence could not have been obtained with reasonable diligence for use at the hearing below;

(b) the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive;

(c) the evidence must be such as is presumably to be believed.”

14.In order for the court to grant leave to adduce fresh evidence in the appeal proceedings, Mr Sheppard, counsel for the plaintiffs, accept that he has to satisfy all the three conditions laid down in Ladd v Marshall.

THE NEW EVDIENCE PROPOSED TO BE ADDCUED BY THE PLAINTIFFS

15.In the New Evidence Summons, the plaintiffs ask for leave to adduce the following new evidence in the appeal:

(i) the 2^nd affidavit of Franke sworn on 1 July 2013 (“Franke’s 2^nd Affidavit”); and

(ii) the expert opinion on Vietnam law by a law firm known as Vilaf dated 2 September 2013 (“the Expert Opinion”).

16.I will deal with the proposed new evidence in turn.

(i)      Franke’s 2^nd Affidavit

17.According to the order of Master H Au-Yeung dated 20 February 2013, the plaintiffs were allowed to file affidavit in opposition to the Setting Aside Summons within 42 days of the date of the order, and the defendant was allowed to file affidavit in reply within 21 days thereafter.  In addition, no further affidavit would be allowed without the leave of the court.

18.With the time extended once, the plaintiffs filed the affidavit in opposition (the 1^st affidavit of Franke) on 22 April 2013.  Subsequently and with the time extended three times, the defendant filed the affidavit in reply (the 2^nd affidavit of the defendant) on 17 June 2013.

19.On 4 July 2013, the plaintiffs made an application seeking leave to adduce Franke’s 2^nd Affidavit for the purpose of the hearing of the Setting Aside Summons.  The application was dismissed by Master K Lo on 8 July 2013.  Instead of appealing against the order of the Master, the plaintiffs now apply for leave to adduce the same affidavit for the purpose of the appeal proceedings.

20.It is clear that the plaintiffs have adopted the wrong procedure in trying to adduce the “new” evidence, which was the same as what happened in Jindal Exports Ltd v Waco Trading Co Ltd [2000] 2 HKC 46.  In that case, the defendant made an application for leave to adduce further affirmation in an O 14 hearing before the master.  The master refused to grant such leave, and the O 14 application was subsequently dismissed.  Upon appeal by the plaintiff, the defendant applied for leave to adduce the same fresh evidence on appeal.  In dismissing the application, DHCJ Chu (as she then was) said at 47I-48F:

“In my view, what the defendant should have done is to appeal against the Master’s refusal instead of taking out the present summons applying for leave to file the affirmation. An application which is similar to the present summons had been made to the Master and he had made a decision on it. It is procedurally wrong to renew that application instead of appealing against it. … …

… … In this case, the so-called ‘new’ or ‘fresh’ materials were available to and were before the Master at the hearing below, but they were not allowed to be admitted and used as a result of a conscious decision made by the Master after hearing arguments. Whilst there is no doubt that the court has power to admit new or fresh evidence under O 58 r 1 RHC, the court cannot invoke the power when the Master had already exercised his discretion on the same matter, short of an appeal.

The summons is therefore procedurally wrong and misconceived. … …”

21.The case of Jindal was followed by DHCJ Lam (as he then was) in the subsequent decision of Ip Yin Ping & Ors v Ip Anne [2003] 2 HKC 595 at 599H.

22.In his submission, Mr Sheppard argues that the dicta of DHCJ Chu’s in Jindal is no longer good law after the introduction of O 58 r 1(5) in the CJR.  According to him, the admission of new evidence in an O 58 appeal is now solely governed by the new regime in O 58 r 1(5), and so the court also needs to consider whether there are special grounds in deciding whether to allow the new evidence, irrespective of whether the master has made an earlier decision about the admission of such evidence.  Mr Sheppard has also placed particular emphasis on the commentary about admission of new evidence in O 58 proceedings in Hong Kong Civil Procedure.  In the 2009 edition of the White Book, there was still a reference to the Jindal case in the commentary, and yet there is no such reference to the same case in the 2013 edition.  Hence, Mr Sheppard argues that it is no longer good law.

23.In my judgment, Mr Sheppard’s argument is totally misconceived.  Master K Lo had made a decision refusing the admission of the evidence contained in Franke’s 2^nd Affidavit.  Rightly or wrongly, it is a valid and binding order of the court.  Unless there is an appeal against such order, the appellate court, even in a rehearing of the substantive application, has no power to make an order the effect of which would contradict the earlier order of the master.  There is nothing in r 1(5) which seeks to disturb such simple principle of res judicata.

24.A fortiori, that should be the case after the CJR where there is a more tightened control over the admission of new evidence in master appeals.  To me, the principle is so clear that the learned authors did not see the necessity of including the same reference to the Jindal case in the new editions of the White Book after the CJR.

25.Further, the procedural error of the plaintiffs is a significant one, as the considerations for the court in determining the two types of applications, i.e. an appeal against master’s decision is refusing to allow the filing of a particular affidavit and an application to adduce new evidence in a master appeal, are totally different.

26.As the plaintiffs have adopted the wrong procedure in trying to adduce the evidence contained in Frank’e 2^nd Affidavit for the purpose of the appeal proceedings, I refuse the plaintiffs’ application for leave to file such affidavit.

(ii)     The Expert Opinion

27.I then turn to the application relating to the Expert Opinion.

28.In the Expert Opinion, Mr Nguyen Truc Hien, who is a partner of Vilaf, purports to give expert opinion on, inter alia, the following issues:

(i) whether the 2 plaintiff can commence proceedings in Vietnam;

(ii) whether the 1^st or the 2^nd plaintiff (or both) is the proper plaintiff in the intended claim against the defendant under the laws of Vietnam;

(iii) whether the plaintiffs’ claim is time-barred under the laws of Vietnam;

(iv) whether the courts in Vietnam have jurisdiction to grant some of the relief claimed by the plaintiffs in the Hong Kong proceedings;

(v) whether the laws in Vietnam provide remedy for some of the wrongs alleged by the plaintiffs in the Hong Kong proceedings; and

(vi) various procedural matters if the claim against the defendant is to be pursued in Vietnam.

29.In my judgment, this application can be dismissed simply because the plaintiffs have failed to satisfy the first condition of Ladd v Marshall.

30.In the 5^th Affidavit of Mr Anthony Francis Hill (“Hill”), which is the affidavit in support of the New Evidence Summons, Hill only provides an account about what happened prior to the hearing before Master A Ho, laying particular emphasis on the fact that the plaintiffs had kindly allowed the defendant extension of time for three times to file the affidavit in reply.  Hill has not given any explanation as to why the Expert Opinion could not have been obtained with reasonable diligence for use at the hearing before Master A Ho.

31.It is trite law that where a defendant is not a resident in Hong Kong and the plaintiff institutes proceedings in Hong Kong not as of right, the burden is on the plaintiff, in persuading the court to grant an order to serve outside jurisdiction, to show that Hong Kong is clearly the appropriate forum (Noble Power Investment Ltd v Nissei Stomach Tokyo Co Ltd [2008] 5 HKLRD 631, see also Ren Yun Liang & Ors v China Merchants Bank & Ors, unrep, HCA 1456/2005, per Recorder B Yu SC at §18).   The Expert Opinion is clearly aimed to deal with issues relating to forum non conveniens.  As the plaintiffs and their legal advisers should have been aware of the issues to be considered in the application under the Setting Aside Summons, there is no reason as to why they have not included the Expert Opinion in their round of filing affidavits in opposition.

32.According to the submission of Mr Sheppard and the contents in Hill’s 5^th Affidavit, it is the plaintiffs’ case that the Expert Opinion has to be filed in order to address some of the matters raised in the oral reasons of Master A Ho.  This is exactly the undesirable practice that r 1(5) seeks to avoid.  As mentioned in §13 above, O 58 r 1(5) was introduced to curb the undesirable practice before the CJR when parties sought to adduce a further round(s) of evidence on appeal after an unfavourable decision from a master.  R 1(5) aims at effecting a change of culture so that parties should prepare their application properly prior to the hearing before a master.  The spirit of this rule will be defeated if a party is allowed to revert to the pre-CJR practice.

33.The plaintiffs should not therefore be allowed to have two bites at the cherry.  Prior to the hearing before Master A Ho, the plaintiffs had to make a decision as to the totality of the evidence to be presented to the Master for consideration.  What they are not allowed to do, like the culture in the pre-CJR era, is that they wait for the decision of the Master, and if the decision is undesirable, they then present further evidence to the court in the appeal.

34.In his submission, Mr Sheppard has repeatedly emphasized that the plaintiffs had given consent to the defendant three times for extension of time in the filing of affidavit in reply.  However, this is a non-point.  The plaintiffs simply did not see the need to file the Expert Opinion to oppose the Setting Aside Summons, otherwise they would have included such evidence in the summons to file further evidence dated 4 July 2013.  If they did not have sufficient time to obtain the Expert Opinion, they could have made an appropriate application for time to file such evidence, and yet no such application was made prior to the hearing before Master A Ho.  Hence, there is simply no merit in the application.

35.Based on the aforesaid, I dismissed the New Evidence Summons.

36.There is no dispute that costs should follow the event.

37.The defendant asks for his costs to be taxed on indemnity basis.  I disagree.  Although there is totally no merit in the application under the New Evidence Summons, I do not find that the plaintiffs have conducted the application in an unreasonable manner.  In my judgment, the application was made by the plaintiffs due to misapprehension of the law rather than as an attempt to delay the proceedings.  Hence, I only ordered the costs to be paid on party-and-party basis, and I summarily assessed the costs in the sum of $35,750 in the hearing.

38.These are the reasons for my decision.

Mr Andrew Sheppard, instructed by Tanner De Witt, for the 1^st and 2^nd plaintiffs

Mr Desmond Leung, instructed by Stephenson Harwood, for the defendant