Re Moulin Global Eyecare Holdings Ltd
Read the full judgment text of HCCW 470/2005 on BabelCite. This High Court CFI judgment was delivered on 19 December 2013.
1. In both sets of HCCW proceedings, the respondent Liquidators apply (A) to strike out an affirmation filed by a Mr Xie on behalf of the applicants; and (B) for an order for cross-examination of Mr Xie.
Cited by 25 cases · Cites 3 cases
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HCCW 470/2005 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMPANIES (WINDING-UP) NO 470 OF 2005 ____________
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_____________ D E C I S I O N _____________ 1.In both sets of HCCW proceedings, the respondent Liquidators apply (A) to strike out an affirmation filed by a Mr Xie on behalf of the applicants; and (B) for an order for cross-examination of Mr Xie. THE BACKGROUND 2.Moulin Global Eyecare Holdings Limited (“Moulin”) used to be a listed company and the ultimate parent of a group of companies and a substantial multi-national group engaged in manufacturing, marketing and sales of optical products. Leadkeen Industrial Limited (“Leadkeen”) was its wholly owned subsidiary. Moulin and Leadkeen are in liquidation. The respondents have been appointed as their Liquidators. 3.The applicants (“BOC”) sought to recover debts based on the Guarantees executed by Moulin and Leadkeen respectively. Relying on Mainland judgments against Moulin and Leadkeen (upheld on appeal) in their favour, BOC lodged proofs of debt, but they have been rejected by the Liquidators. 4.BOC lodged appeals under Rule 95 of the Companies Winding-up Rules (Cap 32H) (“Rule 95”), supported by the affirmation of Mr Xie Wei (“Xie-1st”). In that affirmation, the sole question for the appeal was whether the Mainland judgments gave rise to res judicata which bound the Liquidators to admit BOC’s proofs of debt in the respective liquidation. 5.The Liquidators contest the appeal on the grounds, amongst others, that it is necessary to go behind the Mainland judgment to investigate the genuineness or otherwise of the purported BOC loans/Guarantees. Moreover, since BOC refused to cooperate with the investigations, the Liquidators seek an order for discovery against BOC to provide the documents in support of their proofs of debt. An affidavit of Mr Batchelor was filed on behalf of the Liquidators. 6.The evidence of the Liquidators showed that there was no record of the Moulin Guarantee, the Leadkeen Guarantee, the Moulin Minutes and the Leadkeen Minutes authorising execution of the Guarantees. The nature of dealings between the Moulin Group and the Borrower of the loans and the reasons why Moulin and Leadkeen had chosen to guarantee the debts of the Borrower were also not known to the Liquidators. 7.The Mainland court appointed expert concluded that the signature of Ma Bo Kee (former Chairman) and the stamp of Lead Keen (not Leadkeen) Industrial Limited on the Leadkeen Guarantee was different from the samples of genuine signatures and chops provided by BOC. However, Ma Bo Kee made a declaration on 21 July 2006 that he had in fact signed the Leadkeen Guarantee, without condescending upon particulars. Ma Bo Kee did not attend the Mainland hearings. His lawyer represented to the court that all of the signatures of Ma Bo Kee on the Moulin Guarantee, Leadkeen Guarantee, the Moulin Minutes and Leadkeen Minutes were genuine. The Mainland judgments relied upon Ma Bo Kee’s evidence, especially his declaration in rejecting the findings of the court appointed expert. 8.The Liquidators’ enquiries with BOC met with unforthcoming responses and refusal to provide documents. Upon the evidence then available to it, the Liquidators adjudicated upon and rejected BOC’s proofs of debt. 9.The Liquidators now claim that “new evidence” had emerged which called into question the bases of the Mainland judgments. That was the conviction of Ma Bo Kee and other key officers on charges of conspiracy to publish a false statement and conspiracy to defraud. The findings of the criminal court in the Court of First Instance showed that the fraudulent conduct of Ma Bo Kee, his family members and associates included the presentation of false or forged documents to banks for the purpose of raising funds; unauthorized execution of loan and security documents on behalf of Moulin by Ma Bo Kee and Cary Ma; and unauthorized execution of false board minutes by Ma Bo Kee and Cary Ma. During the criminal trial, Ma Bo Kee lied to the court. The Liquidators’ interviews with one Ma Wu Bei showed that he would sign documents on behalf of Leadkeen for use in the Mainland without authority to do so and at the direction of Ma Bo Kee. The “new evidence” was said to demonstrate that the evidence of Ma Bo Kee upon which the Mainland judgments were premised was at least unreliable and the Mainland judgments were unsafe. 10.The opinions of experts obtained by the Liquidators also showed that the signatures on the Moulin Guarantee and Leadkeen Guarantee were not made by Ma Bo Kee. There were no board meetings actually held to approve execution of the Guarantees. BOC had notice of possible irregularities but failed to properly confirm the authority of the person giving the Guarantees. The evidence of Ma Bo Kee’s evidence was false and misleading. The Liquidators also suggested that the Leadkeen Guarantee might have been procured after the borrower had defaulted on the loans and improperly backdated. The Liquidators took the view that the Mainland judgments were procured by fraud/collusion. 11.On 18 October 2013, the 2nd affirmation of Mr Xie (“Xie-2nd”) was filed in reply. This affirmation is the subject of the strike-out application. 12.The substantive hearing of the appeal has been set down for 21 January 2014. The Liquidators seek to cross-examine Xie at that hearing. A. STRIKING OUT OF XIE-2ND Legal principles governing the strike out of an affidavit or parts of it 13.An affidavit should only contain facts as the deponent is able of his own knowledge to prove: Order 41, rule 5(1) of the Rules of the High Court. The contents should be relevant to the dispute before the court. 14.Under Order 41, rule 6, the court may order to be struck out of any affidavit any matter which is scandalous, irrelevant or otherwise oppressive. 15.An affidavit should not contain objectionable hearsay and exposition of the views of his solicitor on forensic matters: Robert Lee Flickinger v Director of Immigration [1988] 1 HKLR 81, Clough JA, at 94E. 16.In Chan Woon Fui v Chan Wing Suen, HCCW 350/2004,Barma J (as he then was) summarized the principles as follows:
17.Specifically on legal arguments, comments and opinions rather than factual matters, Lam J has this to say in Oh Jae-hoon Eugene v Richdale [2003] 4 HKC 318, at para 15-16,
Identification of the offending paragraphs 18.Mr Dentice of Messrs Reed Smith Richards Butler (“RSRB”) acting for the Liquidators deposed to the fact that the allegations in Xie-2nd “raised a broad range of factual disputes, including scandalous and crudely argumentative attacks upon the integrity, competence and credibility of the Liquidators and their other deponents, plus an illegitimate attempt to adduce inadmissible, incorrect and misleading purported expert evidence on Mainland law without expert directions or tendering the expert for cross-examination”. Ironically, his affidavit made lots of comments and submissions about Xie-2nd. 19.The subject matter of attack by the Liquidators can be found in paragraphs 7 to 23 of Xie-2nd:
20.In summary, paragraphs 7, 8, 11, 13-16 (“the offending paragraphs”) do fall foul of Order 41, rules 5(1) and 6. 21.Mr Pao submits that this is a case of extreme double standards in that the Liquidators committed similar errors as Xie. For example,
22.I agree with Mr Pao. However, one party’s non-compliance with the Rules does not justify the other party’s breach. Subject to proper justification, the Liquidators’ affidavit evidence is open to the same attack under Order 41, rule 6 at the appeal. Exercise of discretion to strike out 23.The offending paragraphs are clearly identifiable and the appeal judge can easily exclude them from his/her mind with proper assistance from the Liquidators’ counsel. The Liquidators can make application for disallowing part of the costs for preparing Xie-2nd. 24.I can hardly see the substantive benefit of the strike out to the Liquidators. The filing of evidence has closed. There was no suggestion that if the offending paragraphs were not struck out, the Liquidators needed to file a supplemental affirmation in opposition. 25.Engaging 2 counsel to argue this application was simply not procedurally proportionate in the light of the tight timetable or conducive to the swift disposal of the appeal. 26.The time spent on the striking out summonses could have been better spent on the expert directions, or the discovery summons had the Liquidators been minded to pursue it. The hearing of the Order 41 summonses was fixed urgently with only 30 minutes reserved for argument on 2 applications. Regrettably, with 22 authorities just from the Liquidators (for both applications), other court sittings and an intervening duty outside Hong Kong, this court has been unable to produce a faster decision. There is now only one month left before the appeal to tie up any loose ends. 27.Considering all circumstances, I decline to strike out the offending paragraphs. Even if I were to strike out, I would have considered the same factors in paragraphs 25-26 above and declined to order costs in favour of the Liquidators. B. CROSS-EXAMINATION OF DEPONENT Legal principles applicable 28.The test for permitting cross-examination of a deponent is whether it is in the “interests of justice” to do so. Permission will be given when good and sufficient reasons are shown. Permission is more often given where a final order is to be made or where the substantive relief sought has an element of finality: Wenta Sung Yuen v Park Yiu Yuen [1984] HKLR 431. For example, 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. 29.The court will of course consider the delay and expense that will arise as a result of the need to cross-examine a deponent, but that consideration should not lightly take away a party’s right to cross-examine. Nature of the appeal proceedings 30.Although the proceedings are termed as an “appeal”, it is in substance a new hearing before the court, not limited to reviewing the correctness of the Liquidators’ decision. The “appeal” will result in a final order whereby the court may reverse the Liquidators’ decision and admit BOC’s proof of debt: Rule 95. 31.In Active Base Ltd v Roderick John Sutton & Desmond Chung Seng Chiong, Joint and Several Liquidators of Moulin Global Eyecare Holidngs Ltd, HCCW 470/2005, 4 June 2008 (upheld by the Court of Appeal and the Court of Final Appeal), Kwan J (as she then was) directed, pursuant to Rule 95, that an appeal be heard de novo with the filing of evidence and cross-examination of deponents. She described the role of the Liquidators, the court and the procedure to be adopted as follows:
32.Mr Barlow SC submits that an estoppel (arising from res judicata) cannot operate so as to prevent the Liquidators from performing their statutory functions: In re Exchange Securities & Commodities Ltd [1988] Ch 46 at 60. 33.On the other hand, Mr Pao contends that the Liquidators are unable to show an authority enabling them to re-open a judgment given after trial. Moreover, the rationale for estoppels not to binding the liquidators (as opposed to the company) is that they were not privy to representation. However, the Liquidators here were privy to the Mainland litigation: In re Exchange Securities & Commodities Ltd, at page 59D-F. 34.Mr Pao’s submission will form the subject of the appeal. However, in the light of the authorities which Mr Barlow SC draws to my attention, I cannot agree with Mr Pao that the January hearing is not a full-blown appeal. The Rule 95 summonses or Xie‑1st were not prepared for a preliminary issue. Neither did the order made on 27 August 2013 frame an issue. Even if it was a preliminary issue to be tried, that would still not be an interlocutory matter in the scheme of Rule 95, but is intended to be a final order dispositive of the appeal. Mr Barlow SC also rightly pointed out that there was no application for split trial of issues. How BOC has chosen to conduct their case could not tie the hands of the Liquidators. The application for cross-examination was not pre-mature. Necessity for cross-examination 35.Xie (the only witness for the applicants) claimed that given how he understood Moulin to have operated, Ma Bo Kee did in fact sign on most if not all of Moulin’s crucial documents. The Liquidators disputed his evidence and challenged his credibility. It is in the interests of justice that his evidence be tested in cross-examination so that the court can make findings of fact. 36.Mr Pao complains about the delay of the Liquidators in raising the question of cross-examination (a) after the trial date has been fixed; (b) when the only reference to concrete examples which the Liquidators wish to cross-examine on were contained in Xie-1st filed on 25 July 2013. 37.In my view, whilst the Liquidators could have acted more promptly, taking out this application soon after filing of affidavits has been closed was not an unacceptable delay in the overall scheme of things. 38.Accordingly, I will give leave to cross-examine Mr Xie. I will add that the Liquidators’ cross-examination should not be limited to that on Xie-1st. 39.Mr Barlow SC indicated that the time for cross-examination would be half a day. Given the limited time available in the court’s diary, 20 January 2014 will also be reserved for the appeal, to commence at not earlier than 11 am. Three hours will be assigned for the Liquidators’ cross-examination and the rest for re-examination and submission. CONCLUSION 40.I dismiss the applications for striking out Xie-2nd. I give leave for cross-examination of Xie and hence an order in terms of para 2 of the summonses. COSTS 41.The summonses have been disposed of at the first hearing. The applicants have successfully resisted the strike out of Xie-2nd but they did breach Order 41, rules 5(1) and 6. Their resistance to the application for cross-examination failed. I make an order nisi that each party do bear its own costs. Any application for variation shall be by summons returnable for arguments on 20 January 2014. 42.I thank counsel for their assistance.
Mr Jin Pao and Ms Elizabeth Cheung, instructed by Cheung Tong & Rosa, for the applicants Mr Barrie Barlow, SC and Ms Rachel Lam, instructed by Reed Smith Richards Butler, for the respondents | |||||||||||||||||||||||||||||||||||||||||||||||||
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