In the decision of China Minsheng Banking Corp Ltd v Top Power Enterprises Ltd [2023] HKCFI 2469 on 28 September 2023, the Court upheld the decision of the Master in refusing the Defendants’ application for leave to adduce expert evidence.
The decision serves as a reminder to practitioners that expert evidence should not be adduced if its sole purpose is to buttress a party’s factual case.
The Facts
The Plaintiff bank claims against the 1st and 2nd Defendants for a US$250 million loan owed pursuant to a 2013 Facility Agreement, and further claims against the 3rd Defendant pursuant to a guarantee entered into in December 2014.
The 1st and 2nd Defendants owned 70% of the shares in Victorian Iron Pty Ltd (“Victorian Iron” and “Victorian Iron Shareholding”), an iron mining company incorporated in Australia.
The 3rd Defendant claimed that the reason why he entered into the guarantee in December 2014 was not to acquire Victorian Iron, since he was informed by a Mr. Chi (an executive director of one of the 3rd Defendant’s companies) that the iron mine was of no value. Mr. Chi formed his opinion after an earlier site visit at the iron mine in September or October 2014.
The 3rd Defendant instead claimed that he entered into a separate collateral oral agreement with the Plaintiff in December 2014, under which the Defendants would not be required to repay the loan unless the Plaintiff had advanced another US$300 million loan to the 3rd Defendant’s investment projects in Singapore.
The Defendants’ proposed expert issue is the objective value of the Victorian Iron Shareholding as of December 2014 (“Proposed Expert Evidence”).
The Court upheld the decision of the Master, and refused to grant leave for the Defendants to adduce the Proposed Expert Evidence.
Key Takeaway for Practitioners
There are four takeaways to this decision for practitioners:
- It serves as a cautionary reminder that the proposed expert evidence being of “some assistance” is insufficient to justify leave being granted. This is consistent with the line of authorities since Shenzhen Futaihong Precision Industry Co Ltd v BYD Co Ltd [2019] 2 HKC 175 to the effect that the Court does not allow expert evidence simply on the basis that it cannot rule out a possibility of such evidence being relevant and helpful.
- In justifying the evidential value of the proposed expert evidence, not only are the parties entitled to rely on issues arising from the pleadings, but also on issues raised in witness statements and documentary evidence. In this case, the Court considered that whether the 3rd Defendant subjectively believed the Victorian Iron Shareholding to be of no economic value is a factual matter to be answered based on facts known to him in December 2014, not the actual value of the mine then or at the time of the expert report.
- Parties should be cautious as to the probative value of a retrospective valuation exercise. In rejecting the Proposed Expert Evidence, the Court accepted that it was impossible for the experts to now meaningfully verify the then on-site condition of the iron mine when Mr. Chi inspected it about a decade ago. This serves as a reminder to practitioners that the probative value of a valuation exercise is both time and asset specific – there could be cases whereby retrospective valuation after a long lapse of time would significantly hamper the probative value of the proposed valuation.
- In an appeal against a Master’s decision, parties often include the transcript of the hearing before the Master in the hearing bundle. The Court in this case cautioned against this approach, reasoning that it would be wasteful to produce the whole set of transcript when an appeal against a Master’s decision operates by way of a rehearing.
Catrina Lam and Arthur Poon, instructed by Allen & Overy, acted for the Plaintiff
