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The Hong Kong Court of Appeal maintains a strict stance on accepting fresh evidence during appeals, applying the Ladd v Marshall test (see our previous blog post here). However, exceptions can be made where justice demands it, as illustrated by the recent case of Grade One Ltd & Ors v Chow Chin Yui, Angela & Ors [2025] HKCA 1051. There, the Court of Appeal admitted fresh evidence that indicated the summary judgment may have been procured by fraud. On the basis of that evidence, the Court set aside a summary judgment for approximately HK$26 million and allowed the Plaintiffs to defend the counterclaims against them.
Background
The dispute arises from a facility agreement between the Plaintiffs (as borrower and guarantors) and the 3rd and 4th Defendants (as lenders). The Court of First Instance granted summary judgment in favour of the counter-claim brought by the Defendants for payment of principal and interest under a facility agreement. The Plaintiffs appealed and sought leave to introduce fresh evidence, which they contended would show that their liability had been discharged prior to the action, that the evidence had been supressed by the Plaintiffs, and that the Plaintiffs had obtained the summary judgment by fraud.
Issues
In deciding whether to admit the Plaintiffs' fresh evidence on appeal, the Court of Appeal adopted the three-limbed Ladd v Marshall test as their starting point, which requires that:
- the evidence could not have been obtained with reasonable diligence for use at first instance;
- the evidence would probably have an important influence on the result of the case, though it need not be decisive; and
- the evidence must be apparently credible, though it need not be incontrovertible.
However, the Court accepted that where the lower court's judgment is alleged to have been obtained by fraud, the first limb of test should be relaxed, provided that the applicant can demonstrate a reasonable prospect of establishing the fraud (clear evidence of fraud is not required at this stage).
Decision
The Court of Appeal considered the Plaintiffs' fresh evidence, which included a side letter, draft loan agreement, payment schedule, demand letter and communications concerning the alleged liabilities.
The Court of Appeal concluded that the evidence was material and credible and would have an important influence on the outcome of the appeal. The evidence was capable of showing that the Plaintiffs' debts were discharged by a US$3 million loan, before the counterclaims were pursued against them. This suggested that the Defendants' counterclaims involved conscious and dishonest suppression of material facts, and there was a reasonable prospect of showing that the judgment may have been obtained by fraud. Accordingly, the Court of Appeal was satisfied that the second and third conditions of the Ladd v Marshall test were met.
Comment
This decision underscores the Court's willingness to relax the reasonable diligence requirement in the Ladd v Marshall test where a party presents specific and credible evidence of fraud affecting the first instance judgment. The Court also accepted the 3rd Plaintiff's explanation for delays in obtaining evidence, noting the lack of access to certain records. While appeals are not intended to offer a "second bite at the cherry", the Court emphasized that where the integrity of the judicial process itself is at stake, it will not hesitate to reopen matters to ensure the full facts are revealed.
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