YANG YUN AND OTHERS v. CHINA YUN LONG INVESTMENT HOLDINGDS GROUP LTD (formerly known as CHINA SHOUTONG INVESTMENTS HOLDING GROUP LTD) AND ANOTHER

HCA 1173/2021

[2025] HKCFI 4218

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1173 OF 2021

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D E C I S I O N

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Introduction and Background

1.  I have before me an application by the Plaintiffs (“Ps”) by Summons dated 17 June 2025 (“the Summons”) for leave to adduce the 3^rd Affirmation of Yang Yun Thor (“Yang 3^rd”) for use in support of Ps’ appeal against the judgment of Master Bonnie Cheng (“the Master”) dated 7 February 2025 which is scheduled to be heard before me on 20 August 2025 (“the Appeal”). Given that this is not the hearing of the Appeal, I propose only to state shortly the background on a high level of generality and give short reasons sufficient to dispose of the Summons.

2.  The present action arises out of a sale and purchase agreement dated 21 December 2020 (“the SPA”) whereby Ps and the Defendants (“Ds”) agreed for Ds, as sellers, to sell to Ps, as purchasers, shares in a company (“the Target Company”).

3.  In gist:

(1)  Ps’ case is that Ds did not provide the audited financial accounts of the Target Company for year ending 31 March 2017 to 31 March 2020 (“the Relevant Accounts”) in breach of SPA; and

(2)  Ds’ case is that they have provided the Relevant Accounts but Ps have not paid the remaining purchase price in breach of SPA.

4.  On 7 February 2025, the Master ordered judgment be entered for Ds against Ps and Ps’ claim in the Statement of Claim be struck out with costs to Ds.

The Applicable Principles

5.  The applicable principles for leave to adduce evidence on appeal are well-established and not disputed. The 3 Ladd v Marshall conditions to be satisfied are:

(1)  It must be shown that the evidence could not have been obtained with reasonable diligence for use at the hearing below;

(2)  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; and

(3)  The evidence must be such as is presumably to be believed.

Discussion

6.  In Yang 3^rd, it seeks to produce the following evidence:

(1)  copies of 4 financial statements of the Target Company including the signed reports from the director and independent auditor report for the period from 2016 to 2020 dated 30 November 2020 (“Financial Statements”); and

(2)  a copy of email dated 21 January 2025 (“the Email”) from the auditors, Messrs Y.T. Lo & Co (“the Auditors”) attaching the Financial Statements.

7.  Even on Ps’ evidence, the Financial Statements were provided to them attached to Ds’ Summons filed on 6 February 2025, which was one day before the hearing before the Master (“the Hearing”): see Yang 3^rd, §7(2).  As for the Email, according to Ps, this was included in the 5^th Affirmation of Chan King Chung (“Chan 5^th”) which had been filed but no leave was obtained (as the Summons for leave to adduce Chan 5^th was opposed by Ps, it was not pursued by Ds before the Master): see Yang 3^rd, §1. Thus plainly, both the Financial Statements and the Email were already in Ps’ possession at the time of the Hearing.

8.  Whilst Ps submitted that they had no time to evaluate the Financial Statements provided on the eve of the Hearing, it is Ps’ own evidence that Ps had liaised directly with the Auditors from around April or May 2021 for the preparation of the Relevant Accounts: see 2^nd Affirmation of Yang Yun Thor, §40. In the emails exhibited to Yang 3^rd, it clearly shows that there was direct communication between “Tony Wong” (according to the Dramatis Personae prepared by Ps, he was the 3^rd Plaintiff) and the Auditors between 16 March 2021 to 13 July 2021[1]. Yang’s 3^rd, §7 also stated: “Since the auditor, Mr Y.T. Lo, has communicated with the 3^rd Plaintiff on numerous of occasions through emails between March 2021 and mid-July 2021…”.

9.  According to Ps’ Reply, §5(17), on or around 26 July 2021, Ps received from Ds a copy of finalized audited report of the Target Company which was signed by Ds but remained unsigned by the Auditors. I cannot accept Ps’ submissions that they had exercised reasonable efforts to obtain the signed Financial Statements. There is no explanation why Ps could not have asked the Auditors to provide the signed Financial Statements in the past 4 years given the admission that they had been in direct contact with the Auditors since March 2021.

10.  Whilst it was stated that Ds could have provided the signed Financial Statements to Ps, who had no duty they say under the SPA to obtain those, where this is now an application for leave to adduce evidence which is available to Ps before the Hearing, it is for Ps to demonstrate reasonable diligence.

11.  As for the Email, plainly these have always been in their possession given they were email exchanges between the 3^rd Plaintiff and the Auditors.

12.  Mr Chin, counsel appearing for Ps, submitted that there is a “potential fraud” and if judgment was obtained by fraud the first of the Ladd v Marshall condition will be applied flexibly. However, in both the authorities cited by him in support, Johnson Electric International Ltd v BEL Global Resources Holdings Ltd [2014] 5 HKC 504, §12 citing Karaha Bodas Co v Persusahaan Pertambangan Minydak Dan Gas Bumi Negara [2007] 4 HKLRD 1002 at §§148-153, the Court of Appeal made it clear that it is not whenever fraud is alleged that the first condition is relaxed. Much depends on the strength of the case as to fraud and its relevance.

13.  In the present case, I do not accept there is any clear case of fraud. Fraud has never been pleaded by Ps. The premise of Ps’ allegation of fraud is that it would have been impossible for the Auditors to have signed the Financial Statements on 30 November 2020 when there was discussion between March 2021 and mid-July 2021 on the preparation of the Financial Statements, the Auditors were engaged only in early 2021 and there are some missing pages to the Financial Statements in the Hearing bundle and other discrepancies in the documents. However, the Auditors have never stated that they signed the Financial Statements on 30 November 2020 but rather that they cannot recall the exact time of signing the audited accounts of the Target Company[2]. Besides there is nothing suspicious about the dating of the Auditors’ reports on 30 November 2020 as that was agreed between Ps and Ds: see 6^th Affirmation of Chan King Chung, §15.1 which was not disputed by Ps. This then leaves the allegation of missing pages and discrepancies in the Hearing Bundle[3] which on its own could hardly amount to clear evidence of fraud.

14.  Given the failure to satisfy the first condition of Ladd v Marshall, I would dismiss the Summons. This is sufficient to deal with the Summons.

15.  There is no reason why costs should not follow the event. I order Ps to pay to Ds their costs of the Summons to be summarily assessed.

16.  Having considered the Statement of Costs, adopting a broad brush approach, I have summarily assessed Ds’ costs of the Summons at HK$32,000.