SECURITIES AND FUTURES COMMISSION v. LEUNG ANITA FUNG YEE MARIA AND OTHERS

HCMP 1917/2019

[2024] HKCFI 2800

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1917 OF 2019

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D E C I S I O N

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1.  Introduction[1]

1.1  At the hearing on 6 February 2024 (“Hearing”), I dealt with 3 applications, namely P’s Injunction Summons, R1’s Adjournment Summons and her Evidence Summons. At the Hearing, I dismissed the Adjournment Summons. By the decision handed down on 6 May 2024 (“Decision”):

(1)  Having considered the evidence sought to be adduced by the Evidence Summons on a de bene esse basis, I dismissed the Evidence Summons (Decision section 4(i));

(2)  I provided my reasons for the dismissal of the Adjournment Summons (Decision section 4(ii));

(3)  I acceded to the Injunction Summons and granted a Mareva injunction against R1 on the terms set out in the Decision.

1.2  As set out at Decision §4.7, the Adjournment Summons was pursued by R1 on two bases, respectively termed the First Basis and the Second Basis in the Decision. As recorded at Decision §4.10, the scope of disagreement in respect of the First Basis was curtailed at the Hearing, having been limited to the issue of whether R1 should be afforded the opportunity to file responsive expert evidence in relation to the authenticity of the WeChat Messages. For the reasons set out at Decision §§4.11 to 4.16, I did not regard the First Basis as a valid reason to adjourn the Hearing (Decision §4.17).

1.3  By her summons dated 3 June 2024 (“Summons”), R1 applies out of time (by 14 days) for leave to appeal against the Decision (“Leave Application”). The Summons also seeks leave to refer to and adduce an expert report (“New Evidence Application”) prepared by Mr Alan Jeffries of D3 Forensics Limited dated 27 March 2024 (“Jefferies Report”).

1.4  Directions were given for the Summons to be determined on the papers. Pursuant to those directions, I have received helpful written submissions from Mr Vincent Chen[2] for R1 and Mr Jin Pao SC (leading Ms Sheena Wong) for P.

1.5  In the draft Notice of Appeal, 11 proposed grounds of appeal are advanced (Grounds 4 and 11 are catchall grounds and do not materially add to R1’s argument). In summary:

(1)  Grounds 1 to 3 are directed my decision to refuse to adjourn the Hearing by reason of the First Basis;

(2)  Although Grounds 5 to 8 are directed at my decision to accede to the Injunction Summons, they are related to my decision to refuse the adjourn the Hearing by reason of the First Basis;

(3)  Only Grounds 9 to 10 can be said to be “independent” from the issues relating to the First Basis.

1.6  As has been clarified by Mr Chen, the New Evidence Application does not seek leave to adduce the Jefferies Report. Instead, Mr Chen only seeks to refer to the Jefferies Report for the purpose of the Leave Application, on the basis that he can demonstrate that it is reasonably arguable that the Court of Appeal would grant leave to adduce the Jefferies Report on appeal by reference to the criteria in Ladd v Marshall: Man Lin Heung (the Administratrix of the Estate of Man Kwai Yin aka Man Kwai Yin) v 梁根林 & Anor [2019] HKCA 846 at Footnote 1.

2.  The applicable principles

2.1  There is no real controversy between counsel on the applicable principles. They may be summarized as follows.

2.2  Leave to appeal is only granted if the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard: SMSE v KL [2009] 4 HKLRD 125 §17. Reasonable prospect involves that the prospect must be more than fanciful without having to be probable.

2.3  On the issue of whether an extension of time should be granted (KNM v HTF, HCMP 288 of 2011, 7 September 2011 §§16 and 19):

(1)  An extension of time for appeal is a matter which lies within the discretion of the court. An application for an extension of time should be supported by an affidavit deposing to any facts relied on by the applicant and giving a full account of, and explanation for, the whole of the delay since time expired;

(2)  Where a delay is inexcusable although insubstantial, a party seeking an extension of time must show a real prospect of success on the merits.

2.4  The dismissal of the Adjournment Summons is a case management decision. In this regard:

(1)  Case management decisions are pre-eminently within the province of the judge and it is only in wholly exceptional circumstances that the Court of Appeal would interfere;

(2)  The appellant faces has very high hurdle and must show that the judge has gone clearly wrong and made orders which will clearly involve an injustice or an inability for the trial court to carry out its task or if the judge erred in principle or the order was irrational having regard to the issues that had to be resolved (see for example Tsang Wai Fan v Hui Siu Kwong, HCMP 409 of 2016, 12 April 2016 §§21 to 22).

2.5  In respect of R1’s appeal against the granting of the Mareva injunction (New Sparkle Roll International Group Limited v Sze Ching Lau [2024] HKCA 336 §68):

(1)  The granting of an interlocutory injunction is an exercise of discretion of the court;

(2)  The well-established principles are that the appeal court ought to defer to the judge’s exercise of discretion and not interfere with it merely on the ground that it would have exercised the discretion differently;

(3)  The appeal court will not disturb the judge’s exercise of discretion unless one or more of these grounds are established: the judge had misdirected himself with regard to the principles or the evidence in accordance with which his discretion had to be exercised; he had taken into account irrelevant matters; he failed to take into account relevant ones or his exercise of discretion is so plainly wrong that it is outside the generous ambit within which reasonable disagreement is possible.

3.  Reasons for R1’s delay in making the Leave Application

3.1  The explanations for R1’s delay in making the Leave Application are set out in the 6^th Affirmation of Chiu Pak Yue Leo (“Chiu”), a partner of the firm of solicitors representing R1. The explanations are as follows:

(1)  As a result of the Decision, R1’s bank accounts are frozen. Even before the granting of the Mareva injunction, R1 has already incurred substantial legal costs in defending these proceedings and the Injunction Summons;

(2)  After the Decision, R1 was severely hampered by the lack of financial resources in lodging any application for leave to appeal. At the same time, she was obligated under the Mareva injunction to render further disclosure in respect of her financial assets;

(3)  It was only recently that she was able to borrow funds from her friend which could be used to fund her application for leave to appeal against the Decision;

(4)  R1’s solicitors only received costs on account on 29 May 2024.

3.2  I agree with Mr Pao that R1’s delay is inexcusable, for the following reasons:

(1)  The Mareva injunction has carved out a monetary exception of HK$250,000 per month for legal fees (Decision §5.33). That sum is plainly sufficient for lodging the Leave Application[3];

(2)  As pointed out by Mr Pao, neither R1 nor her solicitor has deposed that as a result of the Injunction Order, R1’s legal team was unable or unwilling to commence work in order to lodge the Leave Application within the stipulated timeframe;

(3)  I do not place any weight on the suggestion that R1 was only recently able to borrow funds from her friend. There is no explanation why this factual evidence has to come from Chiu instead of from R1 herself. The evidence is in any event barren, as there are no particulars or documentary evidence on (a) the identity of the alleged friend, (b) the amount of the loan, (c) when the request for the loan was made and why it could not have been made earlier, (d) when R1 purportedly received the loan.

3.3  However, I am prepared to proceed on the basis that, like KNM, the delay here is inexcusable but insubstantial. The question therefore is whether R1 is able to demonstrate that the proposed appeal has a real (as opposed to reasonable) prospect of success on the merits.

4.  Merits of the proposed appeal

(i)   Whether the Jeffries Report arguably satisfies the Ladd v Marshall criteria

4.1  It is common ground that the Jeffries Report does not concern evidence as to matters which have occurred after the date of the hearing within the meaning of RHC Order 59, rule 10(2), which provides:

“The Court of Appeal shall have power to receive further evidence on questions of fact, either by oral examination in court, by affidavit, or by deposition taken before an examiner, but no such further evidence (other than evidence as to matters which have occurred after the date of the trial or hearing) shall be admitted except on special grounds.”

4.2  In the present case, counsel agree that in order for the Jeffries Report to be admitted on appeal (and referred to at the Leave Application), R1 has to satisfy the Ladd v Marshall criteria, namely the Jeffries Report (for the purpose of the Leave Application arguably):

(1)  Could not have been obtained at the trial with reasonable diligence;

(2)  Would or might, if believed, have a very important effect on the mind of the tribunal; and

(3)  Is evidence of a sort which inherently is not improbable.

4.3  The disagreements between counsel are on the 1^st and 2^nd criteria. The relevant background is already set out at Decision §§4.10 to 4.15.

4.4  In relation to the 1^st criterion, Mr Chen submits:

(1)  The Phase 1 Report and the Phase 2 Report were only adduced into evidence by Yip 11^th which was filed on 19 January 2024;

(2)  As such P’s expert evidence was only adduced as reply evidence shortly before the Hearing;

(3)  On 23 January 2024, R1’s solicitors had invited P to agree to an adjournment as R1 did not have sufficient time to consider, inter alia, the Phase 1 Report and the Phase 2 Report but her invitation was rejected by P;

(4)  As time was required for R1’s expert to compile his report, the Jefferies Report was not a piece of evidence which R1 could have obtained with reasonable diligence for use at the Hearing.

4.5  I do not agree with Mr Chen’s characterization that the Jefferies Report is strictly only reply evidence to the Phase 1 Report and the Phase 2 Report, for the following reasons:

(1)  As set out at Decision §§4.11 to 4.12, the WeChat Messages were first adduced by P in Yip 6^th dated 19 September 2023 and R1 had already challenged the authenticity of the WeChat Messages on 21 September 2023, albeit at that time on a factual basis by adducing evidence from Dr Alice Wong and Mr Warren Chan;

(2)  In R1’s 4^th Affirmation dated 6 December 2023, namely before P adduced the Phase 1 Report and the Phase 2 Report, she already stated that expert evidence would be provided to the court as soon as possible;

(3)  As a matter of substance, the Jefferies Report was not strictly in reply to the Phase 1 Report and the Phase 2 Report, as the underlying bases of the reports are diametrically different. Whereas the Phase 1 Report and the Phase 2 Report are based on an analysis carried out on Zhao’s phone, the Jefferies Report is based on an analysis carried out on an iPhone 14 Plus owned by R1. As noted at Decision §4.16(3), the submission made by R1’s leading counsel at the Hearing was that R1 might question the appropriateness or the effectiveness of the methodology adopted by Deloitte (and in that sense evidence in reply to the Phase 1 Report and the Phase 2 Report). The Jefferies Report does not comment on the methodology adopted by Deloitte;

(4)  In other words, and viewed in the above light, the Jefferies Report is precisely the type of expert evidence intimated in R1’s 4^th Affirmation which would be provided to the court as soon as possible. The “Instructions Received” section and the “Evidence Items provided to the expert” section of the Jeffries Report do not set out any considerations which make it impracticable for it to have been compiled earlier and in time for use at the Hearing;

(5)  I therefore do not see how it can be said that the Jefferies Report was not a piece of evidence which R1 could have obtained with reasonable diligence for use at the Hearing. Indeed, the process of compiling the Jefferies Report could have commenced in late September or early October 2023. See also Decision §4.16(2);

(6)  I am therefore of the view that it is not reasonably arguable that the Jeffries Report satisfies Ladd v Marshall 1^st criterion.

4.6  In relation to Ladd v Marshall 2^nd criterion, Mr Chen submits that the Jefferies Report is to be preferred over the Phase 1 Report and Phase 2 Report. As the Jefferies Report confirms that the WeChat Messages were not sent by R1, it follows (Mr Chen reasons) that there are erroneous factual conclusions at Decision §5.26, namely that the WeChat Messages were not fabricated and that I had erroneously and impermissibly speculated that it was unlikely that Zhao would go to the length of fabricating the WeChat Messages using some sophisticated but unidentified technique (Grounds 2 to 4).

4.7  In assessing Mr Chen’s submissions on Ladd v Marshall 2^nd criterion, it is important to bear in mind what was at issue at the Hearing and decided in the Decision:

(1)  It was accepted by leading counsel for R1 that P has a good arguable case on merits, irrespective of the WeChat Messages. The WeChat Messages were relevant principally to the risk of dissipation (Decision §§3.9 and 4.9);

(2)  The Decision proceeded on the basis that the authenticity of the WeChat Messages was in dispute and allowing R1 to adduce expert evidence would not change the character of the debate although the character of the debate would be raised to an additional level of expert evidence. Leading counsel for R1 did not suggest that the expert evidence of R1 would be of the cogency level that it would conclusively undermine the Phase 1 Report and Phase 2 Report (Decision §4.16(3)). Having considered the Jefferies Report, the foregoing picture remains the case;

(3)  At Decision §4.16(4), I emphasized again that the WeChat Messages were predominantly only relevant to the issue of risk of dissipation of assets, the assessment of which involved looking at the matter holistically. The WeChat Messages were only relevant to P’s allegation that (a) R1 had low regard of the law (in making threats to Zhao) and (b) R1 had plans to emigrate to Canada. In relation to the former, leading counsel for R1 accepted P has a good arguable case on claims based on fraud and dishonesty, and in relation to the latter, there were indisputable immigration records showing R1’s prolonged absence from Hong Kong;

(4)  At Decision §4.25, I reiterated the assessment of risk of dissipation involved looking at the matter holistically and identified those factors which were either not disputed or based on objective evidence, including (a) the uncontested evidence that R1 was concurrently selling very substantial properties worldwide, (b) the documentary evidence disclosed by R1 herself showing dubious features in the Shanghai SPA and the Lions Bay SPA and (c) the objective evidence that R1 has not returned to Hong Kong since her departure in December 2021. The WeChat Messages do not impinge on any of the foregoing.

4.8  I therefore agree with Mr Pao that the Jeffries Report is not evidence which would or might, if believed, have a very important effect on my mind, in the particular circumstances where the Jeffries Report is ultimately not conclusive on the issue of whether the WeChat Messages were sent by R1. At its highest, the Jeffries Report merely contends that the WeChat Messages were not sent from the iPhone 14 Plus provided to Mr Jeffries. The Jefferies Report identifies other devices which could access R1’s WeChat account, and the resolution of the issue of whether the WeChat Messages were sent by R1 would depend on the factual disputes on who had control of or access to those devices on which at the Hearing there was, and at present there is, no evidence.

4.9  For completeness, Mr Chen further submits that it was likely the WeChat Messages were pre-typed, as shown by the timestamps on the WeChat Messages [D/84-85][4] which I had examined (Decision §4.16(1)). He submits that it can been seen after Zhao’s message sent on 20 August 2023 at 02:23:42 (containing 249 Chinse characters), R1 sent a reply message to Zhao just 37 seconds later (at 02:24:19) containing a total of 216 Chinese characters. Mr Chen criticizes the court for not dealing with that anomaly, which was raised at the Hearing, in the Decision. It is said that the Jefferies Report now further calls into question the court’s finding that the WeChat Messages were more likely than not “not fabricated”.

4.10  As pointed out by Mr Pao, the mere fact that certain matters relied on by counsel are not mentioned in the judgment does not mean that the judge has not taken them into consideration. Nor is the judge required to address all the points made by counsel, whether legal or factual: Harbour Front Ltd v Money Facts Ltd & Ors [2019] HKCA 916 §9.

4.11  In so far as necessary, it must be pointed out that the WeChat conversation on 20 August 2023 started at 02:09:53 by a message by R1 to Zhao threatening Zhao not to betray her. This was followed by 2 messages from Zhao at 02:20:04 and 02:23:42 dealing with the same topic. The point raised by Mr Chen assumes that the drafting of R1’s reply sent at 02:24:19 only commenced after Zhao’s message received at 02:23:42. However, it can be seen that even if one were to omit Zhao’s message of 02:23:42, the reply sent by R1 made perfect sense as a reply to the message sent by Zhao on 02:20:04. It may well be that R1 started drafting the message sent by her at 02:24:19 after she received Zhao’s message at 02:20:04 but in the interim Zhao sent an additional message on the same topic at 02:23:42.

4.12  For the above reasons, I am also of the view that it is not reasonably arguable that the Jeffries Report satisfies the 2^nd Ladd v Marshall criterion.

4.13  However, in case I am wrong on the foregoing, I will consider the Jefferies Report in assessing the merits of the proposed appeal grounds. Even on that basis, I am not persuaded that the Leave Application has any merit.

5.  The appeal relating to the Adjournment Summons

5.1  Mr Chen relies heavily on New Sparkle Roll and submits that it was procedurally unfair for me to grant the Injunction Summons against R1 without affording her a fair and reasonable opportunity to adduce expert evidence in response to the Phase 1 Report and the Phase 2 Report. It is further said that in refusing an adjournment, material evidence was shut out and R1 was deprived of the chance to adduce the Jefferies Report which shows that R1 did not send the WeChat Messages.

5.2  Mr Chen does not dispute that the present case is factually miles apart from New Sparkle Roll.

5.3  I agree with Mr Pao that R1 has not begun to engage or identify any palpable errors in the analysis set out at Decision §§4.11 to 4.17. Merely rearguing submissions on the evidence and factual aspects of the case already made in the court below with the hope that the appellate judges may come to a different view is not a proper function of the appellate process: China Gold Finance Ltd v CIL Holdings Limited & Ors, CACV 11 of 2015, 27 November 2015 §§14-16.

5.4  Ground 1 asserts that, as a matter of procedural fairness, I ought to have allowed R1 a proper chance to respond to the Phase 1 Report and the Phase 2 Report which were adduced only as reply evidence by way of Yip 11^th. This has been dealt with at Decision §§4.11 to 4.16 in particular at §§4.16(2). As further explained at §4.5 above, I do not regard it as a correct characterization that R1 only became aware of the need to file expert evidence after P adduced the Phase 1 Report and the Phase 2 Report.

5.5  Ground 2 asserts that without affording R1 an opportunity to properly respond, I was wrong to have heavily relied upon the WeChat Messages. As is clear from the Decision, and as pointed out by Mr Pao, there was no heavy reliance on the WeChat Messages. Ground 2 refers to Decision §5.28 and it is said that I had relied on the WeChat Messages in finding that R1 had a plan to leave Hong Kong. It is plain that what is said at Decision §5.28 is that the WeChat Messages, in so far as they mention R1’s plan to leave Hong Kong, were consistent with the other objective and indisputable evidence.

5.6  Ground 3 asserts that had an adjournment been granted, I would have had the benefit of the Jefferies Report which confirms that the WeChat Messages were not sent by R1 to Zhao. First, as has been pointed out at §4.5(3) above, the submission made by leading counsel at the Hearing on the possible nature of the expert report is materially different from what is in fact set out in the Jefferies Report. Secondly, as pointed out at §4.8 above, the Jefferies Report is ultimately not conclusive on the issue of whether the WeChat Messages were sent by R1.

5.7  Ground 4 is a catchall ground and does not materially add to Ground 1 to Ground 3.

5.8  For the above reasons, the appeal relating to the Adjournment Summons does not enjoy real prospect of success (which, as stated above, is the threshold required in the present case given D1’s inexcusable but insubstantial delay).

6.  The appeal relating to the Injunction Summons

6.1  Ground 5 has been dealt with at §§4.10 to 4.11 above.

6.2  Ground 6 asserts that by reason of Grounds 1 to 5, I was wrong to find that the WeChat Messages were more likely than not “not fabricated” and to have relied on the WeChat Messages to find that there was real risk of dissipation or that R1 had plans to leave Hong Kong.

6.3  As pointed out by Mr Pao, the assessment of a real risk of dissipation of assets is an exercise which necessarily involves an evaluative and predictive judgment: Convoy Collateral Ltd v Cho Kwai Chee & Ors [2020] 6 HKC 81 at §40. Where the exercise carried out by the judge is an evaluative one, sometimes with a predictive element and with more than one possible right answer, the evaluation of the facts relevant to the determination of the disputed evidence is very much the province of the first instance judge, An appellate court should only interfere where it is clear that an error of principle has been made or that the result falls outside the range of potentially right answers: AmTrust Europe v Trust Risk Group [2016] 1 All ER (Comm) 325 at §33.

6.4  As has been set out in the Decision, no heavy reliance was placed on the WeChat Messages and they were only one of the factors taken into account in coming to the conclusion that there was a real risk of dissipation.

6.5  Ground 7 asserts that I failed to take into account (at all or sufficiently) the fact that Zhao had also previously signed a document for the purpose of supporting R1’s defence in these proceedings. At Decision §4.19, I expressly referred to the 2023 招慧霞報告. I had analyzed the apparently change of stance on the part of Zhao at Decision §§4.23 to 4.25 and in particular I set out the following observations:

(1)  The proper approach was to examine the cogency of the New Information stripped of R1’s own emotive perceptions of disloyalty on Zhao’s part;

(2)  It was quite plain that P did not simply take Zhao’s word as the New Information was independently analyzed and verified;

(3)  R1’s leading counsel’s acknowledgment of the foregoing at the Hearing, culminating in his acceptance that P has crossed the threshold of a good arguable case on merits, even if P’s case is in part based on what was described as “dubious evidence of Zhao”.

6.6  Ground 8 has been dealt with at §5.5 above.

6.7  Ground 9 asserts that I was wrong in holding that P’s underlying claim based on fraud and dishonesty should be a factor showing risk of dissipation, in particular as these proceedings were commenced in 2019. R1 has not identified any errors in the analysis set out at Decision §§5.12, 5.16 to 5.18, 5.19 and 5.30 to 5.31.

6.8  Ground 10 asserts that I was wrong in holding that the Shanghai SPA and the Lions Bay SPA were dubious or that such terms by themselves were sufficient to give rise to any evidence of risk of dissipation. I have set out my analysis at Decision 5.20 to 5.25. Mr Chen submits that the sale of a property, without more, does not connote real risk of dissipation. However, Mr Chen has not attempted to show that I was wrong to have taken into account the unusual features set out at Decision §5.20. In any event, I did not regard that the unusual terms by themselves were sufficient to give rise to any risk of dissipation and repeated at Decision §5.24 that they must be assessed holistically.

6.9  Ground 11 is a catchall ground and does not add to the analysis.

6.10  For the above reasons, I am of the view that the appeal relating to the Injunction Summons does not enjoy a real prospect of success.

7.  Conclusion

7.1  Mr Chen has not suggested that there is some other reason in the interests of justice why the proposed appeal should be heard.

7.2  The Leave Application is dismissed. I also make a costs order nisi that the costs of the Summons be paid by R1 to P to be summarily assessed. R1 is to lodge and serve its objections to P’s Statement of Costs dated 8 July 2024 within 3 days hereof. I will thereafter carry out the summary assessment on the papers.