JOE ZHIXIONG ZHOU v. SAIF PARTNERS II L.P. AND ANOTHER

FAMV No. 369 of 2019

[2020] HKCFA 9

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 369 OF 2019 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL

FROM CACV NO. 62 OF 2018)

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DETERMINATION

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The Appeal Committee :

1.  The applicant was the plaintiff in the action and defendant by counterclaim.  He seeks leave to appeal against the judgment of DHCJ Field,[1] upheld by the Court of Appeal,[2] entered against him in favour of the respondents on their counterclaim for breach of fiduciary duty, ordering an account of profits with discovery and cross-examination.  

2.  The applicant puts forward as questions of law of the requisite importance the following:

(1)     Do our courts have jurisdiction (in either the literal sense or the broader sense), following the trial of an Action, to grant substantive remedies to a counterclaiming defendant, as a ‘trustee’ for non-parties whom the defendant has neither joined in the Action nor shown any specific authority to represent therein? (Question 1)

(2)     Does the principle barring recovery for reflective loss go to the jurisdiction of the court or is it a matter of judicial discretion? (Question 2)

(3)     Where parties enter into a written partnership agreement, which, except in respect of the managing and controlling partner, imposes no partners’ fiduciary duties inter se, can such duties nonetheless be inferred from the partners’ post-contractual mutual ‘good conduct’ expectations? (Question 3)

3.  These Questions raise issues as to (1) whether the respondents were the proper plaintiffs to bring the claim and to be awarded relief for breach of fiduciary duty; (2) whether their claim was precluded by the reflective loss principle; and (3) whether it was right to hold that the applicant owed the relevant fiduciary duties.  Additionally, the application is also made on the “or otherwise” basis.

4.  We grant leave to appeal solely in respect of Question 1. 

5.  We do not think it reasonably arguable that the principle of reflective loss is engaged and refuse leave on Question 2.

6.  We do not think it reasonably arguable that the Courts below were in error in holding the applicant subject to the fiduciary duties in question and so refuse leave on Question 3.

7.  It is only in exceptional cases that leave is granted on the “or otherwise” basis.   The matters referred to by the applicant do not justify such exceptional grant of leave.

8.  The appeal will be listed for hearing on 1 December 2020.