CHUNG PUI TONG v. The Personal Representatives of CHUNG SAU MIU (also known as CHUNG SAU MUI, or SAU MUI CHUNG), deceased AND OTHERS

CACV 526/2020

[2023] HKCA 660

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 526 OF 2020

(ON APPEAL FROM HCA 3150/2016)

---------------------------

---------------------------

(By Original Writ)

---------------------------

(By Original Writ and Order to Carry On
by Master Hui dated 10 March 2017)

---------------------------

___________________________

REASONS FOR DECISION

___________________________

Hon Barma JA (giving the Reasons for Decision of the Court):

1.  This was the plaintiff’s application, by Summons filed on 6 May 2022 (“the Summons”), for leave to adduce new evidence in this appeal.

2.  The appeal is brought by the 5^th and 6^th defendants against the interlocutory order made by DHCJ P Fung SC (“the Judge”) on 1 November 2019 (“the Order”), reasons for which were given in his judgment handed down on the same day[1] (“the Judgment”).  The relevant parts of the Order which are challenged on appeal are paragraphs 5 and 6, by which the Judge made an ancillary disclosure order against the 5^th and 6^th defendants in association with a Mareva injunction granted against them (“the Ancillary Disclosure Order”).  The Ancillary Discovery Order required the 5^th and 6^th defendants to make extensive disclosure and discovery of documents disclosing what traceable proceeds of the estates of the late Chung Yung (“CY”) and Au Yeung Kit (“AYK”) they had received from the 2^nd and/or 4^th defendants, and what had become of such proceeds.  The documents sought included bank statements covering a period of nearly 20 years.

3.  The new evidence that the plaintiff wishes to produce for the appeal is a copy of an extract of the 5^th defendant’s passbook for her Bank of China account which shows inter alia entries for (i) a sum of HK$3,725,383.80 deposited on 17 September 2009; and (ii) a sum of HK$3,750,000.00 withdrawn on 18 September 2009 (“the Passbook Entries”).

4.  The Passbook Entries were referred to and exhibited by the 5^th defendant in her 6^th affirmation filed on 14 January 2022, some two years after the Order and Judgment.  They were not previously available to the plaintiff.

Background

5.  The plaintiff is the son of CY (his father) and AYK (his mother), the 5^th defendant is a granddaughter of CY and the daughter of the 2^nd defendant (whose birth mother was not AYK), and the 6^th defendant is the husband of the 5^th defendant.

6.  CY and AYK both operated successful mahjong shop businesses during their lifetimes.  By CY’s will, AYK was appointed as his executrix and he bequeathed his estate to her upon trust to pay the income to herself during her lifetime, and after her death, to pay the capital and income to the plaintiff, who was 3 years old when CY died, absolutely (see [27] of the Judgment).  In turn, by her will, AYK bequeathed her estate to the 1^st and 2^nd defendants, also to hold the same on trust for the plaintiff absolutely (see [27(7)] of the Judgment).

7.  The plaintiff’s case in the substantive proceedings below (the trial of which is yet to take place) is essentially that the defendants, whether individually or acting in concert at various points in time since CY’s death, failed to inform him of his interest under the wills of his parents, and had misappropriated the estates of CY and AYK and used the monies of the estate to purchase various landed properties in their names or for their benefit.  These landed properties included a property at Kai Tai Court, 28 Kai Yip Road, Kowloon (“the Kai Tai Property”), at which the 5^th and 6^th defendants reside and of which they are co-owners.  The plaintiff claims declaratory relief as to the ownership of the properties, including the Kai Tai Property, which were allegedly purchased with the monies of the estate, and damages against the defendants.  

8.  For their part, the 5^th and 6^th defendants say that the 5^th defendant herself also owned and operated a successful business (trading and selling in chemical materials) and that they saved enough money to purchase the Kai Tai Property without the aid of a mortgage.  Their case is that the purchase money of the Kai Tai Property did not come from CY and/or AYK’s estates.  They also say that by 2009, they had saved enough to have had a fixed deposit of HK$3,750,000.00 (“the Fixed Deposit”) (see [29(14)] of the Judgment) funded from their own resources.

9.  By the Judgment, the Judge dealt with various interlocutory applications by the parties, the main application being the plaintiff’s application to continue the existing Mareva injunction against the 5^th and 6^th defendants granted by the Judge on 14 September 2018 in wider form to include the Ancillary Disclosure Order.

10.  In making the Ancillary Disclosure Order, the Judge noted at [32] to [33] of the Judgment that the 5^th and 6^th defendants had failed or refused to disclose their bank statements for the period between 2001 and 2010 and had adduced no evidence as to how the Fixed Deposit had been accumulated.  He was also of the view that the matters raised by the plaintiff and the 5^th and 6^th defendants regarding the alleged breach of trust under CY’s will (which he set out at [28] to [32] of the Judgment) involved serious issues to be tried.

11.  By his subsequent decision dated 28 November 2019[2], the Judge refused to grant the 5^th and 6^th defendants leave to appeal against the Order, but ordered that there be a stay of execution of [5] and [6] of the Order pending the determination of their application for leave to appeal to the Court of Appeal.  On 21 September 2020, this court (Barma and Au JJA) granted the 5^th and 6^th defendants leave to appeal with a stay of execution of [5] and [6] of the Order pending determination of the appeal.

12.  By their Notice of Appeal filed on 28 September 2020, the 5^th and 6^th defendants set out their grounds of appeal against the Ancillary Disclosure Order, which may be broadly summarised as follows:

(a)  the Judge erred in law by making the Ancillary Disclosure Order, which was not a permissible nor proper order for the purpose of tracing the sums allegedly misappropriated by the 5^th and 6^th defendants as it amounted to a fishing expedition, particularly as there was no proper pleaded allegation identifying the allegedly misappropriated funds or assets;

(b)  the Judge wrongly exercised his discretion to grant the Ancillary Disclosure Order as the scope of such order, requiring the disclosure of account statements for a period of over 19 years, was oppressive.

13.  On 8 October 2020, the plaintiff filed a Respondent’s Notice, seeking to uphold and affirm the Ancillary Disclosure Order on additional grounds.  A Notice of Setting Down of Appeal was filed on 29 October 2020, followed by the plaintiff’s Supplementary Respondent’s Notice filed on 12 April 2022.  The hearing date of the appeal is yet to be fixed.

Legal principles

14.  Order 59 rule 10(2) of the Rules of the High Court (Cap 4A) gives the Court of Appeal power to admit fresh evidence on appeal where there are special grounds for doing so. It is well established that in order to establish such special grounds, the conditions laid down in Ladd v Marshall [1954] 1 WLR 1489 must be met.  These are that the further evidence to be admitted:

(a)  could not have been obtained at the hearing below with reasonable diligence;

(b)  would or might, if believed, have an important influence on the result of the case, though it need not be decisive; and

(c)  is apparently credible though it need not be incontrovertible.

The present application

15.  The plaintiff lodged written submissions, prepared by his solicitors Messrs Charles Wong & Co, in support of this application on 15 June 2022 (“P’s Skel”).  The 5^th and 6^th defendants lodged submissions prepared by their counsel, Mr Julian Chan, in opposition to the application on 29 June 2022 (“Ds’ Skel”).  It appears that the plaintiff has recently engaged counsel, Ms Natalie So, who lodged supplemental written submissions on 17 April 2023 (“P’s Supp Skel”).  We are grateful to Ms So for her submissions, which set out the plaintiff’s position much more clearly than the earlier submissions did.

Discussion

16.  It is clear from counsel’s submissions that the only issue dividing the parties is whether the second Ladd v Marshall condition is satisfied, i.e. whether the Passbook Entries would or might, if believed, have an important (although not necessarily decisive) influence on the result of the appeal.  The first and third conditions are clearly met, as the passbook was only disclosed by the 5^th and 6^th defendants well after the hearing below, and emanating from them, is prima facie credible. 

17.  The material issue to be determined in the substantive appeal is whether the Ancillary Disclosure Order was properly granted by the Judge with a view to gathering as much relevant evidence as possible for the trial, where the key issue will be whether or not the 5^th and 6^th defendants did misappropriate the funds of the plaintiff’s parents’ estates, or received the proceeds of misappropriations from those estates.  

18.  Ms So submits (at [4] to [11] of P’s Supp Skel) that the Passbook Entries are clearly relevant to the appeal and would have an impact on its outcome, as they represent the 5^th defendant’s purported answer to the question of how the monies for the Fixed Deposit had been accumulated.  She submits that the additional evidence would assist this court in the determination of the appeal, not least as it would provide a more complete picture of the 5^th defendant’s purported flow of funds.  

19.  Mr Chan, however, suggests that the appeal is based on grounds that allege errors of law made by the Judge and is thus not concerned with any challenge to his findings of fact and does not call for a complete re-assessment of the evidence, so that, while accepting that the Passbook entries would be relevant, they would not have any real influence, let alone important influence, on the outcome of the appeal so as to satisfy the second Ladd v Marshall condition (see [32] to [33] of Ds’ Skel).

20.  However, as we have noted at [12] above, the 5^th and 6^th defendants contend that the Ancillary Disclosure Order was oppressive and amounted to a fishing expedition.  Whether or not these grounds are made out cannot in reality be conducted in a vacuum, and must be considered in light of the factual matrix and context of the present case. 

21.  The issue of whether the Fixed Deposit derived from the alleged misappropriation of the two estates by the defendants is the crux of the dispute between the parties in the substantive proceedings.  That being so, it seems clear that the Passbook Entries must form an important part of the context against which the court will have to determine the issues raised by the 5^th and 6^th defendants on their appeal.  They may provide an answer to the plaintiff’s complaints, or they may raise further questions which would tend to support those complaints.  Either way, they appear to us to be relevant and of potential importance.

22.  Accordingly, we agree with Ms So that the new evidence would provide a more complete factual background to this court, and would be of particular relevance and importance if the court were to be satisfied that the Judge had erred so that it fell to this court to exercise the discretion afresh.  We are therefore of the view that it satisfies the second Ladd v Marshall condition.

23.  We also note that at [23] to [26] of Ds’ Skel, Mr Chan drew attention to a dispute between the parties regarding what is shown by several handwritten Chinese words in the Passbook. However, Ms So has confirmed that these are no longer relied on, and we therefore do not propose to comment further on this aspect of the matter.

Disposition and costs

24.  For these reasons, we allowed the plaintiff’s application and make an order that leave be granted to the plaintiff to adduce the Exhibit as new evidence for the hearing of the substantive appeal.

25.  Having heard submissions from counsel as to costs, we ordered that the costs of this application should be in the cause of the appeal.