HONG JING CO LTD v. ZHUHAI KWOK YUEN INVESTMENT CO LTD

FAMV Nos 1, 2, 4 and 5 of 2013

FAMV No. 1 of 2013

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 1 OF 2013 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL FROM

CACV NO. 63 OF 2011)

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DETERMINATION

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Mr Justice Ribeiro PJ:

1.  Reserving our reasons, we dismissed the plaintiff’s leave applicant with costs and granted the defendant an extension of time for applying for leave to appeal in respect of one of the questions sought to be raised.  These are our reasons.

2.  The plaintiff sued the defendant for breach of contract and breach of fiduciary duty in connection with an unsuccessful attempt by the plaintiff to take over certain debts and properties held by the defendant pursuant to an agreement reached between the parties.  Those assets were in fact transferred by the defendant to a third party under a subsequent agreement. 

3.  After trial, Yam J[1] found in favour of the plaintiff but his judgment was set aside and a retrial ordered by the Court of Appeal[2] which held that findings essential to establishing liability had not been made by the Judge.  The missing findings were held to be necessary for deciding whether there was a breach and if so, whether there was a causal connection between breach and loss.

4.  The plaintiff applied to the Appeal Committee for leave to appeal against the Court of Appeal’s order for a retrial.  Mr Denis Chang SC sought to argue that such leave was as of right on the basis that it came within the second limb of section 22(1)(a) of the Court’s statute, it being submitted that the claim was for a proprietary right of the value of the sum referred to in the declaration of constructive trust made by the Judge. 

5.  We do not accept that submission.  The sum in question was claimed on the basis that it represented sums allegedly obtained by the defendant in breach of fiduciary duty which it, as such fiduciary, was obliged to disgorge.  It is plainly a personal claim and not one for a particular property or proprietary interest as discussed in WLK v TMC (No 1).[3]

6.  It was alternatively submitted that leave should be granted on the “or otherwise” basis, the argument being that the Court of Appeal had erred in suggesting that the Judge had failed to make critical findings (especially in relation to the “double dealing” allegation) and that, in so far as the Judge had failed to make other findings (such as in respect of the issue of causation), the Court of Appeal was wrong not to make such findings itself instead of ordering a retrial.  The Appeal Committee was therefore being asked to grant leave on the basis that the Court of Final Appeal should perform the fact-finding task which the Court of Appeal had declined to undertake.  We consider such a course wholly inappropriate.  The Court of Appeal, for instance, held that the Judge had crucially failed to make findings as to the credibility and weight of the evidence given by the defendant’s witnesses regarding the alleged change of stance by the Bank of China and the consequences for causation, holding, quite understandably, that it was in no position itself to make such findings.  It is not the role of the Court of Final Appeal to undertake such a task.

7.  For the abovementioned reasons, we dismissed the plaintiff’s leave application with costs.

8.  The defendant applied to the Court of Appeal either (i) for an order that time for applying for leave to appeal to this Court be extended until after determination of the retrial; or (ii) alternatively, for leave to appeal to be granted regarding two questions of law said to be of the requisite importance, formulated as follows:

“(1) Whether, as a matter of law, a duty to use reasonable or best endeavours to perform a certain task vis-à-vis a third party can be implied into a contract, given that in law there can be no duty to negotiate in good faith in a bipartite situation (paragraph 17 of the Court of Appeal Judgment).

(2) Whether in assessing damages for loss of a chance the Court is entitled to take into account its knowledge of what had subsequently occurred (by applying the “Bwllfa principle” in Bwllfa and Mertby Dare Steam Collieries (1981) v Pontypridd Waterworks Co. [1903] AC 426) (paragraph 90 of the Court of Appeal Judgment).”

9.  The Court of Appeal[4] rejected the application for extension of time on the ground that “this would cause further delay in the proceedings”, adding: “If there are issues in our judgment that the defendant disagrees with, it should seek leave now so that all the contentious issues could be addressed together before the retrial”.[5]  The Court of Appeal refused the application for leave to appeal on the basis that the first question is case-specific and that the second question has recently been sufficiently clarified in a recent House of Lords decision.[6]

10.  Subject to the questions set out above being reasonably arguable, we do not, with respect, agree with the Court of Appeal’s refusal to defer an application for leave to appeal until after the outcome of the retrial is known.  As indicated above, the issues ordered for retrial go to the heart of the dispute.  Until those issues are resolved, there is no winner or loser.  The Court of Appeal having set aside Yam J’s judgment in favour of the plaintiff, no final judgment exists in favour of either party to be appealed against. 

11.  The only existing judgment is the order of the Court of Appeal setting aside Yam J’s judgment and directing a retrial on the relevant issues.  But the defendant does not want to challenge that order.  If the retrial is resolved in its favour, for example on the issue of causation, it would not need to lodge an appeal.  What the defendant wants is to preserve the position in case it loses at the retrial and loses on any post-retrial appeal to the Court of Appeal.  It might then wish to apply for leave to challenge the basis on which it is then held liable.  It would clearly be preferable for all possibly viable grounds of appeal to be put forward at the same time in a single leave application pursuant to a final judgment of the Court of Appeal.  It would not be practicable or procedurally economical to have some of the issues in what is still an unresolved action brought up for leave to appeal now, with the remaining issues potentially left to be brought up after the retrial.   

12.  However, accepting Mr Chang SC’s submissions on the point, we are not satisfied that the first of the two questions formulated by the defendant is reasonably arguable.  It is therefore not appropriate to extend time to apply for leave in respect thereof.

13.  We therefore grant the defendant an extension of time for filing, if so advised, an application for leave to appeal to the Court of Final Appeal, restricted to the second of the two questions identified above, until after determination of the retrial and after determination of any appeal to the Court of Appeal from the judgment or orders made on such retrial or until further order.

14.  We make no order on the defendant’s present application for leave to appeal.  We also make no order as to the costs of the application for extension of time.  The parties have leave to apply to a single permanent judge for any procedural directions which may later be needed in respect of the extension of time granted.