ALLIED SUCCESS CREATION LTD v. CHEUNG HON KUEN AND OTHERS

HCMP 1388/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 1388 OF 2015

(ON AN INTENDED APPEAL FROM HCA NO. 451 OF 2010)

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REASONS FOR JUDGMENT

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Hon Kwan JA:

1.  This is an application of the 2^nd defendant for extension of time to appeal against the judgment of Deputy High Court Judge S Leung given on 16 March 2015.  The application arose in this way.

2.  The plaintiff brought an action against five defendants, claiming that it had been induced by the fraudulent scheme of its estate agent to sell its property to a purchaser which, unbeknown to the plaintiff, was set up by the estate agent and the property was resold within days at a substantial profit.  The 4^th defendant was the estate agent.  The 1^st and 2^nd defendants were its only directors and shareholders at the material times.  The 5^th defendant was the corporate vehicle set up by the 1^st and 2^nd defendants as the purchaser and the 3^rd defendant was the sole director and shareholder of the 5^th defendant.

3.  The trial took place in May 2013 and lasted for seven days.  Judgment was handed down more than 22 months later.

4.  The judge found in favour of the plaintiff against the 1^st, 2^nd, 4^th and 5^th defendants.  Judgment was entered against them jointly and severally for damages assessed at $8.4 million.

5.  The 1^st and 5^th defendants filed their notice of appeal within time on 10 April 2015.  A notice of appeal dated 13 April 2015 was served by the 4^th defendant on the plaintiff’s solicitors, apparently on 16 April 2015.  The time for serving the notice of appeal expired on 13 April.  No point was taken that the 4^th defendant’s notice of appeal was served out of time.

6.  The 2^nd defendant took out his summons for extension to time to lodge an appeal on 8 June 2015.  He was 56 days out of time.

7.  He filed two affirmations to explain his delay.  He claimed that he was shocked and totally devastated by the judgment, which brought financial ruin to him.  He was confused after talking to a few solicitors whose views were diverse.  He was worried about the additional costs to be incurred for bringing an appeal.  He could not think rationally and refused to listen to the 1^st defendant and the latter’s solicitors who had also acted for him at the trial.  After some time, he calmed down and spoke to the 1^st defendant and the latter’s solicitors.  He obtained further legal advice and raised funds from his parents.  He then decided to appeal and issued the present summons.

8.  A draft notice of appeal was attached to the summons.  The grounds of appeal are virtually the same as the grounds in the notices of appeal filed by the 1^st and 5^th defendants and the 4^th defendant.  The same team of counsel and solicitors acting for these defendants would be engaged to act for the 2^nd defendant, if an extension of time is granted.

9.  The 2^nd defendant contended that no prejudice would be caused to the plaintiff if extension is granted.  He claimed he would suffer grave injustice if it is refused, as in the event that the appeals of the other defendants are allowed wholly or in part, he would be the only one to shoulder the judgment sum.

10.  Mr Kenny Lin and Ms Anna Chow submitted that the length of the delay was not substantial, relying on my decision in The OOCL China v The Darya Bhakti (No 2) [2013] 6 HKC 240, in which I said at §9 that a delay of 53 days was “not substantial although I would not say it was short”.  My view in that case would appear to be out of line with what I said in two subsequent cases: YN v NA [2014] 5 HKC 49 at §18, delay of 51 days was substantial; Lee Chick Choi v Best Spirits Co Ltd, HCMP 371/2015, 21 May 2015, at §20, delay of more than six weeks was substantial.  Ms Ebony Ling for the plaintiff also drew our attention to Full Wisdom Holdings Ltd & Ors v Traffic Stream Infrastructure Co Ltd & Ors, CACV 266/2003, 27 July 2004, which was concerned with an application for leave to appeal to the Court of Final Appeal out of time (the time limit is also 28 days from the date of the judgment appealed from), in which Ma CJHC (as he then was) expressed the view that a delay of over six weeks, or a delay of four weeks from the handing down of the reasons for judgment, was substantial.

11.  In light of the decisions to which this court’s attention has been drawn, I do not stand by my view in The OOCL China regarding substantial delay.  The delay of 56 days in the present situation must be regarded as substantial.

12.  Nor do I think the delay excusable in light of the reasons given by the 2^nd defendant.  The time limit of 28 days for lodging an appeal applies to all litigants across the board.  The fact that a losing party has suffered great disappointment and could face financial ruin as a result of the judgment going against him is not a valid excuse to allow him further time to appeal.  The 2^nd defendant knew that the 1^st defendant and the companies he controls with the 1^st defendant would appeal against the judgment.  That he had second thoughts when he realised he might be left to bear the judgment sum in case the others succeed on appeal is not excusable.

13.  Ms Ling submitted that as the delay was substantial and inexcusable, the principles in Secretary for Justice v Hong Kong & Yaumati Ferry Co Ltd & Anr [2001] 1 HKC 125 at 127D to 128D and 133G should be applied, namely, that the factors normally to be taken into account are: (a) length of delay; (b) reasons for delay; (c) chances of the appeal succeeding; and (d) prejudice to the would-be respondent, and where the delay is substantial and not wholly excusable, the applicant would need to show real prospects of success on the merits in the intended appeal.

14.  On behalf of the 2^nd defendant, it was urged upon us that the court should not adopt a rigid, mechanistic approach but should consider all the circumstances and decide whether the overall justice of the case requires the exercise of the discretion to extend time (Nantong Angang Garments Co Ltd v Hellmann International Forwarders & Ors [2005] 4 HKC 86 at 96A to E).  Whilst the consideration of the four factors referred to in the Yaumati Ferry case would usually be sufficient in most cases, it remains a broad discretion which must be exercised by reference to the special facts of each case (The Real Estate Developers Association of Hong Kong v Building Authority, HCMP 1746/2014, 27 May 2015, §14).  It was further submitted that as an informed assessment of the prospects of this intended appeal could only be made at a hearing equivalent to the hearing of the appeal itself, the overall interests of justice would require that the would-be appellant’s time be extended without any further consideration of the merits (Unison Knitwear Ltd v Rich Easy Ltd, HCMP 1438/01, 30 March 2001, pp 3 to 4).

15.  The grounds of appeal in the draft notice of appeal ran into 16 paragraphs.  It is sought to challenge various findings of fact (that the judge was wrong in rejecting the defendants’ version of events which was opposite to that of the plaintiff) and law (that the 4^th defendant did not act as the agent of the plaintiff and did not owe a fiduciary duty) and the assessment of damages (that the judge had failed to take into account the sub-sale price).  At the forefront of the arguments to be advanced is the significant delay of 22 months in handing down judgment.  Counsel for the 2^nd defendant referred to Welltus Ltd v Fornton Knitting Co Ltd [2013] 5 HKC 106 at §§10 to 17 and submitted that the long passage of time must have substantially diminished the trial judge’s recollection of the oral evidence and demeanour of the witnesses called at the trial.  As an illustration of the effect of the delay in handing down the judgment, our attention was drawn to §73 of the judgment in which a factual mistake was made regarding the date when a plan was obtained from the Buildings Department by the consultant (not disputed by Ms Ling) and the judge had relied on the mistaken date to discredit the defendants’ case.

16.  Ms Ling however contended that the above factual error was just a minor mistake.  She argued forcefully that the intended appeal has no real prospects of success as the judge had considered all the evidence and disbelieved the defendants who were found to be undeniably dishonest in perpetrating the fraud against the plaintiff.  And as was held in Mak Kang Hoi v Ho Yuk Wah David (2007) 10 HKCFAR 552 at §57, a delay of 30 months in delivering judgment cannot of itself succeed as a ground of appeal in the absence of it being shown that there are omissions, errors, misunderstandings, inconsistencies and the like which invalidate the trial judge’s findings, rendering the judgment unsafe and have led to injustice to the appellant.

17.  It would not be appropriate to allow this application to become an occasion for the parties to rehearse substantially their arguments on the merits of the intended appeal.  It is only in those cases where the court can see without much investigation that the grounds of appeal are either very strong or very weak will the merits have a significant part to play in balancing the various factors in the exercise of its discretion (The Real Estate Developers Association of Hong Kong v Building Authority, §18, citing R (Hysaj) v Secretary of State of the Home Department [2014] EWCA Civ 1633 at §§46 and 47).

18.  Where it is sought to argue on appeal that the judgment contains errors probably attributable to inordinate delay in delivering the judgment, the approach of the appeal court is that a higher degree of scrutiny is required than the usual cases involving factual challenges.  The substantial delay in itself must have weakened the advantage of the trial judge of having seen and heard the witnesses, and this consideration has to be taken into account in reviewing the material which was before the judge (Chow Sau Hei v Ho Keung Yuen & Anr, CACV 112, 113 & 114/2013, 7 July 2014 at §7.8).

19.  If it had not been for the judge’s delay in delivering the judgment, I might have been inclined to taking a robust approach in assessing the prospects of success of the intended appeal.  Given the approach that a higher degree of scrutiny is required in this situation, the factual mistake cited as an illustration by the 2^nd defendant cannot be rejected summarily as a single minor error.  The exercise of looking at the findings under challenge with special care cannot be carried out in this application.

20.  An added consideration is that there are extant appeals brought by the other defendants on the same or substantially the same grounds, and that all the defendants would be represented by the same legal team.

21.  In these rather unusual circumstances, I am persuaded that the overall justice would require an extension of time be granted to the 2^nd defendant, notwithstanding his substantial and inexcusable delay.

22.  We have therefore granted him leave to serve and file a notice of appeal as per the draft annexed to the summons within seven days of our judgment.  We have made an order that he should bear the costs of the plaintiff in this application in any event as he is seeking an indulgence from the court.  After he has lodged a notice of appeal, he can seek directions to have his appeal heard with the appeals of the other defendants.

Hon Chu JA:

23.  I agree with the reasons for judgment of Kwan JA.