XINHUA NEWS MEDIA LTD AND ANOTHER v. JI DAVID WEI AND OTHERS

HCA 391/2022

[2024] HKCFI 3687

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 391 OF 2022

(Transferred from District Court Civil Action No. 464 of 2021)

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DECISION

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1.  This is the Pre-trial Review of the trial due to commence on 11 February 2025.

2.  P’s case against D1 has been settled.  P has obtained default judgment against D3.  The upcoming trial concerns only D2 and D4.

3.  P2 is a BVI company listed in the Hong Kong Stock Exchange.  P1 is its wholly owned subsidiary.  At times material to this action, D1 to D4 were officers of Ps.  By this action, Ps say that D1 approved unauthorised payment of discretionary bonuses to D2 to D4 in the respective amounts of HK$880,000, $660,000 and $200,000.  Ps’ pleaded causes of action against Ds include variably breach of fiduciary duties, failure to exercise reasonable care, and unjust enrichment.

4.  D2 and D4’s defence in gist is, inter alia, as follows.  They held options for shares in P2.  At the material time, P2 faced a hostile takeover offer.  Its independent financial advisers advised that the offer should be opposed.  D2 and D4 were approached by Mr Yu Guang (“Yu”), the Executive Director and CEO of Ps.  Yu asked them to exercise their share options, obtain the shares, and utilize the voting rights which those shares carried to assist in the opposition.  Yu orally assured them that Ps would reimburse them for inter alia their tax liabilities arising from the exercise (the “Oral Assurance”).  The subject payments, whilst subsequently called discretionary bonuses, were in fact such reimbursements.  They also counterclaim P for the profits they would otherwise have obtained had they exercised their options at different times under more favourable conditions.

5.  For the trial, Ps originally intended to call Ms Chan Yuen Ying Stella as a witness.  Ms Chan was at the material times P’s company secretary.  2 witness statements of her have been filed.  By summons of 27 November 2024, Ps seek leave to file the witness statement of Tsui Kwok Hing.  Mr Tsui has himself filed an affirmation in support.  Therein, he says that Ms Chan has resigned as Ps’ company secretary.  He says that “After [Ms Chan’s] resignation, [Ps] have made the best effort to liaise with her to continue to act as the witness of [Ps] but in vain.  [Ps] have no alternative but to assign another person to act as the witness for [Ps] as she is no longer able to act as the witness of [Ps] and attend the trial hearing for the present proceedings as and when necessary”.  Ps hence seek to rely on Mr Tsui’s evidence instead.

6.  I have considered the various authorities cited to me, which include Nam Ching Wun v Tsun Un Pawn Shop & Ors (HCA 2151/2008, 7 October 2014)  and Tao, Soh Ngun v HSBC International Trustee Ltd [2018] HKCFI 2543.

7.  Ms Chan resigned with effect from 30 June 2023, some 17 months prior to the issue of the Summons.  No explanation has been given on the delay in the issue of the summons.

8.  No particulars have been provided as to what efforts had been made to secure Ms Chan’s attendance as a witness, why those efforts were in vain, and why Ms Chan is no longer able to attend as a witness for Ps.

9.  Mr Tsui’s proposed statement contains matters which are not contained in Ms Chan’s statements.  In particular, matters contained in §§33, 35-36, 42-46, 48-49, 51-54 and 56-58 are either not in Ms Chan’s witness statements, or represent substantial expansion of what are in Ms Chan’s evidence.  They seek to deal with facts material to issues like Yu’s authority to make the alleged Oral Assurance, whether even if made it was a personal promise made by him, that other senior officers who had exercised their options not having sought reimbursement, trading restrictions under certain paragraphs of the Listing Rules, that D2 and D4 were seeking to by-pass the internal approval and compliance procedure, that D2 and D4 had abused their positions, and that they were using Ps’ resources to “pay the bills” for their or Yu’s personal conduct.  Also important is that in those new materials, Ps on more than one occasions (see §§49 and 57)  claim that D2 and/or D4 had knowledge of certain matters, which they say support certain inferences in support of Ps’ case. 

10.  Justice dictates that if Ps are to be permitted to rely on those new materials, D2 and D4 should be afforded the opportunities to compile evidence in reply.

11.  The trial is however less than 2 months ahead.  Directing another round of evidence will most probably upset the trial dates.  It is in any event unfair to D2 and D4 for Ps to have sat on the matters for some 17 months and then to force upon D2 and D4 a tight and compressed schedule for compilation of evidence in reply or rebuttal.  

12.  If Ps had been able adduce clear evidence explaining their difficulties in calling Ms Chan, and then seek only to call a substitute witness to restate and confirm Ms Chan’s intended evidence, their application would have been considered under different lights.  That is not what Ps are seeking to do. They are, opportunistically, seeking under the pretext of Ms Chan’s alleged unavailability to slip in additional evidence or to expand on matters only briefly mentioned in Ms Chan’s witness statement.  That in my view, having conducted a balancing exercise, unfair, will upset the trial dates, and is in the circumstances of this case not permissible.

13.  In the circumstances, I refuse Ps leave to rely on the Mr Tsui’s proposed witness statement.

14.  I order that costs of this application shall be borne by Ps in any event.