MAMMY PANCAKE CO LTD v. CARLA DAY LTD AND OTHERS

CAMP 108/2025

[2026] HKCA 998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 108 OF 2025

(ON AN INTENDED APPEAL FROM HCA NO 1044 OF 2021)

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D E C I S I O N

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Hon Cheng J (giving the Judgment of the Court):

A. INTRODUCTION

1.  This is the 1^st and 2^nd Defendants’ renewed application for an extension of time to appeal against the judgment of B Fung J (“the Judge”)  dated 6^th May 2024 ([2024] 3 HKLRD 17)  (“the Judgment”), in which the Judge gave judgment for the Plaintiff on its claims against the 1^st and 2^nd Defendants for breach of the duty of confidentiality and good faith.

2.  The 1^st and 2^nd Defendants also seek a stay of execution of the Judgment pending substantive determination of the appeal.

3.  The Judge refused to grant an extension of time to appeal in his decision of 16^th May 2025 (“the Leave Judgment”).

4.  Having considered the papers, we are of the view that it is appropriate to determine this application on paper without an oral hearing pursuant to O.59, r.14A(1)  of the Rules of the High Court, Cap.4A.

B.  THE BACKGROUND

B1.  The factual background

5.  Details of the background were set out in the Judgment at [3] to [33], and will not be repeated here.  For present purposes, it suffices to highlight the following.

6.  The Plaintiff was the franchisor of the “Mammy Pancake” (媽咪雞蛋仔)  brand (“the Brand”).  The 2^nd Defendant was the 1^st Defendant’s sole shareholder and director.  By a franchise agreement of 31^st March 2015, the Plaintiff granted to the 1^st Defendant the right to operate a Mammy Pancake franchise at a shop in Carnarvon Road, Tsim Sha Tsui (“the Shop”).  The 2^nd Defendant also signed the franchise agreement as a guarantor for the due performance of the 1^st Defendant’s duties and obligations thereunder.

7.  It was the Plaintiff who had found the Shop and negotiated with the landlord (“the Landlord”)  for a lease, although it was the 1^st Defendant who entered into the lease with the Landlord, also on 31^st March 2015.

8.  In 2016, the Shop received a Michelin Award for “Recommended Street Food”.  The award related specifically to this shop and not others in the franchise.

9.  On 8^th May 2018, another franchise agreement (“the Franchise Agreement”)  was signed between the parties, extending the franchise to 12th April 2021.

10.  When the Franchise Agreement and the lease came up for renewal, the 2^nd Defendant indicated that she might emigrate, but would consider continuing with the franchise with her sister if the shop rent were lowered.  The Plaintiff indicated that if the 1^st Defendant did not renew the lease, the Plaintiff would take it over so as to retain the Michelin Award for the Brand.

11.  Eventually, the Landlord was willing to reduce the rent (“the Offer”).  The 2^nd Defendant indicated that she would not renew the Franchise Agreement and would emigrate.  But when the Plaintiff told the Landlord that it would like to take up the lease, it turned out that the Landlord had already rented out the Shop to the 5^th Defendant (the 1^st Defendant’s former employee).

B2.  The Judgment below

12.  The Judge’s finding was that the 1^st and 2^nd Defendants wrongly enabled a new lease to be obtained by the 5^th Defendant.

13.  The Plaintiff’s claim again the 3^rd to 6^th Defendants was settled.

14.  The 1^st and 2^nd Defendants were absent from the trial.  The Judge found that the Plaintiff had proved its case against them.  The Judge found that:

14.1  the duty of confidentiality in the context of the duty of good faith covered the information relating to the lease of the shop, including the Offer;

14.2  the 2^nd Defendant stalled for time to enable the 5^th Defendant to take up the lease, by lying to the Plaintiff’s representatives that she might still be interested in renewing the franchise, when in fact the 5^th Defendant had already signed a new lease with the Landlord, and by misrepresenting to the Landlord that one of her “stooges” was the Plaintiff’s representative; and

14.3  the 1^st and 2^nd Defendants therefore acted dishonestly in breach of the duty of confidentiality and good faith under the Franchise Agreement.

15.  The 1^st and 2^nd Defendants were ordered to pay:

15.1  some $3.8m in damages, amounting to four years’ worth of lost profits, on the basis that the Plaintiff could have taken up the lease of the shop;

15.2  $300,000 in exemplary damages.

B3.  The Summons

16.  On 8^th January 2025, the 1^st and 2^nd Defendants issued a summons making the present application (“the Summons”).  The attached draft Notice of Appeal seeks to rely on the following intended grounds of appeal.

16.1  The Judge erred in law in finding that the 1^st and 2^nd Defendants owed a duty of confidentiality to the P under the Franchise Agreement (“Ground 1”).

16.2  The Judge erred in law in finding the 1^st and 2^nd Defendants dishonest as there was no specific pleading of the same (“Ground 2”).

16.3  The Judge erred in law and fact in finding that the 2^nd Defendant stalled for time by lying to the Plaintiff’s representatives that she might still be interested in renewing the franchise at a time when the 5^th Defendant had already signed a new lease for the Shop (“Ground 3”).

16.4  The Judge erred in law and fact in finding that the 2^nd Defendant’s misrepresentations were well documented by Whatsapp messages, and that the 2^nd Defendant misrepresented to the Landlord that one of her stooges was purportedly the Plaintiff’s representative (“Ground 4”).

16.5  Following Grounds 2 to 4, the Judge erred in fact and law in finding that the 1^st and 2^nd Defendants breached cl.24 of the Franchise Agreement (“Ground 5”).

16.6  Following Grounds 1 to 5, the Judge erred in imposing exemplary damages upon the 1^st and 2^nd Defendants (“Ground 6”).

C.  THE RELEVANT PRINCIPLES

17.  The legal principles applicable to an application for extension of time to appeal are well established.  In Lee Chick Choi v Best Spirits Co Ltd, unreported, HCMP 371/2015, 21^st May 2015 at [19], Kwan JA (as she then was)  stated:

“ The legal principles regarding an application to extend time for an appeal are well established. In the exercise of its discretion, the court will take into account the length of the delay, the reasons for the delay, the chances of the appeal succeeding if an extension of time is granted, and the degree of prejudice to the other party if the application is granted. Where the delay is substantial and not wholly excusable, the applicant must show a real prospect of success on the merits, not merely a reasonable prospect of success. In other words, he would need to demonstrate a strongly arguable case (Secretary for Justice v Hong Kong & Yaumati Ferry Co Ltd & Anr [2001] 1 HKC 125 at 127D to 128D, 132F; KNM v HTF, HCMP 288/2011, 7 September 2011, §§2, 19, 20; YN v NA [2014] 5 HKC 49 at §§16, 17).”

18.  In an appeal against a trial judge’s findings of fact, the appellate court will only intervene when it is satisfied that the trial judge’s findings are plainly wrong: Ting Kwok Keung v Tam Dick Yuen (2002)  5 HKCFAR 336.  Where a trial judge has reached a conclusion on primary facts, it is only in a rare case, such as where that conclusion was one (i)  which there was no evidence to support, (ii)  which was based on a misunderstanding of the evidence, or (iii)  which no reasonable judge could have reached, that an appellate tribunal will interfere with it: see China Gold Finance Ltd v CIL Holdings Ltd, unreported, CACV 11/2015, 27^th November 2015 (Lam VP, as he then was)  at [19], citing In re B (A Child) [2013] 1 WLR 1911 at [53] (Lord Neuberger).

D.  THE DELAY

19.  The Judgment was dated 6^th May 2024.  The 1^st and 2^nd Defendants say that they were not aware of it until 11th November 2024 when the Plaintiff arranged for it to be served on the 2^nd Defendant in Tasmania (as part of the process of execution).  The 2^nd Defendant claims that even then, she was “under the impression that the Documents are purely a matter of Tasmania law” and that as she and her family “were financially strained, [she] was so unsettled about the matter”.  She says that she eventually instructed Tasmanian lawyers around 30th December 2024 and only at that point knew that she should engage a Hong Kong lawyer.  It was only on 8^th January 2025 that the 1^st and 2^nd Defendants issued the Summons.

20.  We do not accept that a good explanation has been given for the delay.  The Plaintiff’s solicitors sent a copy of the Judgment to the 1^st Defendant’s address as stated on her Notice to Act in Person, and to the 2^nd Defendant at its registered office, both of which are in Hong Kong.  The Plaintiff’s evidence is that these were not returned, and the 1^st and 2^nd Defendants do not deny this.  Furthermore, the court’s records are that it also sent a copy of the Judgment to the 1^st and 2^nd Defendant’s addresses.  The copy sent to the 1^st Defendant was returned undelivered, but the copy sent to the 2^nd Defendant was not.

21.  In any event, even if the 1^st and 2^nd Defendants only became aware of the Judgment on 11th November 2024, no good explanation has been given for the delay in issuing the Summons. Even if the 2^nd Defendant somehow formed the view that the Judgment was a matter of Tasmanian law, this cannot constitute a good excuse for the delay.

22.  We turn to consider whether there are any prospects of success in the appeal.

E.  THE GROUNDS OF APPEAL

E1.  Grounds 2, 3 and 4

23.  We first deal with the question under Ground 2 of whether the Judge was entitled to find that the 1^st and 2^nd Defendants were dishonest, when the Plaintiff did not plead dishonesty.  Particular complaint is made of the Judgment at [53], where the Judge found that (1)  the 2^nd Defendant stalled for time by lying to the Plaintiff that she might still be interested in renewing the franchise when the 5^th Defendant had already signed a new lease for the Shop, and (2)  the 2^nd Defendant’s misrepresentation to the Landlord was that one of her “stooges” was a representative of the Plaintiff.

24.  However, the elements of the Plaintiff’s claim for breach of cll.15 and 24 of the Franchise Agreement were adequately pleaded.  The Plaintiff pleaded that the 1^st and 2^nd Defendants had wrongfully disclosed confidential information to the other Defendants, that the 2^nd Defendant introduced her colleague to the Landlord as her Mammy Pancake representative, that the 2^nd Defendant had wrongfully assisted another party into entering into a fresh lease with the Landlord, and that the 1^st Defendant was liable for the 2^nd Defendant’s breach under the guarantee given to the Plaintiff.  (See Amended Statement of Claim paragraphs 19, 20, 24, 26.)   Dishonesty is not a necessary element of the causes of action found established by the Judge.

25.  It was therefore open to the Judge to make findings about the credibility and honesty of the 1^st and 2^nd Defendants when he came to consider the evidence about these pleaded events.

26.  As for the challenge under Ground 3 to the actual findings made by the Judge, the challenges by the 1^st and 2^nd Defendants are effectively an attempt to ask the court to re-weigh the evidence and place particular weight on certain pieces of evidence and discount others.

26.1  It is said the Judge’s findings (Judgment at [23])  that on 18^th February 2021, the 2^nd Defendant (1)  told the Plaintiff that she would not renew the Franchise Agreement and (2)  also said that the 4^th Defendant would take up the Shop, were contrary to the finding of stalling for time, since the two matters took place “almost simultaneously”.

26.2  However, the Judge had also found, on the undisputed evidence, that (1)  in late 2020, the 2^nd Defendant had asked the Plaintiff to help negotiate a new lease with the Landlord, culminating in the Offer which was then notified to the 2^nd Defendant on 22^nd January 2021, (2)  the 2^nd Defendant replied that it was a good deal and that “serve u both a big meal when we renew our contract too”, and (3)  on 31^st January 2021, the 2^nd Defendant asked the Plaintiff for a meeting to discuss a new franchise  agreement (see Judgment at [14] to [21]).  Furthermore, there was undisputed evidence given by the Plaintiff’s witnesses that the 1^st and 2^nd Defendants had led the Plaintiff to believe that they intended to renew the franchise (for example, the witness statement of Ng Pak Zing at paragraphs 23 to 24, 28).  In the circumstances, it was open to the Judge to find that up to 31^st January 2021, the 2^nd Defendant had stalled for time by lying to the Plaintiff that she might still be interested in renewing the franchise when the 5^th Defendant had already signed a new lease with the Landlord.

27.  It was then said (under Ground 4)  that there were various pieces of evidence, or factors, militating against the Judge’s finding that the 2^nd Defendant’s misrepresentations were well documented by WhatsApp messages and that the 2^nd Defendant misrepresented that one of her “stooges” was purportedly the Plaintiff’s representative, including (1)  the fact that there were differences between the Offer and the offer made to the 5^th Defendant, (2)  the WhatsApp message from the Landlord to the Plaintiff on 10^th March 2021 (saying that the lease had already been signed)  did not suggest that the signatory was the Plaintiff’s representative, (3)  the fact that the 2^nd Defendant had indicated that the 4^th Defendant would take up the Shop, which made it inherently improbable that the 2^nd Defendant would also have misrepresented that she was still interested in continuing with the franchise, (4)  the 2^nd Defendant’s claim that it was her staff who approached the Landlord and that she was not involved, (5)  that an adverse inference should be drawn against the Plaintiff for its failure to call Kinder Lee, and (6)  that the Plaintiff’s evidence was merely hearsay.

27.1  Regarding (1)  to (4), these are, again, an attempt to ask the court to re-weigh the evidence, which is impermissible.  There was evidence before the Judge which justified his finding about the 2^nd Defendant’s misrepresentation.[1]  In his witness statement at paragraph 41, the Plaintiff’s witness Covis Ng said that Kinder Lee of the Landlord had told him that when the 2^nd Defendant went to the Landlord’s office to pay outstanding rent, she took with her a person whom she introduced as her “Mammy Pancake” representative to sign a new lease with the Landlord for the Shop, and the 2^nd Defendant had arranged the meeting with the Landlord.  The Judge accepted the evidence of the Plaintiff’s witnesses on issues of liability (Judgment at [50]).

27.2  Regarding (5), the 1^st and 2^nd Defendants did not adduce any evidence for their claim that Kinder Lee’s evidence would not have helped the Plaintiff to prove the misrepresentation alleged.  There is therefore no “case to answer”, and no basis for drawing any adverse inference.  See Pacific Electric Wire & Cable Company Ltd v Texan Management Ltd,CACV 90-91, 93-96/2012, unreported, 17^th September 2013 at [106] to [107] (Kwan VP).

27.3  Regarding (6), hearsay evidence is admissible, and the weight to be placed on it is a matter for the trial judge.

28.  There is therefore no prospect of success on these grounds.

E2.  Ground 1 and Ground 5

29.  It is said that the Judge was wrong to construe cl.15 of the Franchise Agreement as covering the Offer, when (1)  the Franchise Agreement did not expressly prohibit the non-disclosure of information relating to the lease of the Shop (as noted in the Judgment at [51])  and (2)  cl.24 of the Franchise Agreement imposed the obligation of good faith only in relation to matters mentioned in the agreement.

30.  In relation to (2), the argument is that cl.24 of the Franchise Agreement was split into two paragraphs, with the first governing matters mentioned in the agreement, and the second governing matters not mentioned in the agreement.  It is said that the obligation of good faith under cl.24 was in the first paragraph, and therefore applied only to matters mentioned in the agreement.

31.  We cannot agree with this reading of cl.24 of the Franchise Agreement.  As a matter of plain wording, the first part of cl.24 was the parties’ confirmation that they understood the contents of the Franchise Agreement, and their agreement to perform it in good faith.  The second part of cl.24 was a stipulation that variations or supplements to the agreement had to be in writing.

32.  As to (1), it may be arguable that cl.15 of the Franchise Agreement did not impose a duty of confidentiality in relation to the Offer.  We can see an argument that information relating to renewal of the lease of the Shop is not something that readily falls within cl.15 of the Franchise Agreement.  Clause 15 is about confidentiality of the franchise’s “mode of operations” and information relating to other technical matters, procedures, recipes, formulas, and design, which would appear to cover the business of making egg waffles, rather than the rental level of the shop.

33.  However, even if cl.15 of the Franchise Agreement did not impose a duty of confidentiality in relation to the Offer, the findings in the Judgment would also appear to support the existence of an obligation of confidence in relation to the Offer and breach of the obligation, quite apart from cl.15 of the Franchise Agreement.  As the Judge noted (Judgment at [35]), there are three requirements for establishing a cause of action for breach of confidence:[2] (1)  the information must have the necessary quality of confidence, (2)  the information must have been imparted in circumstances importing an obligation of confidence, and (3)  there must have been unauthorised use or disclosure of the information.  These requirements would appear to have been satisfied in the present case, since (1)  the level of rent was below the market rate, (2)  the 1^st and 2^nd Defendants knew that the Plaintiff would take up the Offer if they did not, and (3)  it must have been the disclosure of the Offer that enabled the 5^th Defendant to take up the lease at this rental rate (see Judgment at [13], [17], and [51] to [53]).  Whilst the Judge did not expressly deal with these findings as a breach of a duty of confidence distinct from the duty under cl.15 of the Franchise Agreement, the Plaintiff did plead this alternative cause of action, and the findings in the Judgment support it.

34.  Furthermore, and in any event, the Judge found that the 1^st and 2^nd Defendant’s conduct, in diverting the lease of the Shop to a third party, without the authorisation of the Plaintiff, in circumstances where the 1^st and 2^nd Defendants knew that the Plaintiff wanted to take up the lease and that it was important to the Plaintiff as franchisor of the Brand, was a breach of the duty of good faith under cl.24 of the Franchise Agreement.  No argument has been advanced to suggest the contrary.

35.  There is therefore no prospect of success on Ground 5.  No real purpose would be served in giving leave to appeal under Ground 1 as the finding that the 1^st and 2^nd Defendants were in breach of cl.24 of the Franchise Agreement would nevertheless stand, and as the findings in the Judgment would support a finding that the 1^st and 2^nd Defendants were in breach of a duty of confidence quite apart from the Franchise Agreement.

E3.  Ground 6

36.  Currently, the challenge to the award of exemplary damages in Ground 6 is framed as being dependent on success under Grounds 1 to 5.  Given the views expressed above, we consider that Ground 6 as currently framed would not have any prospect of success.

37.  That said, we note that Rookes v Barnard [1964] AC 1129 at 1226-1227 set out the three recognised categories in which exemplary damages may be awarded.  Essentially, these are (1)  cases of oppressive, arbitrary or unconstitutional action by government servants, (2)  cases where the defendant’s conduct has been calculated by him to make a profit for himself which may exceed the compensation payable to the plaintiff, and (3)  cases where exemplary damages are expressly authorised by statute.

38.  If and insofar as the Judge considered that the case fell within the second category, it may be questioned whether the case could properly fall within that category, in light of the Judge’s observation in the Judgment at [71] that there was a question of why the 1^st and 2^nd Defendants conducted themselves in the way that they did, when they would not have reaped any real benefit in keeping the Michelin Award without signing a further franchise agreement.

39.  In answer to the court’s requisition, counsel for the Plaintiff, Mr Patrick Chong, submitted that the Judge applied the decisions of the Court of Appeal in China Light & Power Co Ltd & anor v Ford [1996] 2 HKC 23 and Allan v Ng & Co (a firm) [2012] 2 HKLRD 160 in awarding exemplary damages.  In particular, Mr Chong cited China Light & Power Co Ltd for the proposition that “Lord Devlin’s second category in Rookes v Barnard … was ‘not intended to be exhaustive but illustrative’ ”.

40.  However, we note that Liu JA in China Light & Power Co Ltd, after referring to Lord Hailsham’s comment[3] that Lord Devlin’s second category was being not intended to be exhaustive but illustrative, in fact went on to say (at 34F)  that:

“ It would seem that the narrow ambit of Lord Devlin’s second category is tolerably well-defined and that no extension of the category should be encouraged.”

41.  After analysing what the defendant did in China Light & Power Co Ltd did, Liu JA concluded (at 36A-B):

“ But a confidant’s deeds must be judged in the context of a gain such as profit, benefit or advantage within the contemplation of Lord Devlin in his second category. That is not the nature of the defendant’s claimed damages in his American suit. The plaintiffs have themselves sustained no loss. Try as I may, I find it quite impossible to put the defendant’s American proceedings neatly into Lord Devlin’s second category.”

42.  Both China Light & Power Co Ltd and Allan were cases in which the defendant had misused confidential information with a view to making a profit for himself which might well exceed any compensation payable to the plaintiff; in other words, cases within the second category in Rookes v Barnard.

43.  In the premises, for present purposes, it is at least strongly arguable that in Hong Kong, Rookes v Barnard applies in relation to the bases upon which exemplary damages may be awarded.[4]

44.  We therefore consider that in the absence of a finding that the 1^st and 2^nd Defendants’ conduct in disclosing confidential information regarding the lease of the Shop was calculated by them to make a profit for themselves which might exceed any compensation payable to the Plaintiff, an argument that exemplary damages should not have been awarded would meet the test in Hong Kong & Yaumati Ferry Co Ltd, and an extension of time to appeal should be granted on this point.

45.  Mr Chong submitted that the 1^st and 2^nd Defendants should not be allowed to rely on any issues not raised before the Judge or in their draft Notice of Appeal.  However, the Plaintiff itself had pleaded that the 1^st and 2^nd Defendants’ conduct had been calculated to make a profit for themselves which might well exceed the compensation payable to the Plaintiff.  Furthermore, the Plaintiff’s entitlement to exemplary damages was a matter on which the Plaintiff bore the burden of proof before the Judge.  We are not at this stage persuaded that the doctrine in Flywin Co Ltd v Strong & Associates Ltd (2002)  5 HKCFAR 356 would bar the 1^st and 2^nd Defendants from challenging the award of exemplary damages now.

F.  STAY OF EXECUTION

46.  It follows from the above that we consider the merits of an appeal in relation to the award of exemplary damages would constitute a good reason[5] for a stay of execution of that part of the Judgment.

G.  DISPOSITION

47.  We order that the time for the 1^st and 2^nd Defendants to file and serve a Notice of Appeal against the Judgment be extended by 14 days from today, limited to the ground that:

“ The learned Judge erred in law in ordering the 1^st and 2^nd Defendants to pay exemplary damages in the absence of a finding that their conduct in disclosing confidential information regarding the lease of the Shop was calculated by them to make a profit for themselves which might exceed any compensation payable to the Plaintiff.”

48.  We further order that there be a stay of execution of that part of the Judgment awarding exemplary damages to the Plaintiff.  If the Notice of Appeal containing the above ground is not filed and served within 14 days from today, the stay of execution is to be lifted without further order. 

49.  Whilst we have granted an extension of time for the 1^st and 2^nd Defendants to appeal in respect of the award of exemplary damages, the ground on which leave is given to appeal is not that as formulated in the draft Notice of Appeal; furthermore, we have declined to grant leave to appeal in respect of the other grounds of appeal.  We therefore order, on a nisi basis, that (1)  the costs order made by the Judge in the Leave Judgment stands, and (2)  10% of the costs of the renewed application before us are to be the 1^st and 2^nd Defendants’ costs in the cause of the appeal.