YANG FOO-OI by LEUNG PING CHIU, ROY her next friend v. WAI WAI CHEN AND ANOTHER

HCMP 1433/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 1433OF 2017

(ON AN INTENDED APPEAL FROM HCA NO 1739 OF 2010)

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REASONS FOR JUDGMENT AND
DECISION ON COSTS

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Hon Lam VP (giving Reasons for Judgment and Decision on Costs of the Court):

1.  This is a renewed application for leave to appeal against the interlocutory decision of A Chan J of 3 April 2017. By that decision, the judge granted extension of time to the Plaintiff to make an election between equitable compensation and account for profit and ordered (subject to agreement between the parties) the appointment of a single joint expert, and (in default of such agreement) the appointment of a court expert. The parties did not reach agreement on appointment of single joint expert, the judge therefore made an order on 22 May 2017 for the appointment of a court expert. The expert was appointed to advise the court on what documents would be required to be provided by the 1^st Defendant to give sufficient information to the Plaintiff for the purpose of enabling her to make the election.

2.  These orders were made to implement the judgment of the judge on 29 November 2016.  The judge, after a trial which ran from 21 September to 1 November 2016, gave judgment for the Plaintiff and gave her 14 days to make the election.  The Plaintiff said she needed reasonable information from the 1^st Defendant to enable her to make the election and by a summons of 13 December 2016 she sought what the parties referred to as post-judgment discovery.   

3.  The 1^st Defendant sought leave to appeal against the order of 3 April 2017 and leave was refused by the judge on 6 June 2017.

4.  Four grounds of appeal were put forward in the draft notice of appeal placed before us on behalf of the 1^st Defendant.  With respect to Mr Ho SC (appearing together with Mr Dawes SC and Mr Man for the 1^st Defendant), none of them has any reasonable prospect of success.

5.  Putting Ground 1 aside for a moment, we would start with the challenge as to the jurisdiction of the court to make such order in Ground 2.  The judge examined the application in terms of several basic propositions regarding election at [11] to [14] of the Decision of 3 April 2017:

“ 11.   First and foremost, an account of profits is procedural and to be carried out for the purpose of disgorgement of profits by the trustee who acted in breach of trust.  It is an entitlement of the beneficiary who has suffered as a consequence of the breach of the trust: see para 231 of the Judgment, citing Libertarian.

12.   Secondly, an election of either equitable compensation or an account of profits for the purpose of disgorgement is normally made by the time the trial is concluded: see Tang Man Sit, p 521F.  Hence, the Judgment provided for the election to be made within 14 days subject to justified extension of time. 

13.   Thirdly, the beneficiary is entitled to reasonable information so that he is in a position to make an informed decision on the election: see Tang Man Sit, p 521G-H.

14.   Fourthly, whilst the election is normally made by the time the trial is concluded, there are exceptions.  Two exceptions had been identified in the authorities.  First, where judgment was obtained by default or summarily in which case the beneficiary may not have the requisite information to make an informed election.  Second, where there is a split trial.  See Tang Man Sit, p 512F-G and Island Records, p 1258B-F.”

6.  We agree with these propositions and we do not understand Mr Ho to contend otherwise.

7.  In the judgment of 29 November 2016 the judge provided for the contingency of extension of time to the 14-day time limit (upon a properly justified application) to the Plaintiff to make election.  Given that the Plaintiff was entitled to reasonable information to make an informed election, it was inherent in such provision that there could be scope for post-judgment discovery when the Plaintiff had reasonably refrained from having such information at the pre-judgment stage. 

8.  We agree with Mr Yu SC (appearing with Mr Man SC and Mr Lam for the Plaintiff) that none of the cases cited by Mr Ho support his contention that the court does not have jurisdiction to grant post-judgment discovery.  On the contrary, Mr Yu referred us to the judgment of the Full Court of the Supreme Court of Western Australian in Stambulich v Ekamper [2001] WASCA 283 to illustrate that post-judgment discovery could be ordered to facilitate potential account of profit derived by a fiduciary either directly or indirectly. 

9.  The rationale for post-judgment discovery was explained by Lightman J in Island Records v Tring [1996] 1 WLR 1256 at 1258H as follows:

“ Third, a party should in general not be required to elect or be found to have elected between remedies unless and until he is able to make an informed choice. A right of election, if it is to be meaningful and not a mere gamble, must embrace the right to readily available information as to his likely entitlement in case of both the two alternative remedies. It is quite unreasonable to require the plaintiff to speculate totally in the dark as to whether or not the sum recoverable by way of damages will exceed that recoverable under an account of profits…”

10.  This was endorsed by the Privy Council in Tang Man-sit v Capacious Investments Ltd [1996] 1 HKLR 16 at p.20G.  In that case, Lord Nicholls also said:

“ In the ordinary course, by the time the trial is concluded a plaintiff will know which remedy is more advantageous to him. By then, if not before, he will know enough of the facts to assess where his best interest lie. There will be nothing unfair in requiring him to elect at that stage. Occasionally this may not be so. This is more likely to happen when the judgment is a default judgment or a summary judgment than at the conclusion of a trial. A plaintiff may not know how much money the defendant has made from the wrongful use of his property. It may be unreasonable to require the plaintiff to make his choice without further information. To meet this difficulty, the court may make discovery and other orders designed to give the plaintiff the information he needs, and which in fairness he ought to have, before deciding upon his remedy.”

11.  Lord Nicholls then referred to Island Records v Tring, supra and continued:

“ The court will take care to ensure that such an order is not oppressive to a defendant.”

12.  Thus, it is plain that the court has the power to grant post-judgment discovery though there are discretionary considerations as to whether such power should be exercised after a trial and how the power should be exercised to avoid oppression of the Defendant.

13.  We also reject Mr Ho’s submission that there should be a distinction between cases where a claimant seeks a personal remedy to disgorge the first layer of profits made by a Defendant from his wrongdoing and the present case where the Plaintiff may seek account of profits as a proprietary remedy.  Even assuming it may be arguable that conceptually the two kinds of remedies are different, in terms of the power of the court to order post-judgment discovery to facilitate an informed election to be made, we cannot see the materiality of such distinction.    

14.  We turn next to the exercise of discretion (the other limb of Ground 2).  In the Decision of 3 April 2017, at [15] to [17], the judge explained why he considered that the discretion should be exercised to grant post-judgment discovery in the present case.  He considered in light of the strong denial by the 1^st Defendant as to her position as a fiduciary, it is unlikely that the court would grant specific discovery in respect of information now sought by the Plaintiff at the pre-judgment stage.  The judge therefore held that the Plaintiff should not be blamed for not having the requisite information notwithstanding the conclusion of the trial.

15.  Mr Ho took issue with that assessment.  With respect, this is a highly case-sensitive assessment and the judge was very familiar with the case, having presided over the trial which lasted for a considerable period of time.  We do not see any reasonable prospect of the Court of Appeal disturbing such assessment, certainly not by a mere proposition that the Plaintiff could have pressed for more discovery as there had not been a split-trial.

16.  In our judgment, the crucial question is whether it was reasonable to require the Plaintiff to make the election without further information in the circumstances of the present case.  Notwithstanding the conclusion of the trial, after taking the relevant matter into account the judge assessed that post-judgment discovery should be ordered in these circumstances.  We do not see any reasonable prospect in the Court of Appeal disturbing such assessment.

17.  We therefore see no merit in Ground 2.

18.  Ground 3 relates to the practical problems in such post-judgment discovery.  The judge had addressed some aspects of the problems at [14] and [15] of the Decision of 6 June 2017. Further he has yet to decide on the precise scope of such discovery.  The judge certainly appreciated that it was no easy task given the size of the trust assets and the period of the 1^st Defendant’s accountability.  The judge was also anxious that the discovery to be ordered would not be oppressive on the 1^st Defendant.  That was the reason why the judge decided to enlist the assistance of accounting expert to advise the court.  Much depends on the progress of the matter with the assistance of the expert and parties can make further submissions to the judge after the expert has tendered his report.  We do not regard Ground 3 as a valid ground for us to interfere with the order made by the judge.

19.  Ground 4 is based on the premise that the judge had delegated the task of deciding the scope of reasonable discovery to the expert.  We do not find that to be the effect of the order.  The judge only enlisted the assistance of an expert to advise him for the reason he gave at [25] to [27] in the Decision of 3 April 2017:

“ 25. As pointed out by Mr Ho, the properties portfolio in question is very extensive and the court will be looking at what happened to those properties over a period of 14 years.  The rental receipt over the years involved some 180,000 transactions.  The rental as well as the proceeds of sale of some of the properties were mixed with properties belonging to the Crosby Group as well as a company of Vivian called Gentfull.  The mixed funds were invested and re-vested over the years, and some of the investments took the form of property development, which may involve third party interest.

26. There is substance in Vivian’s complaint that the discovery being sought by Yang amounts to pretty much an account of profits, and that it would be an oppressive exercise where her personal affairs, and to a lesser extent those of third party or parties, would be trawled through. 

27. In short, whilst I feel unable to accept at face value the limited amount of information provided by Vivian as giving an adequate picture of the profits derived from the trusts properties in light of the criticisms made by Mr Yu, I am in no position to judge the matter without the assistance from an accountant.” 

20.  In the present circumstances, we think it was perfectly legitimate for the judge to order the appointment of a court expert to assist him.

21.  We come back to Ground 1.  Mr Ho submitted that the Plaintiff is being barred from seeking post-judgment discovery to facilitate election because the judge had already pre-empted that course at [267] of the main judgment of 29 November 2016 when he ordered the Plaintiff to make an election between equitable compensation and account of profits.  That paragraph reads:

“ 267. In the premises, I declare that the Disputed Agreements have been rescinded.  Further, Yang is entitled to, at her choice, either equitable compensation calculated in accordance with the findings above or an account for profits.  Such election is to be made within 14 days from the date of this judgment, subject to any properly justified application for extension of time.”

22.  The judge did not regard that he had pre-empted the issue by his judgment in this paragraph, see [18] in his Decision of 3 April 2017.

23.  However, Mr Ho drew our attention to the transcript of the trial on Day 21 (1 Nov 2016).  Counsel contended that the question of having a procedural account before an election is made by the Plaintiff had been canvassed by Mr Yu on behalf of the Plaintiff and the judge declined to adopt such course.  In such circumstances, Mr Ho said, the doctrine of issue estoppel barred the Plaintiff from revisiting a similar course by way of post-judgment discovery to facilitate informed election.

24.  We have read the relevant parts of the transcript of that day.  Whilst there were submissions on procedural account as a prequel to election, nothing was said on post-judgment discovery to provide reasonable information to the Plaintiff to facilitate informed election.  We agree with Mr Yu that the two processes are conceptually different and the judge obviously did not rule on the latter in the main judgment. 

25.  We also do not see any scope for the application of the doctrine of issue estoppel since the judge’s judgment of 29 November 2016 explicitly provided for the contingency of extension of time to make an informed election.  The need to have reasonable information to make the election, as held by the judge, is a justified application for extension.  Hence, the judgment of 29 November 2016 itself is not a final determination by the judge having any pre-emptive effect as far as post-judgment discovery to facilitate informed election is concerned.

26.  As there is no reasonable prospect of success in the intended appeal, and we see no other reason in the interest of justice for the grant of leave, we dismissed the application for leave to appeal. 

27.  It also follows that the application for stay of execution was dismissed. 

28.  We also ordered the 1^st Defendant to pay the costs of the Plaintiff.

29.  Having considered the Statement of Costs of the Plaintiff and the comments on the same by solicitors for the 1^st Defendant in the letter of 31 July 2017 and the reply thereto by solicitors for the Plaintiff, we agree that there should be some reduction on the solicitor’s charges and the brief fee of Mr Man SC should not be allowed as there is no justification for having three counsel in a leave application (though we would allow Mr Man’s fees for preparation of written submissions). We would fix the costs of the Plaintiff in this application at $462,822.