TANG FU SUN suing as the Manager of TAI HONG WAI COMMUNITY v. TANG LIK YUEN also known as TANG WING YUEN

[English Translation – 英譯本]
HCMP 887/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 887 OF 2010

(ON AN INTENDED APPEAL FROM HCA 2028 & 2846 OF 2006)

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HCA 2028/2006

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REASONS FOR DECISION

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Hon Tang VP (giving Reasons for Decision of the Court):

1.  The defendant applied for extension of time to appeal in respect of Yam J’s order dated 9 February 2010.

2.  The defendant is the respondent and counterclaimant in the two proceedings HCA 2028/2006 and HCA 2846/2006.  The plaintiff in HCA 2028/2006 is Tang Fu Sun, the duty manager of Tai Hong Wai Community (泰康圍大衆), while the plaintiff in HCA 2846/2006 is Tang Kan Yip, the duty manager of Tang Shung Kok Tso (鄧嵩閣祖). Both cases turn on whether the defendant was removed from the office of duty manager in 2006.  According to paragraph 5d of the Defence and Counterclaim filed by the defendant in HCA 2028/2006,

“d) … the defendant shall continue to act as the duty manager until the plaintiff has, as per the Tso’s custom, removed him from the office of duty manager by resolution of all the members at a members’ general meeting.”

3.  In HCA 2846/2006, the defendant claimed in the Defence and Counterclaim that:

“3) The plaintiff’s agenda on the notice to the members’ general meeting of 22 January 2006 was incomplete and/or contained no clear indication that the defendant was to be removed from the office of duty manager, hence the agenda relating to the said removal was invalid.”

4.  The court has yet to rule on the above matter.

5.  Mr. K. M. Chong of Counsel, on behalf of the plaintiffs in the two actions, submitted that the defendant’s argument in support of his claim that he had remained in the office of duty manager was rather weak.  Since we have not heard full submissions in this regard, we cannot and need not resolve this matter.

6.  This application arises from the claim of the plaintiffs in the two actions for the defendant to produce the accounts of the two Tsos for the period when he was the duty manager thereof.  Such application was approved by Master J. Wong, who made the following order on 14 December 2007 pursuant to Order 43, rule 1(b):

“(1) The Defendant do within 60 days, provide true and proper account of all moneys, assets and properties belonging to the Tsos which has, at any time, come into and out of the hands of the Defendant, his employees, servants or agents or received by any other person on his behalf in his capacity as the Duty Manager (值理) thereof and that such accounts to be:-

(a) prepared in accepted Hong Kong accounting practice; and

(b) verified by an affidavit/affirmation of the Defendant;

(2) The Plaintiff is at liberty to inspect all the relevant documents in the possession or power of the Defendant in respect of the said accounts within 30 days thereafter.

(3)    The Plaintiff’s applications for interim payment are adjourned sine dine with liberty to restore.”

7.  On 9 December 2008, on the basis that the defendant had not fully complied with the above order, Master Wong ordered that the defendant further produce to the plaintiffs the accounts of the two Tsos (“the second Order for Account”).

8.  On 2 April 2009, since the defendant had repeatedly breached the above Summary Order for Account, Master Wong made an unless order requiring the defendant to fully comply with the said Summary Order for Account within 60 days, failing which his Defence and Counterclaim would be struck out forthwith.

9.  The defendant did not comply with the said unless order.  On 16 December 2009, Master Wong ordered that the defendant’s Defence and Counterclaim be struck out (“the striking out order”).

10.  The defendant appealed against the striking out order.

11.  On 9 February 2010, Yam J dismissed the defendant’s appeal and gave oral reasons when delivering his judgment.  The defendant explained in his affirmation dated 7 May 2010 that he started to apply to the court for the audio recording of the proceedings on 10 February 2010, but he was only given a written reply by the court on 10 March 2010, which reads:

“…a reply is given as follows as per Yam J’s instructions given on 11 February 2010:

‘A written judgment will be posted to you. Please read the judgment before deciding on whether you will need the audio recording concerning the outcome of the hearing. If you do need it, please apply to the court in writing again and state the reasons why you need it and what its intended use will be.’

But you must give a written undertaking to pay for your application for the audio recording of the proceedings…”

12.  On 26 March 2010, the defendant wrote to the court to apply for the audio recording concerning the outcome of the hearing and undertook to pay the fees, etc.

13.  The court replied by letter on 29 March 2010:

“Approval is given and the audio recording of the proceedings will be provided.”

14.  The defendant eventually received the audio recording on 1 April 2010.  Meanwhile Yam J’s judgment was posted to him on 23 March 2010.  The defendant explained that since he was not represented, it took him some time to listen to the recording and check the Judiciary’s website to learn about the appeal procedures.  He further explained that he did try to file a notice to appeal in mid-April 2010 but his attempt was rejected by a court clerk because he was out of time.  Later on he checked the Judiciary’s website again and it was only then that he realized he could apply for extension of time to appeal.

15.  On 7 May 2010, the defendant filed his application for extension of time to appeal.

16.  The defendant’s application was heard by this court (rather than the Court of First Instance) for the reasons described by Chu J in Wynn Resorts (Macau) S. A. v. Mong Henry [2009] 5 HKC 515.  The said judgment concerns Order 59, rule 2B(1):

“(1)… an application for leave to appeal against –

(a) an interlocutory judgment or order of the Court;

…

may only be made to the Court in the first instance within 14 days from the date of the judgment or order.”

17.  Chu J gave the following explanation:

“10. …The language suggests that an application to the court below for leave to appeal its judgment or order can only be made within the 14-day time limit.

11.  There is no other provision in Order 59 enabling the court below to extend time for applying for leave to appeal….”

Therefore, the Court of First Instance:

“13. …only has power to deal with an application for leave to appeal under Order 59 rule 2B(1) that is made before the expiration of the 14-day time limit. …”

18.  Mr. Chong stressed that although the judgment was only posted to the defendant on 23 March 2010, the defendant did not offer any reasonable explanation as to why he would only apply to this court for extension of time to appeal on 7 May 2010.  In our view, it may not be easy for an unrepresented litigant to find out the time limit for appeal.  Further, the delay was not substantial and did not cause any prejudice to the plaintiff.  Hence we will not dismiss the defendant’s application on the basis of the delay.  We now turn to the merits of the appeal.

19.  As submitted by Mr. Chong, the defendant had failed to comply with Master Wong’s order in the two years since it was made on 24 March.  Accordingly the learned Master approved the plaintiff’s application on 2 April 2009 and made the unless order against the defendant.  No appeal was lodged against that order, and in those circumstances the learned Master made the striking out order.  Mr. Chong submitted that this court should not vary the learned Master’s order.

20.  Relying on the newly amended Rules of the High Court (Cap. 4A), Mr. Chong submitted that whether the defaulting party had intentionally breached the order was only one of the circumstances that the court should consider when deciding if it should make a striking out order.  Nonetheless, when he made the striking out order, Master Wong did not explain if he found the defendant’s failure to comply was intentional.  Nor was that mentioned in Yam J’s judgment.

21.  The defendant explained in his affirmation that his failure to comply was due to his inability to do so, rather than that it was intentional.  In his affirmation dated 7 September 2009, he gave the reasons for his failure to produce the accounts as follows:

“4. I have repeatedly enquired with my accountant, Vincent L. S. Wong (‘my accountant’), about the provision of accounts which covered the balance brought forward and the balance carried forward. However, in my accountant’s professional opinion, the balance brought forward and the balance carried forward cannot be accurately worked out based on the plaintiff’s accounts, vouchers and bank passbooks that are currently in my possession.

5. In mid-May 2009, my accountant gave me his professional advice and asked me to provide him with more accounting materials before he could accurately work out the balance brought forward and the balance carried forward. I therefore asked my accountant to list out the documents required. On 21 May 2009, I sent to the plaintiffs’ solicitors a letter attached with a copy of my accountant’s letter, asking the plaintiffs to provide me with the documents required for the calculation of the balance brought forward and the balance carried forward. However, I have yet to receive their reply. I hereby attach the said letter together with a copy of my accountant’s letter as Exhibit ‘TLY-2’.

6. What is in issue between the parties is whether I intentionally withheld information about the balance brought forward and the balance carried forward. I never know how to do accounting calculations, nor will I ever calculate the balance brought forward and the balance carried forward without the same being audited by an accountant (sic). That is very unfair to me and is a waste of time as far as the court, the plaintiffs and myself are concerned.

7.  Based on the above, I urge the court to order the appointment of a court expert (Hong Kong registered accountant) to examine the plaintiffs’ accounting documents, vouchers and bank passbooks that are currently in my possession in order to find out if the balance brought forward and the balance carried forward can be accurately worked out.”

22.  In respect of the defendant’s explanation, Yam J gave a detailed account of the incident and arrived at the following conclusions:

“3.  On 14 December 2007, Master Wong made the first order requiring the defendant to produce the accounts.  The defendant later produced part of the accounts, but the plaintiffs were not satisfied with what he had produced.  Eventually the case was again heard before Master Wong, who made another order on 9 December 2008 against the defendant.  As submitted by Mr. Chong for the plaintiffs, the main parts of that order were (1)(a) and (b), namely, first, the defendant must state the period of time that the accounts covered, as well as the “balance brought forward” and the “balance carried forward”; second, the defendant must state “the form” in which all the remaining monies or balance belonging to the two Tsos were kept orsaved,for example whether they were in cash or in the form of bank savings.

4.    Mr Tang gave a simple explanation of these two matters.  He submitted that there was a sum of about $5,247,000 when he first took over, which was clearly shown in pages 280 and 281 of Bundle B which bore his signature.  It was also mentioned in the documents that he received this sum in the form of numerous bank savings and cheques, etc.  However, none of the accounts that he prepared or those prepared by his accountant under his instructions stated what the initial balance brought forward was, nor did they give any detailed information about this sum of 5 million-odd dollars.  Regarding the second part of the order, he did not understand why he was required to account for “the form” in which the sum was kept.

5.    Mr Chong submitted that the cash flow statement relating to the payments for the years 2004 and 2005, which was at pages 244 and 245 of the bundle, clearly showed that there were mainly two sums that the accountant could not confirm.  First, in 2004, there was a total sum of $1,328,000 allegedly kept at bank(s), but the accountant could not confirm that since no documents showed at which bank(s) this sum was kept.  Further, the defendant claimed that $324,075.34 was kept in cash, but his accountant had not seen this cash balance, such as finding out the money flow, nor did Mr Tang ever pass this cash to his accountant for counting in order to confirm the existence of this sum of $324,075.34.

6.    Likewise, a total sum of $1,084,000 was deposited in a bank in 2005, but the accountant clearly stated that “the accounting firm cannot confirm that”.  There was another sum of $567,000 that was allegedly kept by Mr. Tang Wing Yuen.  In other words, the accountant merely made a record of what the defendant (Mr. Tang) said but could not confirm the existence of the money.

7.    Up till now, the defendant has not complied with the order (1)(a) and (b).  As I mentioned at the outset, Master Wong was already of the view that Mr. Tang had failed to comply with the court order on 16 December 2009.  One of the serious consequences of not complying with an order is that the court may strike out the defendant’s defence and counterclaim and enter judgment in favour of the plaintiff.”

23.  In our view, in considering the reasons for the defendant’s failure to comply, Yam J did not give full consideration to whether the defendant was able to comply with the order, nor did he make a ruling on whether the defendant’s failure to comply was intentional.

24.  In this case, as submitted by Mr. Chong, Master Wong’s order and the counterclaim that had been struck out were independent of each other.  In other words, regardless of whether the defendant would continue to act as the manager, the defendant would be required to produce the accounts.  For this very reason, this case is different from one involving the usual unless order in that generally speaking, the act that a litigant is required to perform under an unless order is connected with the final decision of the case, such as an order requiring a litigant to produce documents for the purpose of the trial.  As far as that kind of order is concerned, if the failure to comply is intentional, or if it is prolonged even though it is not intentional, the court is entitled to and indeed should strike out the claim or counterclaim in question.  That is because the action cannot be fairly proceeded with while the required steps have not been taken.  In this case, however, the situation is quite different. As submitted by Mr. Chong, the accounts were independent from the counterclaim.  That being so, even though the accounts were not sorted out, that would not affect the proceeding of the rest of the claim and the counterclaim.  Therefore, whether the court should strike out the counterclaim on the ground that the accounts were not sorted out is a matter that requires careful handling and thorough consideration.

25.  In the premises, we allow the defendant’s application for extension of time to appeal, so that the relevant issues may be thoroughly examined by this Court in the appeal proper.  Costs of this application be in the cause.