WILLWIN DEVELOPMENT (ASIA) CO LTD AND ANOTHER v. WEI XING AND OTHERS

HCA 797/2012

[2024] HKCFI 2546

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 797 OF 2012

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JUDGMENT

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Introduction

1.  On 8 April 2020, Master J Wong handed down his decision (“Accounts Decision”) upon the taking of accounts in which he made inter alia the following orders (i) All three Defendants should pay the 1st Plaintiff US$500,749.03 (US$603,312.09 x 83%), being accounts of profits for diversion of business (“Profits Order”); (ii) the 1st Plaintiff failed to prove and/or quantify any sum of misappropriation by any of the three Defendants (“Withdrawn Sums Order”).

2.  By way of background, the taking of accounts by Master J Wong was conducted following a Judgment (“Trial Judgment”) handed down by Mimmie Chan J on 8 March 2016 in favour of the 1st Plaintiff against the three Defendants. It was a very lengthy Judgment since the issues were numerous. For the purpose of the 1^st and 3^rd Defendants’ duty to account, this court need only refer to the following.

“Whether Xing and Ying[1] have a duty to account for the plaintiffs’ funds

131. The plaintiffs’ complaint is that between April 2008 and March 2011, Xing and Ying withdrew from WW’s bank account in Hong Kong and received respectively (in Xing’s case) the sums of HK$1,816,000 and US$15,500, and (in Ying’s case) the sums of HK$6,290,000 and US$334,460.

132. It is not disputed that the sums were withdrawn by Xing and Ying on Wen’s instructions and with his approval. On Wen’s part, he claims that the withdrawals made by Xing and Ying were made on his instructions, but as a result of requests made by Xing that sums were required for SWT’s operations. This is evidenced by the emails exchanged between Wen and Xing in 2009 and 2010. On Ying’s part, she claims that the amounts withdrawn by her had been paid over either to Wen, or to SWT, or to persons designated by Wen. On Xing’s part, he claims that he had paid such amounts withdrawn by him to Wen, that Wen controlled the bank accounts and the bank statements and audited accounts of WW, such that Wen fully knew the whereabouts of the funds and how they had been utilized.

133. As directors and agents of WW in making the withdrawals of cash from WW’s bank accounts and in receiving the funds, it cannot be disputed that Xing and Ying had a duty to account for, and explain, how the money they received or withdrew had been used. That Wen knew or must have known of the withdrawals, and might or should have been able to ascertain from the audited accounts of WW the state of any indebtedness between SWT and WW, or between Xing and WW, does not in law absolve Xing and Ying from their duties to keep and give accurate accounts of the monies they withdrew for and received from WW.

…

137. I fail to see what defence Xing has to WW’s claim for an account as to the amounts withdrawn by him, and as to amounts paid to him by Ying out of WW’s funds. Ying likewise has to account for the sums of money she withdrew from WW, including full particulars of the individuals to whom she had given each of the sums, and the dates when the payments were made.” (emphasis added)

3.  On the other hand, the learned Judge was unable at the trial to come to a conclusion on whether the 1^st and 3^rd Defendants had misappropriated the Plaintiff’s funds. This is what the Judge said at [138].

“Whether Xing and Ying had misappropriated the plaintiffs’ funds

138. In the absence of further evidence and prior to an account being given by Xing and Ying, I cannot find on the basis only of withdrawals having been made by Ying and Xing from WW’s bank accounts, between April 2008 and February 2011, that these amounts had been misappropriated by the defendants and should be repaid by them…” (emphasis added)

4.  At [155], Mimmie Chan J found in favour of the 1^st Plaintiff on its claims for accounts. Hence, the Judge further ordered an account to be taken of the sums received by the 1^st and 3^rd Defendants.

5.  In March 2021, this court heard the 1st Plaintiff’s appeal against the Profits Order and the Withdrawn Sums Order. Subsequently, this court handed down a Judgment dated 5 October 2021 (“Judgment”). By the Judgment, this court dismissed the 1^st Plaintiff’s appeal against the Profits Order but allowed the 1st Plaintiff’s appeal against the Withdrawn Sums Order. This court then granted an Order that the 1st Defendant do pay to the 1st Plaintiff the sums of HK$1,816,000 and US$15,500 forthwith[2], together with interest. Lastly, this court ordered the 1st Plaintiff was entitled to 50% of the costs of the appeal, to be taxed if not agreed, and paid by the 1st and 3rd Defendants forthwith (“Order”).

6.  This is the hearing of a Summons dated 19 June 2024 (“Summons”) whereby the 1st Defendant seeks (i) leave to appeal out of time against the Judgment, and (ii) a stay of execution of the Judgment pending appeal. The grounds of appeal are set out in the draft Notice of Appeal annexed to the Summons (“draft Notice”). The Summons is supported by a 2-page affirmation of the 1^st Defendant (“Xing 1”) which purports to explain the delay of 2 years and 8 months in launching his appeal against the Judgment.

7.  At the hearing, Ms Tsai confirmed to this court that her client no longer pursued the stay of execution pending appeal.

Deliberation

8.  The legal principles regarding applications for leave to appeal out of time are well established. 

(a)  In the exercise of its discretion, the court will take into account (i) the length of the delay, (ii) the reasons for the delay, (iii) the chances of the appeal succeeding if an extension of time for appealing is granted, and (iv) the degree of prejudice to the would-be respondent if the application for an extension is granted.

(b)  Although the existence of prejudice to a would-be respondent is a ground for refusing an extension of time, the absence of prejudice to a would-be respondent is not a ground for extending the time.

(c)  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.

Chiu Sin-chung v Yu Yan-yan, Angela [1993] 1 HKLR 225 at 227 (Keith J); Lee Chick Choi v Best Spirits Co Ltd unrep, HCMP 371 of 2015, 21 May 2015 at [19] (Kwan JA, as she then was).

Length of delay

9.  In her skeleton, Ms Tsai simply sets out the expiry date for appealing against the Judgment and the date of the Summons. Mr Leung, on the other hand, describes quite rightly that the delay in making the present application is “inordinate”. The Judgment is only 17-page long. The 1^st Defendant was represented by counsel and a firm of solicitors at the hearing of the appeal against Master J Wong’s Accounts Decision. How the 1^st Defendant could have delayed for over 2 ½ years in order to launch an appeal against the Judgment is beyond comprehension.

Reasons for the delay

10.  The 1st Defendant in Xing 1 purports to explain this inordinate delay. Since the relevant parts of Xing 1 consist of only paragraphs 3 to 7, this court will set them out in full for ease of reference.

“3. 本人常居中國內地，不經常逗留香港，尤其於2020年至2022年間正值新冠狀病毒病疫情期間，嚴格的出入境限制令本人無法經常往返香港，鑒於此，本人便委託了吳馨燃先生 (「老吳」) 及其律師團隊處理及跟進此案件的訴訟程序。

4. 儘管本人獲悉該判決書於2021年10月5日頒下，但由於疫情期間出行受阻，加上本人主要依賴老吳負責訴訟過程中的大部分文件，然而，當時老吳已離開了當時代表本人的律師事務所，所以本人無法充分了解上訴的全部細節和相關文件的機會。

5. 此後，本人通過各種渠道試圖獲取更多關於此案件的資訊和全貌，直至約於2023年8月末，本人因另外一個與此費用有關的訴訟案件，才取得該判決書的完整版本並徹底理解了其與黃健棠聆案官於2020年4月8日頒下的判決書之差異。

6. 有見及此，本人及時於2024年1月末左右，委託了現有法律代表就此上訴申請向本人提出適當建議並隨即指示其就當前的上訴作出申請。

7. 可見，延誤主要源於疫情期間出行受限，加上代理的律師事務所職員的離職影響，使得本人無法及時獲取案件的最新進展和相關文件。本人在獲悉及了解該判決書後，已迅速採取行動，以避免進一步的延誤。”

11.  Ms Tsai tries to summarise the explanation in her skeleton as follows.

(a)  The travel restrictions imposed during COVID-19 from 2020 to 2022 prevented the 1^st Defendant, who normally resided in Mainland China, from frequent travel to Hong Kong.

(b)  The 1^st Defendant relied on Mr. 吳馨燃 (“Ng”) and his legal team to handle the legal proceedings. According to Ms Tsai, Ng was a clerk in Cedric & Co, the solicitors’ firm representing the 1^st Defendant at the hearing of the appeal. Ng subsequently left the firm.

(c)  Despite being aware of the handing down of the Judgment in 2021, the 1st Defendant had difficulties in fully understanding the details and chances of an appeal against the Judgment, owing to the travel restrictions and the departure of Ng.

(d)  The 1st Defendant made efforts to gather information of the case through various channels, before he eventually obtained the full version of the Judgment via another related case, allowing for a thorough understanding of its implications around late August 2023.

(e)  The 1^st Defendant has taken prompt action upon understanding the Judgment, with engagement of his current legal representatives in January 2024 to advise on and proceed with the present application.

12.  This court is wholly unable to accept the 1st Defendant’s explanations which are merely excuses. As submitted by Mr Leung:

(a)  There was no need for the 1st Defendant to be physically in Hong Kong to appeal against the Judgment.  In the same way that he instructed his solicitors and counsel to appear before this court to contest the 1^st Plaintiff’s appeal against Master J Wong’s Accounts Decision[3], he could have done the same when appealing the Judgment.

(b)  The 1st Defendant’s bare assertion that his inability to understand the Judgment because Ng had left the 1st Defendant’s then solicitors firm is unjustified and incredible. Ng was only a clerk in Cedric & Co and was in no position to advise him on anything legal. If the 1st Defendant wished to understand the Judgment and the chances of success of his appeal against it, there was no reason why he could not make inquiries with a qualified lawyer in Cedric & Co, or some other law firm, to obtain a copy of the Judgment and to ask him/her to advise him.

(c)  The 1st Defendant’s claim that he had made efforts to gather information on the case is just a bare assertion. In fact, it is difficult to understand what information he thought he needed to gather, other than a copy of the Judgment and advice on the intended appeal.

(d)  The 1st Defendant said he obtained a copy of the Judgment in about late August 2023. However, It took him 5 months in about January 2024 to decide to instruct his current legal representatives to make this application.  

(e)  Lastly, the present application was made in June 2024, another 5 months after the 1st Defendant had instructed his current legal representatives.  

13.   In China Light & Power Co Ltd & Anor v Ford [1998] 1 HKLRD 382 at 387 I-J, Nazareth VP remarked that if there had been inordinate delay and the reasons advanced for the delay were not acceptable to the Court, the delay would of itself warrant the dismissal of the application for leave to appeal out of time (absent potent countervailing factors relevant to the exercise of the Court's discretion). No such potent countervailing factors have been submitted to this court.

14.  For this reason alone, this court is minded to exercise its discretion to dismiss the 1st Defendant’s application.

The chances of the appeal succeeding

15.  In Ms Tsai’s skeleton, all she has done is to give a simplified version of the grounds of appeal set out in the draft Notice without any analysis or elaboration.

16.  In paras 10 to 14 of her skeleton, she has given this simplified version of Grounds 1 a to e and Ground 2 as follows:

“10. The learned Judge erred in ordering the Applicant to pay HK$1,816,000 and US$15,500, for the following reasons:-

(a) The learned Judge has failed to properly consider available evidence by (1) misinterpreting Master’s inability to conclude on the account as a failure by the Applicant to prove discharge; (2) overlooking the Master's finding that the 1st Plaintiff had not satisfied its burden to prove misappropriation; and (3) failing to analyse documentary evidence, including SWT's financial records as directed by the Trial Judge.

(b) The learned Judge has misapplied the burden of proof by (1) erroneously placing the burden on the 1st Defendant to prove proper account.

(c) The learned Judge has overlooked the impact of the 1st Plaintiff's failure to produce satisfactory evidence by (1) failing to consider that evidential difficulties faced by the 1st Defendant were due to the 1st Plaintiff’s unsatisfactory evidence; and (2) overlooking the Trial Judge's observation that account-taking requires cooperation from both sides.

11. The learned Judge erred in misapplying the legal principles in Libertarian Investments Ltd v Hall (2013) 16 HKCFAR 681, for the following reasons: -

(a) The Trial Judge made no finding on the Misappropriation Claim, thus the 1st Defendant should not have been treated as a defaulting fiduciary.

(b) The evidential difficulties were not created by the 1st Defendant's wrongdoing, as withdrawals were made on Wei Wen of the 1st Plaintiff’s instruction and approval.

12. The learned Judge erred in failing to remit the matter to a Master for further and better account of the Withdrawn Sums.

13. The learned Judge erred in ordering a disproportionate and excessive award, given the evidential uncertainties and the nature of the withdrawals.

14. The learned Judge erred in ordering the 1st and 3rd Defendants to bear 50% of the 1st Plaintiff's costs.”

17.  In her skeleton submissions in Reply, Ms Tsai has given a longer version of the grounds of appeal in the draft Notice but the essence of the arguments is the same. They contain only bare assertions with no proper analysis or elaboration and unsupported by authorities. The most blatant error among the grounds of appeal is the failure to appreciate the 1^st Defendant had a duty to account. In that respect, he had the burden of proof of what had happened to the funds he had withdrawn from the 1^st Plaintiff’s bank accounts, as held by Mimmie Chan J. His evidential difficulties, if any, were not of the 1^st Plaintiff’s making. The robust approach advocated in Libertarian Investments Ltd v Hall (2013) 16 HKCFAR 681 was clearly called for.

18.  This court’s reasoning in granting the Order has been set out in paragraphs 20 to 34 and 38 of the Judgment. This court cannot see any fault in the reasoning or the result derived from such reasoning. Having revisited the Judgment in light of Ms Tsai’s 2 skeletons and Mr Leung’s skeleton, this court is firmly of the view that the 1st Defendant does not have reasonable prospects of success on appeal, let alone real prospects of success ora strongly arguable case. 

Prejudice to the 1^st Plaintiff

19.  Mr Leung rightly submits that the 1^st Plaintiff is entitled to treat and has treated the Judgment as final on the ground that the appeal period for the Judgment has long expired. It stands to reason that the 1^st Plaintiff would in all probabilities have arranged its affairs on that basis. Being deprived of that entitlement to treat the Judgment as final after over 2 and ½ years is self-evidently prejudice in itself.

20.  Whether that prejudice should be described as limited or not, that would not make a difference to this court’s decision. This is because the absence of prejudice to a would-be respondent is not a ground for extending the time to appeal.

Conclusion

21.  To conclude, for the above reasons, this court declines to exercise its discretion to extend time to appeal against the Judgment.

Disposition and costs order nisi

22.  The Summons is hereby dismissed.

23.  There shall be an Order nisi that costs of the Summons be to the 1^st Plaintiff to be summarily assessed on paper and paid by the 1st Defendant forthwith. Leave to the 1st Defendant to submit a statement of opposition within 3 days of this Judgment.