Lo Li Li Lily v. Lui Fung He

CACV 1/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 1 OF 2016

(ON APPEAL FROM HCAP NO. 3 OF 2010)

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BETWEEN

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REASONS FOR JUDGMENT
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Hon Kwan JA (giving the Reasons for Judgment of the Court):

1.On 8 December 2015, B Chu J granted leave to the plaintiff to discontinue her claim against the defendant on terms as to costs and an undertaking of the plaintiff not to commence proceedings for the same subject matter, and ordered judgment be entered against the plaintiff in respect of the defendant’s counterclaim with costs of the entire action to the defendant. Judgment was ordered to be entered on the counterclaim on the basis of the plaintiff’s admission in two letters. The plaintiff appealed against that part of the order.

2.At the conclusion of the hearing, we allowed her appeal to a limited extent by deleting these paragraphs from the judgment on the counterclaim: §§2(1), 2(2), 2(3)(a) and a piece of diamond jewellery of 8.24 carat in 2(3)(c).  In respect of the item of jewellery in §2(3)(b) and the two remaining pieces in §2(3)(c), we accepted the undertakings given by the defendant’s leading counsel that (1) the defendant would not seek to depart from her case in the witness statement of Madam Fung Ng Wai Kwan; and (2) the defendant would not take any issue of res judicata on those items of jewellery in subsequent proceedings.  We awarded the defendant 80% of the costs of this appeal, with a certificate for two counsel and ordered her costs be taxed in accordance with the Legal Aid Regulations.

3.These are the reasons for our judgment.

The background

4.We adopt the background matters and the names defined as set out in the Reasons for Decision of the judge handed down on 29 January 2016 at §§4 to 22:

“The present probate action

4. D is the lawful and natural mother of Madam Ng Wai Jing also known as Regina Ng who died on 30 December 2000 (“Deceased”). P and the Deceased held equal shares in a total of 11 companies in a real estate agency business which I shall simply call Chartersince Group (“Group”). D had obtained a Grant of Administration Ad Colligenda Bona on 15 October 2008 to collect the Deceased’s estate, and had instituted a set out of 9 HCMP actions against various companies in the Group (“HCMP Actions”) to recover the shares held by the Deceased and for account and inquiry on dividends and interest on those shares since the death of the Deceased.

5. P was in charge of the Group after Deceased’s death. After commencement by D of the HCMP Actions, P commenced the present action on 4 February 2010 claiming that the Deceased had prior to her death made a gift of her shares in the companies in the Group to P and that P is the legal and beneficial owner of Deceased’s shares by way of donatio mortis causa or otherwise.

6. D denied P’s claims and had counterclaimed against P for injunctive relief from intermeddling and misappropriating the Deceased’s estate, including Deceased’s jewellery, watches, certain diamond ornaments and share certificates of the Deceased’s shares. D sought delivery up of these assets and damages for misappropriation and conversion, and also an account for dividends, profits and earnings arising out of the Deceased’s shares.

Chronology of Events

7. On 13 May 2015, the Registrar of the High Court sent a letter to the parties requesting them to attend court on 23 June 2015 for the purpose of fixing dates. The first attempt to fix trial dates failed for reasons I do not need to go into, and eventually, on 14 July 2015, trial dates and also the pre-trial review hearing date were fixed. The trial was fixed for 10 days to commence from 11 May 2016, notwithstanding D had indicated that her counsel was not available for 2 out of those 10 days. D’s solicitors then wrote to the court to ask for those 2 days to be refixed.

8. In response to D’s above letter, P had written on 20 July 2015 to inform the court indicating that she had sued D only because of one reason, namely to claim for 50% of the Deceased’s shareholding of the companies in the Group, but as the Group would be liquidated, she would not proceed with her claim against D. She wrote again on 27 July 2015 to inform the Listing Officer that she would not proceed with the present action, and that as there would be no trial, there was no need to fix any dates for trial.

9. However, D’s solicitors replied on 29 July 2015 and insisted on refixing the remaining 2 dates, pointing out that D had a very substantial counterclaim against P. This resulted in P sending a further letter indicating that a one day trial would be required instead of 10 days.

10. In view of the continuous correspondence sent to this court, I directed a 15 minute directions hearing to clarify the dispute between the parties. This was fixed on 17 August 2015 (“1^st Direction Hearing”).

11. P was unrepresented at the 1^st Direction Hearing. At the 1^st Direction Hearing, D’s solicitor Mr Kwan had pointed out to P that D’s counterclaim not only included claims for the delivery up of the Deceased’s personal items, and also for delivery up of share certificate of the Deceased’s shares in the Group and an account of profits since Deceased’s death. At this hearing, P said she abandoned her claim, and indicated she would hand over the share certificates/shares. This court had explained to P the details of the counterclaim, which would include an account of income and expenses of the Group for 15 years since Deceased’s death on 30 December 2000. P had said she understood and that the amounts of the personal items were small but as the account was for 15 years, she asked for two months to consult lawyers.

12. It was under the above circumstances that the court adjourned the matter for two month to another 30 minute direction hearing on 26 October 2015 but allowed D to refix the 2 days. Notwithstanding the direction hearing being fixed in the presence of P, 3 days later, on 20 August 2015, P wrote and said she had to be out of town at the end of October 2015.

13. Eventually, on 1 September 2015, I directed that the direction hearing be refixed to 1 December 2015, and further directed that P to inform the court on or before 16 November 2015 as to the following:

(a) Whether P would withdraw/discontinue any of her claims against D, and if so, to clearly identify the claims that would be withdrawn/discontinued by reference to the reliefs sought in the statement of claim;

(b) Whether P would admit any of the counterclaims and agree to any of the reliefs sought by D, and if so, to identify clearly the counterclaims that would be admitted and the reliefs that P would consent to.

14. In response, P wrote to the court on 11 November 2015 to confirm that she would discontinue and withdraw this action against D, and she also agreed all the counterclaims of D as stated in the amended defence and counterclaim filed on 30 May 2014, and that there would be no trial, and no issue regarding length of trial at the hearing on 1 December 2015 (“1^st Admission Letter”).

15. Upon receiving the 1^st Admission Letter, D took out the summons on 24 November 2015 for judgment on the counterclaim. The summons was fixed for hearing on 1 December 2015.

16. P sent a further letter on 24 November 2015 to the court to confirm and to seek the court’s direction for the cancellation of the hearing on 1 December 2015. She reiterated in this letter that she would discontinue and withdraw this action against D, and that she agreed to all the counterclaims of D as stated in the amended defence and counterclaim filed on 30 May 2014, and asked that the hearing on 1 December 2015 be cancelled (“2^nd Admission Letter”).

17. D had served the summons for judgment on Messrs Joseph CT Lee & Co, solicitors acting for the various companies in the Group in the HCMP Actions.

18. However, on 25 November 2015, upon being served with D’s summons, P write a further letter to D’s solicitors indicating that she would need 14 days to inform D as to whether she would oppose D’s summons. D’s solicitors replied the next day that P should let the court know her stance at the hearing on 1 December 2015.

19. On 27 November 2015, P responded denying that she had sought any legal advice before she sent out her letter of 11 November 2015.

20. At the hearing on 1 December 2015 (“2^nd Direction Hearing”), Mr CY Li, Senior Counsel, was instructed to appear for D and Mr Li had lodged detailed written skeleton arguments. Mr Joseph Lee turned up representing the companies in the HCMP Actions, but claimed that he had no particular instructions from P/the companies as to how to deal with the HCMP Actions. P simply failed to turn up at the 2^nd Directions Hearing.

21. In light of P’s letters of 25 and 27 November 2015, I decided to allow P further time to take appropriate steps, and adjourned the direction hearing to 8 December 2015 (“3^rd Direction Hearing”).

22. P’s solicitors came on record the day before the 3^rd Direction Hearing, namely on 7 December 2015, and Counsel Mr Richard Sham turned up at the 3^rd Direction Hearing. Although Mr Sham confirmed that P sought leave to discontinue her claim against D, he submitted that P should be allowed to defend D’s counterclaim. His submission was based on:

(i) What P said in the 1^st Admission Letter was unclear as to her true intention;

(ii) The true intention was that P was applying for leave to discontinue the action and to defend D’s counterclaim;

(iii) The 1^st Admission Letter fairly construed should not amount to an admission;

(iv) If the court were to find that the 1^st Admission Letter amounted to an admission, it would be fair to allow P to resile from the admission as there was no evidence that D would suffer any prejudice if P was permitted to resile from the admission.”

5.These additional matters after judgment may also be mentioned as part of the background.

6.On 4 January 2016, to comply with the judgment against her on the counterclaim, the plaintiff filed an affirmation to give the accounts as ordered: firstly, in respect of the whereabouts, current condition and dealings of the Deceased’s shares in the Group since her death; and secondly, of all dividends, profits and earnings obtained by the plaintiff from the Deceased’s shares since her death till present.  The plaintiff also filed a Notice of Appeal against the judge’s decision on the same day.

7.On 2 February 2016, at the pre-trial review of the counterclaim of this action, the judge ordered that trial dates of 11 to 18 May 2016 be provisionally reserved for the trial of the counterclaim, and fixed a further pre-trial review on 3 May.

The reasons for the judge’s decision

8.The judge’s decision was given at the 3^rd Direction Hearing, with detailed reasons handed down on 29 January 2016.  She rejected the plaintiff’s submission that the meaning of the 1^st and 2^nd Admission was unclear.  She held that the two letters clearly amounted to admissions on the plaintiff’s part.  She rejected also the contention that the defendant would not be prejudiced by the withdrawal of the admission, taking the view that any delay in obtaining judgment would be prejudicial to the defendant.

9.The judge said this in §27:

“I had pointed out to Mr Sham that there was no summons issued by P nor any affidavit filed by her to withdraw her admissions, notwithstanding P had been given further time, and that P should have issued a proper summons, and filed an affidavit to explain why she had sent the 1^st Admission Letter and the 2^nd Admission Letter and/or reasons for withdrawing her admissions. P had had almost 3 months since the 1^st Direction Hearing to seek proper legal advice before sending her 1^st Admission Letter, and by the time of the 3^rd Direction Hearing, almost another month had elapsed since the 1^st Admission Letter and she had further sent the 2^nd Admission Letter reiterating her position. In light of the history of the matter, I was not prepared to give her any further time. I was of the view that the 1^st Admission Letter and the 2^nd Admission Letter were made in response to my directions on 1 September 2015 and contained clear admissions and agreement by P to the counterclaims. P had discontinued her claim that the shares held by the Deceased in the companies in the Group were gifted to P before the Deceased’s death and there was no serious triable issues. I saw no reason as to why D should not be entitled to judgment on the counterclaim.”

New evidence on appeal

10.The plaintiff filed an affirmation in this appeal to depose to the merits of her defence to the counterclaim and to explain why she seeks to withdraw the admission.  This was tendered as the supporting affirmation she would have filed had the judge given her permission to do so.  Her present solicitor also filed an affirmation to depose to the instructions he received one day before the 3^rd Direction Hearing and the submissions made at that hearing.  The defendant filed an affirmation in opposition to the plaintiff’s evidence and the plaintiff replied with a second affirmation.

11.All these affirmations were filed without leave.  The additional materials placed before us are considerable.  Counsel on both sides had simply prepared their skeleton submissions on the premise that we should be looking at the new evidence adduced on appeal.  This is of course inappropriate.

12.At the outset of the hearing, we gave leave to both parties to file further evidence on appeal in the interests of justice.  Other than the plaintiff’s explanation of her alleged mistake in making the admission she seeks to withdraw, the materials covered in the new affirmations comprised the procedural history and evidence that the parties have disclosed in their witness statements or on discovery, and would not have come as surprise to anyone.  As for the plaintiff’s belated explanation in seeking to withdraw her admission, we recognise it is a strong thing to enter judgment against her without allowing her to tender an explanation.  Now that she has tendered an explanation and the defendant has responded to it fully, we should consider it for what it is worth in the interests of justice.

The refusal to adjourn the 3^rd Direction Hearing

13.Mr Edward Chan, SC appeared with Ms Prisca Cheung for the plaintiff on appeal.  It was submitted on behalf of the plaintiff that the 3^rd Direction Hearing was meant to be a directions hearing.  It was stated in the defendant’s summons of 24 November seeking judgment on the counterclaim that the summons was for three minutes.  And that was why the defendant’s solicitors did not prepare a hearing bundle for the 3^rd Direction Hearing.  The judge should have adjourned the defendant’s summons for argument and made consequential directions for the filing of evidence instead of denying the plaintiff the opportunity to explain on affirmation why she wrote the 1^st and 2^nd Admission Letters.

14.We do not think the judge could fairly be criticised for refusing to adjourn the 3^rd Direction Hearing for the plaintiff to issue a summons to withdraw her admission and file an affirmation in support.  The judge had regard to the history of the matter set out in §§7 to 22 of her Reasons for Decision, taking the view that the plaintiff had been given adequate opportunity to seek legal advice on the matters the judge went through with her thoroughly in the 1^st Direction Hearing almost three months ago.  Although the defendant’s summons seeking judgment on the counterclaim had given an estimated time of three minutes, the judge gave directions on 3 December that 30 minutes would be reserved for the hearing of the summons on 8 December.  The hearing that day in fact lasted just over an hour, with full submissions from the parties.  At the 2^nd Direction Hearing when the summons was adjourned to 8 December, the solicitor acting for the Group in the HCMP Actions attended.  The plaintiff had plainly been given sufficient forewarning and knew what was going on.  We see no basis to interfere with the judge’s exercise of discretion in a case management decision in refusing to entertain the plaintiff’s request for more time to issue a summons and file a supporting affirmation.

15.On an appeal against a judge’s exercise of discretion, the appeal court reviews the decision and does not exercise an independent discretion of its own.  That said, additional materials have since been adduced on both sides that were not placed before the judge.  In light of the further materials, we would need to exercise the discretion afresh whether the plaintiff should be allowed to resile from her admission.  Of course, this would have costs implications if we should decide to exercise the discretion in favour of the plaintiff having considered her new affirmations adduced on appeal.

The applicable law on withdrawing an admission

16.Mr Chan placed particular reliance on these parts of the majority judgments in Gale v Superdrug Stores Plc [1996] 1 WLR 1089 and he emphasised these words as italicised:

“In my judgment leave should normally be granted if the application is made in good faith, raises a triable issue with a reasonable prospect of success, and will not prejudice the plaintiff in a manner which cannot be adequately compensated … It is not normally necessary for a party to justify his decision to amend his pleadings or withdraw an admission. It is enough that he wishes to do so.” (1100A to C, per Millett LJ)

“A party withdrawing an admission is to be regarded in a more favourable light. Excuse (or lack of it) is not entitled, in my judgment, to any particular emphasis: it is just part of the overall picture and will carry no more weight than the particular circumstances require.” (1097G to H, per Waite LJ)

17.Gale v Superdrug Stores Plc was applied by the Court of Appeal in Re Chung Wong Kit (a bankrupt) [1999] 1 HKLRD 410.  Mr Chan quoted this passage in the judgment of Rogers JA at 413J to 414C with particular emphasis on these words as italicised:

“[it was] argued that the respondents should not have been allowed to rely upon this affirmation as it constituted a withdrawal of an admission which was being made without proper explanation. This however is not a rule of law in itself but just an example of the proposition that a party should not be permitted to resile from an admission unless it was just to allow it to do so having regard to the interests of both sides. … in determining whether it is fair to allow a party to resile from an admission, it is not sufficient for the Court to presume prejudice to the opposing party but it is necessary to balance the prejudice suffered by the admitting party if deprived of his right to resile against any prejudice which the relying party has specifically established he will suffer if the admission is withdrawn.”

18.Mr C Y Li, SC, who appeared with Mr Adrian But for the defendant, submitted that the need for the applicant to put forward a convincing credible explanation of the circumstances in which the admission was in fact made is nonetheless a powerful factor (although not conclusive) in considering whether to give leave to withdraw an admission, see Tse Yuk Tin v Chee Cheung Hing & Co Ltd [1984] HKLR 391 at 395E to G; Ho Wai Yin & Ors v Cheng Suet Yee, HCAP 18/2003, 29 June 2005, §§3 and 8.  The question whether there is a proper explanation why the admission was made goes to the issue of good faith on the part of the applicant (Singh Balwinder v Sino Phil Engineering Services Ltd [2007] 1 HKLRD 560 at §10).  We do not understand Mr Chan to have disputed these propositions.

19.Gale v Superdrug Stores Plc was decided before the Civil Procedure Rules came into effect on 26 April 1999.  As stated by the English Court of Appeal in Sowerby v Charlton [2006] 1 WLR 568 at §34, the judgments of the majority in Gale v Superdrug Stores Plc should now be approached with caution because they were concerned with the effect of a regulatory regime which has been abolished and in particular there were features of the pre-CPR practice, as described in the judgment of Millett LJ, which would no longer be acceptable practice post CPR.  In §35, the court went on to cite the unreported decision of Sumner J in Braybrook v Basildon and Thurrock University NHS Trust [2004] EWHC 3436 (QB) at [45], which offered this valuable guidance on the way in which a court should exercise its discretion when determining whether or not to permit the withdrawal of an admission that was made after the action was commenced:

“(1) In exercising its discretion the court will consider all the circumstances of the case and seek to give effect to the overriding objective.

(2) Amongst the matters to be considered will be:

(a) the reasons and justification for the application which must be made in good faith;

(b) the balance of prejudice to the parties;

(c) whether any party has been the author of any prejudice they may suffer;

(d) the prospects of success of any issue arising from the withdrawal of an admission;

(e) the public interest, in avoiding where possible satellite litigation, disproportionate use of court resources and the impact of any strategic manoeuvring.

(3) The nearer any application is to a final hearing the less chance of success it will have even if the party making the application can establish clear prejudice. This may be decisive if the application is shortly before the hearing.”

20.The court in Sowerby v Charlton ended with these words in §36:

“Above all, the exercise of any discretion will always depend on the facts of the particular case before the court. The words “will consider all the circumstances of the case” have particular resonance in this context.”

21.We think the above guidance should apply equally to Hong Kong in view of the underlying objectives in Order 1A rule 1(a) to (d) and (f) of the Rules of the High Court introduced as a result of the Civil Justice Reform.

The plaintiff’s explanation

22.The plaintiff gave the following explanation in her two affirmations why the admission was made and why she would wish to withdraw it:

“31. … I had intended to withdraw the main proceedings against D not because I agree that she should have title to the Deceased’s shares in Chartersince Group but because of three personal reasons. First, the Deceased’s shares in Chartersince Group are no longer of value to me. Second, as alluded to earlier, D had taken out a total of 11 actions on the Deceased’s shares in Chartersince Group. Not only was I emotionally drained from these actions by D, but I was also financially drained, and hoped that by acting in person in my action against her and ultimately discontinuing it, I would be able to save costs. Finally, I was given layman advice that I would not be able to recover much even if I win a litigation against a litigant supported by legal aid. As such, I decided to discontinue my main action against D.

32. That said, it had never been my intention to admit to D’s counterclaims against me. I had not taken any of the jewellery, watches and diamond ornaments as alleged by D. As explained in Section B above, my case is supported by D’s evidence. I have therefore always defended D’s Counterclaim rigorously throughout these proceedings.

…

34. Against these circumstances, I wrote the November Letters. As a layman without legal representation, I did not appreciate that by agreeing to D’s Counterclaim, I would be construed as having admitted to all of them legally to the extent that the Court would disregard the truth and what D’s case was. Given my strong defence against D’s Counterclaim, it was inconceivable for me to admit to any of it.

35. It was only upon receiving D’s Summons that I sought legal advice and instructed my current solicitors on 7 December 2015. When my current solicitors explained the effect of D’s Summons to me, I was shocked, as I had never fully appreciated the legal effect of the November Letters until then. …”

“8. As to the bona fides of my application to withdraw my alleged “admission”, the Court is respectfully invited to refer to Section C of my 1^st Affirmation, where I explained that I was under a genuine mistake that Fung’s Admission meant that the Defendant’s Counterclaim would fall away if I had discontinued my original action against her. In answer to [the defendant’s affirmation], when I made the alleged “admission”, I most certainly did have in mind the merits of my defence against the Counterclaim. However, as already explained in paragraph 31 of my 1^st Affirmation, I wrote the November Letters because I did not know that they had the legal effect of being an “admission” to the Counterclaim, and was eager to put an end to this action in view of the 11 other actions the Defendant took out against me regarding the Deceased’s Shares in Chartersince Group. … this was why I instructed those acting for me on 8 December 2015 to submit that the November Letters were not intended to be an admission, and that I would in any event take out a Summons to withdraw the alleged “admission” if construed as such.

9. In hindsight, I admit that I made a mistake in my understanding of the legal effect of the November Letters. Yet this does not mean that I was in bad faith. …

…

17. … the Defendant also equates my lack of industriousness in appointing legal representation until 7 December 2015 with bad faith on my part. This is simply not true. Due to various personal reasons (such as financial difficulties) as well as my mistaken belief all throughout that by discontinuing my original action, the Counterclaim would fall away as well, I did not instruct legal representation until 7 December, when I “suddenly realised” … that matters were more complicated than I had thought after receiving two letters from [the defendant’s solicitors] to myself dated 3 December 2015. The first of these two letters asked me to sign a Consent Summons, whilst the second one attached, inter alia, further submissions of the Defendant, a supplemental list of authorities and a draft judgment. …

18. I admit that the Court did remind me to seek legal representation as early as 17 August 2015, and in hindsight, I should have immediately done so. This was a genuine mistake on my part, made for reasons I believe I have repeated enough in both of my Affirmations. However, this does not mean that I was in bad faith. I made a mistake, and attempted to rectify it immediately upon realising it on 7 December 2015.”

Whether the plaintiff was acting in good faith

23.This action was commenced by the plaintiff in February 2010.  For a period of five year, she had been represented by three solicitors firms successively with counsel acting for her until she acted in person on 11 March 2015, by which time preparation work for this action had been largely completed and it was soon ready to be set down for trial.  It was only during the period of 11 March to 6 December 2015 that she was not legally represented in this action.  As for the HCMP Actions, the companies in the Group were all along represented by various firms of solicitors one after another from 2008 to present.  The plaintiff was the only person in charge of the companies that could give instructions to those solicitors at all material times.  And the HCMP Actions were stayed in April 2013 until the determination of this action.

24.This action had a long delay caused by another litigation brought by the plaintiff in 2013 to dispute the grant of administration ad colligenda bona to the defendant.  It was only when that satellite litigation was struck out on 20 November 2014 that this action progressed again and in July 2015 dates for this action were eventually fixed for a ten-day trial.

25.The 1^st Direction Hearing was specially held by the judge to clarify the plaintiff’s intentions, as she was then acting in person, after she had written to the court to vacate the trial dates stating that there would be no trial or only a much shortened trial as she would not proceed with this action.

26.In the 1^st Direction Hearing, the judge went through with the plaintiff the various reliefs sought by the defendant in the counterclaim in some detail item by item.  When the plaintiff indicated she had no objection to the counterclaim, the judge asked her to consider carefully whether she would defend the counterclaim and perhaps consult a lawyer first, because any admission given would have costs consequence and it would involve seeking relief against her.  Further, she would need to provide a letter to the court stating clearly which heads of the counterclaim she would oppose and which heads she would agree, and depending on the remaining issues in dispute, the judge would fix the number of days required for the trial.  The plaintiff then told the court that as the defendant to the counterclaim, she was concerned about the serious consequences in the various reliefs claimed, being the recovery of the jewellery items and the dividends of the deceased’s shares for 15 years.  The judge repeatedly impressed upon the plaintiff the importance of seeking legal advice and adjourned the directions hearing for over two months to 26 October 2015 so that she could consult a lawyer.  The plaintiff told the judge she would discuss with a lawyer.  She clearly understood and had acknowledged to the court that the adjourned hearing was to deal with the counterclaim after a decision was made by her.

27.When the directions hearing was further adjourned to 1 December to accommodate the plaintiff, the judge gave clear directions on 1 September 2015 that she should provide to the court two weeks in advance the letter mentioned in the 1^st Direction Hearing, namely, whether she would withdraw or discontinue any of her claims against the defendant and if so to identify such claims by reference to the reliefs and whether she would admit any of the counterclaims and agree to any of the reliefs therein and if so identify such counterclaims and reliefs that she would consent to.  It was pursuant to those directions that the plaintiff gave the identical admissions in her two letters in November, stating that she would “discontinue and withdraw this action” and she would “also agree all the counterclaims of the Defendant as stated in the Amended Defence and Counterclaim” and “therefore, there would be no any trial for this court case.”

28.In her two affirmations filed in this appeal, the plaintiff did not give any credible or cogent reason why she only engaged lawyers on 7 December 2015, the day before the 3^rd Direction Hearing.  She did not make clear what were the “personal reasons (such as financial difficulties)” which she said accounted for why she had not engaged lawyers earlier, until she “suddenly realised” on 7 December the matters were more complicated than she had thought after receiving two letters from the defendant’s solicitors dated 3 December.  She merely acknowledged she should have immediately engaged lawyers as the judge did remind her to seek legal representation as early as 17 August 2015.  It is apparent from the exchanges she had with the judge at the 1^st Direction Hearing that she was left in no doubt about the serious consequences of admitting the counterclaim.

29.She claimed that as a layman she was mistaken about the consequence of agreeing to the counterclaim and the legal effect of her admission in the November letters, alleging that she did not appreciate it would be construed as admitting the counterclaim without regard to some of the evidence to the contrary in one of the statements given by a witness for the defendant, and that she had mistakenly believed by discontinuing her action the counterclaim would fall away as well.  And she gave those mistaken beliefs as another reason why she did not engage lawyers earlier.  She did not mention why she did not seek legal advice on the legal consequence and effect of admitting the counterclaim before she sent the letters in November, contrary to her telling the judge at the 1^st Direction Hearing that she would discuss with her lawyer, for which purpose she was granted a two-month adjournment.  The alleged mistaken belief that by discontinuing her action the counterclaim would fall away was contrary to what she had been told by the judge in the 1^st Direction Hearing.  If the plaintiff had indeed been labouring under such mistaken beliefs as alleged when she made the admission, she was the author of her own misfortune and any prejudice she may suffer as a result.

30.Although the law does not prohibit a party from making a fundamental change after a conscious decision was made, it would expect that party to put forward a convincing, credible explanation in considering whether discretion should be exercised to allow that party to resile from his admission.  We do not think the plaintiff has given a convincing, credible explanation.  The admission by her two letters was a conscious choice on her part, in the face of clear warnings by the judge, which were acknowledged by her, of the serious consequences of the admission.  She said in her affirmation when she made the admission, she “most certainly did have in mind the merits of [her] defence against the Counterclaim”.  The assertion that “it had never been [her] intention to admit to D’s counterclaims” has a hollow ring about it.  We are far from satisfied that there was a bona fide genuine mistake and not a tactical manoeuvring on her part.  We have considerable reservations in respect of her claim that she was acting in good faith in seeking to resile from the admission.  This is a powerful, though not conclusive factor for not exercising the discretion in favour of the plaintiff.

31.We turn to consider a number of points raised by Mr Chan regarding the merits of the plaintiff’s defence to the counterclaim.  It was submitted that the plaintiff would suffer grave prejudice if leave to resile from her admission was refused, as she has a strong and arguable defence to the counterclaim in respect of the claims of conversion of the share certificates of the deceased’s shares and intermeddling with the deceased’s estate, and conversion of various items of jewellery.

Conversion of share certificates and intermeddling with the estate

32.Mr Chan submitted that the claims of conversion of the share certificates and intermeddling with the deceased’s estate are untenable.  He drew our attention to the amended defence and counterclaim and submitted no facts were pleaded as to how it is alleged that the plaintiff had purported to act as an executor as regards the deceased’s shares in the Group.  Although the plaintiff had custody of the share certificates, it is not in dispute that the shares remained registered in the deceased’s name.  Hence, she did not and could not have in any way acted characteristically as an executor in administering the share certificates.  Mere custody of the share certificates is insufficient to render the plaintiff an executor de son tort and constitute intermeddling, something more than mere custody or possession is needed to make the plaintiff liable for intermeddling.  Mr Chan cited Williams, Mortimer and Sunnucks on Executors, Administrators and Probate (20^th ed) at §§7-02, 7-06 and 7-11.

33.The facts alleged in the defendant’s pleading in support of the claims of conversion of the share certificates and intermeddling with the deceased’s estate were these.  The plaintiff and the deceased were equal shareholders of the companies in the Group and both had been responsible for managing them.  After the deceased’s death, the plaintiff assumed sole control of the Group without ever accounting to the defendant about their affairs especially the profit and loss, the asset and liability and the dividends declared and distributed.

34.Mr Chan made the point it was not pleaded by the defendant there was any declaration and distribution of dividends after the deceased’s death, what was pleaded was that the plaintiff did not account to the defendant of any declaration and distribution of dividends.  We think this must be looked at in context of the known circumstances.

35.The defendant had sought accounts from the companies but was turned down by the companies which were in the sole control of the plaintiff.  The defendant instituted the HCMP Actions to recover the shares of the deceased and for an account and inquiry on the dividends on those shares, and those actions were stayed as a result of this action brought by the plaintiff in which she alleged that the deceased’s shares were gifted to her.  It is entirely understandable that the defendant did not plead any declaration or distribution of dividends as she had sought but was denied information on these matters and could only plead the refusal to account to her for an inference to be drawn that there was intermeddling with the assets of the estate.

36.We would put it no higher than such an inference may possibly be drawn on the available evidence.  Although the plaintiff claimed in her second affirmation filed in this appeal that no dividends were “distributed” by the Group since the deceased’s death on 30 December 2000 and referred to the witness statement of the auditor Joseph Fan Wing Pui in support, the latter did not mention in his statement that the latest declaration of dividends was on 17 December 2000 and there was no declaration of dividends thereafter.  As pleaded in the statement of claim, the plaintiff had been operating the companies in the Group for more than ten years after the deceased’s death as the managing director.  It is not as if the companies were dormant and nothing had happened.  There is no clear statement from the plaintiff that no dividends had ever been declared in the ten-year period when she was running the companies on her own.  The plaintiff had also asserted in §50 of her witness statement that it would be unfair to her to shoulder all the responsibilities of the companies whilst accounting for 50% of the profit to the defendant or the deceased’s sister.

37.Furthermore, the latest declaration of dividends on 17 December 2000 before the deceased’s death was for very substantial sums, interim dividends of $44,465,000 for one company and $2 million for another.  The board resolutions were not signed by the deceased.  The auditor had informed the Commissioner for Inland Revenue in 2008 that those dividends “would be set off against those current accounts in the name of the deceased for the simplicity of future running of business.”  The auditor’s reply raised queries as to the state of the current accounts in the deceased’s name (no accounts of which have been adduced) and whether all the dividends to which the deceased was entitled had been set off as claimed.

38.We do not think the claims for conversion of the share certificates and intermeddling with the estate are unsustainable.  And it does not appear to us that the plaintiff’s defence is particularly strong.  We would say she has raised triable issues on her defence, and we have taken this into account in the exercise of our discretion whether to allow her to withdraw the admission.

Inconsistent remedies

39.Next Mr Chan drew our attention to §§5 and 6 of the judgment entered on the counterclaim, which he submitted must be wrong in law and principle as they provided for relief for inconsistent alternative remedies.  A plaintiff must elect between the alternative remedies of damages and account for profits when judgment is given in his favour, see The Personal Representatives of Tang Man Sit v Capacious Investments Ltd [1996] 1 HKLR 16 at 19C to D, 23E to H.

40.Mr Chan is correct about reliefs given in the judgment for inconsistent alternative remedies, but we do not think the situation is irremediable.  The Privy Council in Tang Man Sit also said this at 20E to J:

“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 interests 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. A recent instance where this was done is the decision of Lightman J in Island Records Ltd v Tring International Plc [1995] 3 All ER 444. The court will take care to ensure that such an order is not oppressive to a defendant.

In the ordinary course the decision made when judgment is entered is made once and for all. That is the normal rule. The order is a final order, and the interests of the parties and the public interest alike dictate that there should be finality. The principle, however, is not rigid and unbending. Like all procedural principles, the established principles regarding election between alternative remedies are not fixed and unyielding rules. These principles are the means to an end, not the end in themselves. They are no more than practical applications of a general and overriding principle governing the conduct of legal proceedings, namely, that proceedings should be conducted in a manner which strikes a fair and reasonable balance between the interests of the parties, having proper regard also to the wider public interest in the conduct of court proceedings. Thus in Johnson v Agnew [1980] AC 367 the House of Lords held that when specific performance fails to be realised, an order for specific performance may subsequently be discharged and an enquiry as to damages ordered. Lord Wilberforce observed, at page 398:

“Election, though the subject of much learning and refinement, is in the end a doctrine based on simple considerations of common sense and equity.” ”

41.We think the above words apply aptly to the present situation.  The judgment on the counterclaim was entered on the admission of the plaintiff, not at the conclusion of a trial.  On the state of the evidence available to the defendant at the time judgment was entered, she simply did not have sufficient materials to make an informed decision whether she should go for the remedy of an account or to pursue a claim for damages.  Even with the affirmation of the plaintiff filed on 4 January 2016 purportedly in compliance with the judgment to provide the two accounts as ordered, we do not think it equitable or reasonable to require the defendant to make an election between the inconsistent remedies, until the court has made discovery and other orders designed to give her the information she should have to make her choice.  Only in this manner would a fair balance be struck between the interests of the parties.  As long as it is borne in mind that the defendant should be put to an election of her remedies at a subsequent stage as we have indicated, we do not think it is necessary to vary §§5 and 6 of the judgment.

Conversion of various items of jewellery

42.Mr Chan referred the court to various parts of the witness statement of Madam Fung Ng Wai Kwan, in support of his contention that even on the defendant’s own evidence, certain paragraphs of the judgment on the counterclaim relating to the conversion of jewellery items cannot stand or there is clearly a triable issue regarding the plaintiff’s defence.  Neither party had brought these matters to the judge’s attention when she was asked to enter judgment on the counterclaim.

43.It is not necessary to go into details about Mr Chan’s submissions, in view of the sensible stance taken by Mr Li at the hearing.

44.Mr Li accepted that certain paragraphs of the judgment to which objection was taken could be deleted.  We agreed to take that course, and we ordered that those paragraphs mentioned at the beginning of our judgment be deleted, not on the basis of allowing the plaintiff to resile from her admission, but on the basis that the defendant would no longer pursue that particular remedy or that relief should not be granted to her on the undisputed evidence before the court.

45.As for other parts of the judgment relating to the conversion of jewellery items, we have accepted Mr Li’s undertakings as recorded in the beginning of our judgment.  This would ensure that the plaintiff would not suffer any prejudice if she should desire to run an argument on the underlying merits of her defence in the enforcement proceedings by way of account, inquiry or the assessment of damages.

Balancing prejudice

46.Mr Chan complained that in refusing leave to the plaintiff to withdraw her admission, the judge had failed to conduct a proper balancing exercise of the prejudice that might be suffered by the opposing party against the prejudice occasioned to the admitting party.  There was no evidence of prejudice to the defendant as both parties have conducted discovery, exchanged witness statements and the trial dates have not been vacated, and any costs incurred by the defendant could be compensated with money.  The judge had just presumed prejudice to the defendant.

47.The judge took the view that “any delay in obtaining judgment would be prejudice to [the defendant].”  In this particular situation, we are inclined to agree with that view, bearing in mind that the defendant is 93 years old.  We would also agree with Mr Li that any further delay in the recovery or enforcement proceedings would add to the difficulty and risks of the defendant in obtaining meaningful recovery, in light of the plaintiff’s assertion that she was “financially strained” and that we are given to understand two of the companies in the Group are in liquidation.  We are satisfied that prejudice would be occasioned to the defendant if the plaintiff should be granted leave to resile from her admission.

48.As for prejudice to the plaintiff, we think she would suffer some prejudice if leave to withdraw the admission be refused as she would be barred from defending the claim for intermeddling with the deceased’s shares and she would be held liable to account for profits or to compensate the estate in damages.  But other prejudice would have been lessened to the extent that some paragraphs in the judgment relating to the recovery of jewellery items have been deleted and the defendant has through her counsel given the undertakings as mentioned regarding other jewellery items.

Conclusion and costs

49.We have looked at all the circumstances, including the lack of good faith of the plaintiff, the triable issue the plaintiff is able to establish, the balance of prejudice to the parties, and the closeness in time of this application to the trial dates.  We think it would be a disproportionate use of court resources to allow a trial to be held on the counterclaim in this situation.

50.For the above reasons, we have come to the view that we should exercise the discretion in favour of the defendant and we decline to allow the plaintiff to withdraw her admission.

51.We awarded 80% of the costs of this appeal to the defendant, to take into account that parts of the judgment on the counterclaim were deleted in recognition of the plaintiff’s argument that the defendant should not be granted relief on those particular items and the plaintiff has to bring an appeal to vary those parts of the judgment.

Mr Edward Chan SC leading Ms Prisca Cheung Shun Ling, instructed by Lily Fenn & Partners, for the Plaintiff (Appellant)

Mr C Y Li SC leading Mr Adrian But, instructed by Tsang, Chan & Woo, for the Defendant (Respondent)