China Shanshui Cement Group Ltd and Others v. Zhang Caikui and Others

HCA 2880/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2880 OF 2015

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R E A S O N S   F O R   D E C I S I O N

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1.On 13 October 2016, this court gave leave to cross-examine D3 on his affirmations (“the Decision”). This was D3’s application for leave to appeal and stay of execution pending appeal. After hearing, I dismissed the application with costs against D3. Here are my reasons. The abbreviations followed those in the Decision.

Legal principles

2.Kwan, JA in Wong Kar Gee Mimi v Severn Villa Ltd [2012] 1 HKLRD 887 at 896-897:

“29. The principles on granting leave to appeal are well established. Leave can be granted if the court is satisfied that (a) the appeal has a reasonable prospect of success; or (b) there is some other reason in the interests of justice why the appeal should be heard. Reasonable prospects of success involve the notion that the prospects of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable”. As the leave requirement was introduced largely to address satellite litigation on interlocutory issues which almost invariably gives rise to major delay and expense, so for the court to be satisfied that the appeal does have “reasonable prospects of success”, merely showing that the appeal is “arguable” and “not fanciful” would not be sufficient.

...

31. ... Case management decisions are only subject to appeal in rare circumstances. The appellant faces a “very high hurdle” and must show that the Judge “has gone clearly wrong and made orders which will clearly involve an injustice or an inability for the trial court to carry out its task”, or if the Judge “erred in principle or the order was irrational having regard to the issues that had to be resolved”. It need hardly be emphasised that generally, an appellate court will not interfere with a judge’s exercise of discretion unless the Judge has misunderstood the law or the evidence or the exercise of his discretion was plainly wrong such that it was outside the generous ambit within which a reasonable disagreement is possible.”

3.In respect of stay of execution, an applicant has to show, as a minimum requirement, that there are arguable grounds of appeal. Beyond that, he has to show “additional reasons as to why a stay is justified”, one such reason being that the appeal would be rendered nugatory if a stay is refused.  Ultimately the court embarks upon a balancing exercise and uses common sense, bearing in mind, at all times, the starting point that the successful party is not lightly to be deprived of the fruits of his success.  See Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84,at §9, Ma J (as he then was).

Intended grounds of appeal

4.In his submission, Mr Zimmern described the application for cross-examination to be a moving target.  He pointed out that the plaintiffs had given this court at the substantive hearing the impression that they had limited documents when in fact (with discovery and seizing the Jinan plant) they had over thousands of documents, including corporate documents. That was relevant to whether the court should exercise its discretion to order cross-examination.

5.Mr Zimmern referred to, amongst others, a letter of the Plaintiffs’ solicitors dated 26 October 2016 and the timetabling questionnaire dated 30 September 2016 whereby the Plaintiffs have sought to delay discovery on the basis that they required a substantial amount of time to compile the list of documents in view of the large number of documents.

6.That letter and the timetabling questionnaire were not in existence at the time of the substantive hearing.  Further, this court had actually considered D3’s contention that the Plaintiffs might have already obtained many of the documents and has queried the utility of the application for leave to cross-examine in paragraphs 56-59 of the Decision.  These 2 documents could not assist D3.

7.The draft notice of appeal set out the following grounds:

(1) That this court failed to consider or find that there was a real likelihood that D3 has information which should have been disclosed pursuant to the Orders; that this court seemingly acknowledge that D3 may not have any further information as to the current whereabouts of the Plaintiffs' Records; this court went beyond the ambit and purpose of the Orders by wrongly delving into issues considered to be relevant but were actually matters properly for trial;

(2) That this court misapplied the statutory requirements in the Companies Ordinance (Cap 622) and Inland Revenue Ordinance (Cap 112);

(3) That this court placed excessive reliance upon the employment status on Mr Li & Mr Yao and had a misunderstanding of the second round of e-mail disclosure.

8.Mr Barlow SC described these as an appeal against a case management decision. With respect, I disagree. The order to cross-examine was to enable the Plaintiffs’ Records to be located for proper management of the Plaintiffs as corporations and not to manage the case itself. 

9.With regard to ground (1), the question that the court was said to have failed to consider was but an instance which would lead to the ultimate test on whether an order for cross-examination should be made in interlocutory proceedings. It was not a concurrent requirement that had to be satisfied before the courts would do so. 

10.Neither paragraph 47 nor 62 of the Decision contained an acknowledgement by this court that D3 may not have any further information as to the current whereabouts of the Plaintiffs’ Records.

11.The scope of enquiry as to what the Listed Items comprised, how they might be reconstituted, what became of them and who (apart from D3) was responsible for keeping them was, in the context of this case, part of the exercise to ascertain the current whereabouts of the Plaintiffs’ own records.

12.With regard to ground (2), the focus was not, as D3 suggested, upon the question of whether or not D3 was under a statutory duty to ensure that the Plaintiffs' Records were kept in the Hong Kong office.  Rather, the focus was on why he had passed the Handover Items to Li & Yao when D3 knew that this would put the Plaintiffs in contravention of those statutory provisions.

13.The court’s observation that by 24/25 November 2015, the Handover Items had already been removed was premised on D3’s own evidence of his last date of employment and the date of handover.  D3 might have knowledge of the location (other than Lippo Centre) of the Listed Items and where they were delivered to.

14.With regard to ground (3), D3 had unequivocally stated that he had handed over the documents and the Group server to Li & Yao and that he did not know the current whereabouts of the Plaintiffs’ Records.  Mr Zimmern submits that, in the context of discovery orders, it was a conclusive statement, however incredible it might be: Realkredit Danmark A/S v York Montague Ltd, All England Official Transcripts, English CA, 26 November 1988, p 5.

15.In my view, the statement of D3 could not be conclusive even for discovery purpose when there was evidence (to D3’s knowledge) to contradict the employment status of Li & Yao.  Such employment status was of significance in deciding whether D3 was truthful and whether the documents had genuinely left his possession or control.

16.With regard to the emails, the focus was not on the fact of there being a second round of disclosure but that the second round came without explanation.  The manner of disclosure suggested possible concealment of relevant information by D3.  The ground of appeal now put forth was an attack on the court’s interpretation of the facts rather than the law.

17.In summary, none of the grounds had reasonable prospects of success.  Those grounds were in substance challenges to the court’s exercise of discretion, which has not been shown to be plainly wrong or that it was outside the generous ambit within which a reasonable disagreement was possible.  I therefore declined to give leave to appeal.

18.The application for stay is dismissed as well.

Costs

19.Without disrespect, this application for leave to appeal did not justify the engagement of senior counsel and 2 fee earners on the solicitors’ side.  I summarily assessed and allowed costs with certificate for 1 counsel at $70,000.

20.I thank counsel for their assistance.

Mr Barrie Barlow SC and Mr David Chen, instructed by Wilkinson & Grist, for the 1^st, 2^nd and 3^rd plaintiffs

Mr Richard Zimmern, instructed by Smyth & Co, for the 3^rd Defendant