Sunfund Securities Ltd v. Many Idea Cloud Holdings Ltd and Others

HCMP 220/2023

[2026] HKCFI 657

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 220 OF 2023

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DECISION

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1.The background relating to the dispute in this action is set out in the decision of Madam Justice Au-Yeung dated 27 February 2024 (see [2024] HKCFI 602). For present purposes, it suffices to say that the underlying dispute arose from the successful listing of the 1^st Defendant’s shares on the Hong Kong Stock Exchange, and one of the substantive issues to be resolved is whether the 1^st Defendant exercised its contractual discretion capriciously in determining the allocation of an underwriting fee of HK$17,588,000.

2.The 3^rd directions hearing of these proceedings took place before me on 8 May 2025. There, I refused to adjourn these proceedings to a further directions hearing pending the Plaintiff’s intended application for adducing expert evidence on the question of allocation. In short, I took the view that there was considerable delay on the part of Plaintiff and that the proposed expert evidence might not assist the court to resolve the underlying dispute. In the circumstances, I order that the proceedings be set down for substantive argument with 4 days reserved, and leave was granted for the parties to cross-examine each other’s witnesses.

3.The substantive hearing of these proceedings will commence on 19 January 2027.

4.On 1 December 2025, the Plaintiff took out a summons seeking leave to file the 3^rd affirmation of Yuan Xulin (“Mr Yuan”). This is a fairly lengthy document, comprising of 57 paragraphs and 36 pages of exhibits. In gist, Mr Yuan, who is the Plaintiff’s director, mentioned, inter alios, (i) his background in capital markets and underwriting transactions, (ii) the alleged principles governing allocation of underwriting fees, (iii) the alleged market environment at the time when the relevant transactions took place, (iv) the alleged bases for allocating underwriting fees to the Plaintiff, the 2^nd Defendant and the 3^rd Defendant, and (v) the amounts that should be allocated to them.

5.It is hardly disputable that there was, to say the least, considerable delay on the part of the Plaintiff in taking out the summons dated 1 December 2025.

6.In his submissions, Mr Joshua Yeung (for the Plaintiff) explained that prior to the 3^rd directions hearing on 8 May 2025, the Plaintiff’s stance was to adduce expert evidence on the question of allocation, but the Plaintiff’s current stance is to rely on the assertions of Mr Yuan. Mr Yeung urged me to take into account that the substantive hearing of these proceedings would only take place in January 2027, and, as such, it cannot be said that the summons dated 1 December 2025 is a last-minute application that would cause imminent prejudice to the Defendants. In this connection, Mr Yeung emphasized that the primary aim of the court’s exercise of powers is to secure the just resolution of disputes in accordance with the substantive rights of the parties.

7.I am not impressed by the Plaintiff’s litigation conduct.

8.As stated in paragraph 27 of Madam Justice Au-Yeung’s decision dated 27 February 2024, “[i]t is in the interest of every party to have the matter resolved as quickly as possible”. Bearing in mind the need for expediency and the nature of the underlying dispute, the learned Judge took the view that it would not be appropriate to direct the parties to file pleadings (para 31), and the directions that she gave (para 32) included the followings: -

(1)  the 2^nd and 3^rd Defendants shall have leave to file and serve affirmations within 42 days;

(2)  the Plaintiff and the 1^st Defendant shall have leave to file and serve affirmations in reply within 35 days thereafter; and

(3)  No further affirmations shall be filed without leave of the court.

9.Relying on Order 32, rule 11A(4) and Tian Hongmei v Zhang Wei [2023] HKCFI 2675 at paras 24 to 33 (per DHCJ Herbert Au-Yeung, as he then was), the 1^st Defendant submitted that since there has been an order prohibiting the filing of further evidence without leave of the court, the conditions of Ladd v Marshall have to be satisfied.

10.Whilst Order 32, rule 11A(4) and Tian Hongmei are concerned with interlocutory applications, the directions given by Madam Justice Au-Yeung  concerned the evidence in the underlying proceedings. Apparently, the context and the court’s concerns regarding questions relating to proportionality are different. As pointed out by Cheng J in Re ZPMC-Red Box Energy Services Ltd [2022] 3 HKLRD 4 at para 2:-

“… in considering whether or not to grant leave to file this additional evidence, the requirement of exceptional circumstances in RHC O.32 r.11A(4) does not apply, as Adkins 2^nd is not sought to be filed in support of an interlocutory application. Whilst Jose Miranda Da Costa Junior v Lorenzo Yih, unreported, HCA 156/2010, 28th April 2014 and HCMP 1127/2014, 21st July 2014 considered the effect of an order prohibiting further evidence to be adduced without leave, this was in the context of an interlocutory application which was accepted to fall within the O.32 r.11A(4).”

11.In my view, the correct approach to be applied in the present context was propounded by Bharwaney J in Parsad v Great Wealthy Engineering Co Ltd [2012] 3 HKLRD 705 at paras 5 to 8, which was followed by, inter alios, Cheng J in Re ZPMC-Red Box Energy Services Ltd at para 4 and Recorder William Wong SC in Re Cao Zhong, ex p Bilistyle Investments Ltd [2021] HKCFI 3143 at paras 20 to 23.

12.In Parsad at para 6, Bharwaney J stated:-

“Whilst the primary aim is to secure the just resolution of the dispute in accordance with the substantive rights of the parties, and which must include the right of a party to rely on admissible, relevant and probative factual evidence, the Court must also have regard to other relevant circumstances, such as the potential disruption to the trial, the prejudice to the other parties, and the explanation offered by the applicant for the late application. These matters have to be considered and weighed in the light of and against the underlying objectives of Civil Justice Reform to ensure cost effectiveness and economy, expedition, proportionality, and fairness between the parties.”

13.I will follow and apply the approach propounded in Parsad.

14.Despite Mr Yeung’s submissions, I am not persuaded that the Plaintiff’s summons dated 1 December 2025 should be allowed. In my view, the Plaintiff was plainly guilty of inordinate delay, and it cannot be said that the Defendants would not suffer prejudice should the Plaintiff’s application be allowed.

15.In my view, pursuant to the aforesaid direction given by Madam Justice Au-Yeung on 27 February 2024 (which was almost 23 months ago), the Plaintiff should have put forward all the evidence to be relied on in accordance with the timetable imposed by the court. For reasons best known to those who have been controlling the Plaintiff, the Plaintiff did not put forward the assertions that are now contained in Mr Yuan’s 3^rd affirmation.

16.Worse still, at the previous directions hearing that took place on 8 May 2025 (which was more than 8 months ago), the Plaintiff still took no action, and it was not even indicated that an application for adducing further affirmation(s) would be taken out.

17.I accept the submissions of the 1^st and 2^nd Defendants that the delay on the part of the Plaintiff was serious, inordinate, and inexcusable. In this connection, there is no substance in the excuses put forward on behalf of the Plaintiff: -

(1)  I do not accept Mr Yeung’s submissions that this court’s reluctance to entertain the Plaintiff’s intended application for adducing expert evidence at the previous hearing on 8 May 2025 could constitute a valid excuse for not putting forward the factual evidence to be relied on. The Plaintiff should have formed a view as to the factual evidence to be relied on before the deadline imposed by the court expired.

(2)  Mr Yeung also informed me that there had been settlement negotiation between the parties. This is not a valid excuse at all. There is no guarantee that the settlement negotiation would necessarily lead to a fruitful result. The timetable imposed by the court should always be complied with. The Plaintiff should not have stopped prosecuting these proceedings with due diligence simply because its counter-parties were willing to engage in settlement negotiation. In any event, there is a not a shred of evidence showing that the parties were close to a concluded settlement deal, and I was informed by counsel that the parties’ solicitors had not even been instructed to liaise with each other in regard to the terms of the intended settlement.

18.Had the Plaintiff indicated that further interlocutory applications would be taken out or that an application for adducing further evidence would be pursued, at the previous directions hearing that took place on 8 May 2025, this court would not have set down the proceedings for substantive argument with 4 days reserved.

19.I am very concerned that the Plaintiff’s late application would derail and/or seriously disrupt the upcoming substantive hearing. If the Plaintiff’s late application were allowed, the 1^st and 2^nd Defendants would obviously be entitled to challenge and dispute the new assertions raised by Mr Yuan during cross-examination. Moreover, out of an abundance of caution, the 1^st and 2^nd Defendants would also wish to file further affirmations to rebut Mr Yuan’s new assertions, and the Plaintiff’s legal representatives would be entitled to cross-examine the deponents. The proliferation of cross-examination and evidence is worrying. Bearing in mind the length of Mr Yuan’s 3^rd affirmation and that 2 counter-parties are involved, it appears most unlikely that the substantive hearings can be completed within 4 days.

20.Accordingly, there is, to say the least, a very imminent risk that the upcoming substantive hearing in January 2027 will have to be vacated and re-fixed (with more hearing days reserved), and further hearings for giving case management directions will be necessitated. This would be a procedural nightmare. Bearing in mind the serious disruption, I am not inclined to the view that the mere fact that the substantial hearing would not take place soon is ipso facto a good reason for condoning the Plaintiff’s conduct.

21.Even if the upcoming substantive hearing will not be derailed and/or vacated (which is doubtful), there is still a very real risk that the same will have to be conducted in two tranches or adjourned part-heard with additional dates being fixed. This will cause disruption to the court’s diary and is undesirable. More importantly, this will also cause a substantial delay to the proceedings. Justice delayed is justice denied. This would be unfair to the 1^st and 2^nd Defendants.

22.In the premises, I do not accept Mr Yeung’s submissions that the 1^st and 2^nd Defendants would not suffer any prejudice. The 1^st and 2^nd Defendants have every reason to ensure that the upcoming substantive hearing will not be derailed and that the proceedings can be completed as scheduled without undue disruption.

23.For completeness, I should also mention that I am inclined to agree with the observation of Ms Astina Au (for the 1^st Defendant) that the purpose of putting forward Mr Yuan’s 3^rd affirmation is to enable the Plaintiff to rely on the personal opinion of Mr Yuan. It is doubtful as to whether Mr Yuan’s personal opinion is helpful in assisting the court to resolve the dispute between the parties. In this regard, Ms Au was correct in pointing out that whilst Mr Yuan is a director of the Plaintiff, the issue before the court is whether the 1^st Defendant exercised its contractual discretion capriciously, rather than how the Plaintiff would have exercised the same contractual discretion. Be that as it may, out of an abundance of caution, the 1^st and 2^nd Defendants would still wish to challenge Mr Yuan’s new assertions by way of cross-examination and adducing further affirmations. In my view, it is likely that the procedural nightmare canvassed hereinabove will arise. This must be avoided.

24.For all the above reasons, in exercising my case management powers and discretion, I do not accede to the Plaintiff’s application for adducing Mr Yuan’s 3^rd affirmation. I dismiss the Plaintiff’s summons dated 1 December 2025.

25.Costs should follow the event.

26.I order that the Plaintiff to pay the 1^st and 2^nd Defendants’ costs in relation to the summons dated 1 December 2025, to be summarily assessed by this court on papers.

27.The 1^st and 2^nd Defendants shall respectively lodge and serve their statements of costs within 7 days. The Plaintiff shall lodge its statements in opposition within 7 days thereafter.

28.I thank Mr Joshua Yeung, Ms Astina Au, and Mr Sik Chee Ching, for their helpful assistance.

Mr Joshua Yeung, instructed by M/s Mike So, Joseph Lau & Co, for the Plaintiff

Ms Astina Au, instructed by M/s Wellington Legal LLP, for the 1^st Defendant

Mr Sik Chee Ching, instructed by M/s CMS Hong Kong LLP, for the 2^nd Defendant

The 3^rd Defendant was absent