Victory City International Holdings Ltd (in Liquidation) and Another v. Deloitte Touche Tohmatsu (A Firm)

HCA 2083/2024

[2026] HKCFI 2947

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2083 OF 2024

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BETWEEN

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DECISION

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INTRODUCTION

1.By a summons dated 2 January 2026 the defendant (“D”) applies for leave to appeal from the court’s decision dated 19 December 2025 (“the Decision”) and for stay of execution.

2.In the Decision, I granted leave to the 1^st and 2^nd plaintiffs (“Ps”) to seek pre-Statement of Claim (“pre-SOC”) discovery of the AWPs[1] against D. It was essentially a case management decision, involving an exercise of discretion.

3.D now wishes to appeal against the Decision.

4.D and Ps have lodged their written submissions respectively on 28 January 2026 (“D’s Skeleton”) and 11 February 2026 (“Ps’ Skeleton”) and D has lodged its reply submissions on 25 February 2026. D’s application is ordered to be dealt with by way of paper disposal.

5.Ps oppose D’s leave to appeal application but do not object to the stay of execution application.

DISCUSSION

Applicable principles

6.S.14AA of the High Court Ordinance (Cap 4) (“HCO”) requires the court to be satisfied that an intended appeal has a reasonable prospect of success or there is some other reason in the interests of justice why it should be heard. The prospects of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable”: see Hong Kong Civil Procedure 2026 §59/2A/4.

7.As pointed out by Ms Tong, counsel for Ps, the court’s approach to applications for leave to appeal against case management orders (including specific discovery orders) is set out in K&L Gates v Navin Kumar Aggarwal & Anor [2019] HKCFI 200 §7. The following points are worth noting:-

(1) Leave to appeal may only be granted if the applicant can demonstrate reasonable prospects of success. Merely showing that the appeal is arguable and not fanciful is not sufficient.

(2) Case management decisions made in the exercise of discretion (which include orders for specific discovery) are only subject to appeal in “rare circumstances”, and the hurdle faced by the appellant is “very high”.

(3) It is a misuse of the appellate process for a party simply to regurgitate its arguments in the hope that the appellate court may reach a different view. The relevant question is whether the judge has fallen into palpable errors which can give rise to grounds for appellate intervention.

(4) Even if the threshold test of reasonable prospect is satisfied, the court still retains a discretion whether to grant leave and may refuse leave in the interests of procedural economy and proportionality. In the context of specific discovery, one relevant consideration is whether further arguments over discovery would impede, as opposed to progress, the determination of the real disputes between the parties.

D’s proposed grounds of appeal

8.Ms Cheng for D submits that D’s proposed grounds of appeal concern are errors in law and/or principle in the Decision, particularly on the question of whether certain matters meet the legal test of exceptionality to justify pre-pleading discovery in an audit negligence case. This involves a determination in law and in principle of whether those matters are outside the “usual run” (to borrow the expression from the authorities) of cases before the courts. The appellate court would more readily step in to rectify errors of this nature compared to conventional challenges against a judge’s exercise of discretion (in the sense of his or her weighing of various factors or evaluation of the evidence in a given case).

Exceptional circumstances justifying early discovery

9.D’s main ground of appeal is that the court erred in holding that there were exceptional circumstances justifying early discovery.

10.The following proposed grounds of appeal have been raised by D in the draft notice of appeal (“Draft NOA”).

Draft NOA §2

11.Ms Cheng submits that while the court rightly held that an order for specific discovery pre-SOC is the exception rather than the norm, and that exceptional circumstances must be demonstrated to justify such an order (Decision §§44-58), the Decision erred in law and in principle when the court held that there were exceptional circumstances.

12.D submits that a plaintiff is by default not entitled to pre-pleading discovery. It is therefore wrong in principle to find as exceptional that the joint and several liquidators (“JLs”) were not given a full and complete set of AWPs pre-pleading (Decision §§ 71, 79-80).

13.With respect, I did not “find as exceptional that the JLs were not given a full and complete set of AWPs pre-pleading”. Instead, I agree with Ms Tong the point made in Decision §§71, 79-80 is that, based on the existing piecemeal disclosure made by D to Ps, it would be extremely difficult for Ps to properly plead their case.

Draft NOA §3

14.Under this draft ground, D claims that the court was plainly wrong in holding that there was exceptional circumstance in that a full and complete set of AWPs for FY2012 to FY2019 was necessary to enable the JLs to “properly” plead and particularise their allegations of audit negligence against D, and that without them, the JLs would be left to “guess or speculate what D may or may not have done during the audit process”, put “in a seriously handicapped position”, or be “severely handicapped in formulating the claim and drafting the SOC” (Decision §§70-73, 76-77, 81, 89).

15.Ms Cheng submits that it is not the case that, without discovery of all AWPs, the JLs would be unable to plead and particularise their allegations. By admitting in affidavit that it was possible for them to file a SOC before obtaining all AWPs, the JLs (as professional accountants) must have taken the view, with legal advice, that they have enough materials to sustain the pleas to be put forward. The bottom line is that Ps could plead a case and their express concession conclusively refuted any suggestion of inability to plead. To the extent it was thought that the JLs could plead more “properly” in the sense of pleading with greater assurance or particularity with pre-pleading discovery, D says that this could be said in almost every civil litigation and cannot be an exceptional element.

16.I agree with Ms Tong that the above points raised by D are nothing more than a rehash of the arguments already considered and rejected by the court:-

(1) In the Decision, I have fully acknowledged that (i) it would be possible for Ps to file a SOC before obtaining all the AWPs and (ii) arguments can be made in every case that costs and time can be saved if pre-action or pre-SOC discovery is ordered (Decision §§33.2, 33.5, 83, 85).

(2) However, as I have pointed out, the circumstances of this case are “rather different” from the usual case (Decision §83). In particular:-

(i) Having regard the wide-ranging audit deficiencies and the complexity of issues involved, the discovery sought in this case is not merely a matter of enabling Ps to better particularise their case. Rather, the AWPs sought are necessary for Ps to properly plead and particularise the extent and scope of the deficiencies in D’s work during the relevant audits. (Decision §§62, 70-73)

(ii) If AWPs are only obtained after close of pleadings, this would inevitably necessitate “substantial amendments and re-amendments” to the SOC. The likely saving of costs and time is a “highly relevant factor” in favour of early disclosure in this case. (Decision §§62, 81, 86-87)

(3) D’s above submissions fails to engage directly with the above points. A reasonably arguable ground of appeal is not demonstrated by simply repeating the arguments already considered and rejected by the court: see §7(iii) of K&L Gates, supra.

17.In §§8-11 & 13 of D’s Skeleton, Ms Cheng cited various authorities which had been discussed by the court in the Decision. D analysed those cases and submitted that the court have erred in law. However, for the reasons stated at §§7 (1) to (4) of Ps’ Skeleton, I agree with Ms Tong that D fails to identify any error of law in the court’s analysis.

Draft NOA §3(4)

18.This ground concerns D’s claim that the court has given no regard to D’s submissions that Mr Weatherseed’s evidence should be given no weight.

19.In my view, there is no basis for such contention as contained in D’s Skeleton §12. Whilst it is clearly for the court to decide whether the legal requirements for seeking early discovery are met, in my judgment, Mr Weatherseed’s evidence is helpful in explaining the “cumulative and iterative” nature of the audit process and why all AWPs are relevant in identifying D’s audit deficiencies in this case. The court was entitled to place weight on Mr Weatherseed’s evidence in Decision §65, particularly in circumstances where his evidence is wholly unchallenged.

Draft NOA §6

20.D submits under this Draft NOA that there are errors in principle in finding that (1) the availability of the AWPs and (2) the purported lack of prejudice or unfairness (Decision §88) constitute exceptional circumstances when they clearly are not. It appears that D does not seek to challenge the court’s finding that the AWPs requested are readily available and could be easily handed over to Ps. Instead, D’s complaint appears to be that the court somehow omitted to deal with D’s submissions on prejudice. I agree with Ms Tong that there is no substance in this complaint. I have made it clear in the Decision that I do not agree with D’s submissions that early discovery would cause further delay to the proceedings, having found that early discovery would in fact save, as opposed to increase, time and costs (Decision §82). In any event, there is no obligation on the court to deal with each and every point raised by D.

Draft NOA §§8-9

21.On the other miscellaneous points raised by D in D’s Draft NOA §§8-9 (under D’s Skeleton §§15-16), I agree with the following submissions made by Ms Tong:-

(1) On the allegation of “fishing”, the court was correct to reject D’s argument at Decision §75. Based on the 1^st Affidavit of Patrick Cowley (“Cowley 1^st Aff”), Ps already have a prima facie case against D for audit negligence. It is inconsistent for D to assert on the one hand that Ps have all the materials to file a SOC (see D’s Skeleton §6), whilst asserting on the other hand that Ps are somehow “fishing” for materials to identify claims against D (see D’s Skeleton §15).

(2) On the limitation period, the court correctly noted in Decision §19 that Ps intend to rely on s.31 of the Limitation Ordinance (“LO”) to extend any potential limitation period relating to claims which may have expired. Given that the applicability of s.31 of LO turns on factual issues (e.g. when P had requisite knowledge for bringing a claim), the issue is one that can only be determined at a later stage, rather than in the Decision.

(3) As to the alleged floodgate concerns raised by D, the court was clearly mindful of such concerns (Decision §51). However, as is evident from the Decision, the court’s decision to grant pre-SOC discovery is based on the particular facts and circumstances in this case, and does not suggest that early discovery should now become in the norm rather than the exception. The floodgate concerns alluded to by D simply do not arise.

Interest of Justice

22.In D’s Skeleton §17, D relies the “interest of justice” limb of HCO s.14AA, arguing that it would be in the public interest for appellate guidance to be given on the subject of pre-pleading discovery in audit negligence case. However:-

(1) As I have noted in Decision §§58 and 61, whether there are exceptional circumstances justifying early examination of the “individual facts” of each case. It is unlikely that any generally applicable guidelines can be given on this subject.

(2) If anything, further arguments over discovery would likely impede (as opposed to progress) the determination of the real disputes between the parties in this action. It would be contrary to the interest of procedural economy and proportionality for leave to appeal to be granted to D.

CONCLUSION

23.In the aforestated premises, I would refuse D’s application for leave to appeal and dismiss D’s summons in so far as it concerns the matter. There will however be a stay of execution as agreed by the parties. The costs of the summons will be granted in favour of Ps with certificate for 2 counsel, to be taxed if not agreed.

Ms Sara Tong SC leading Mr Eugene Kwan instructed by Minterellison LLP for the 1^st and 2^nd Plaintiffs

Ms Bonnie Y.K. Cheng instructed by Reynolds Porter Chamberlain for the Defendant