IGAL DAFNI v. CMA CGM SA

HCA 1185/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1185 OF 2008

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D E C I S I O N

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1. This is the defendant’s application for a stay of execution pending appeal.

2. The dispute between the parties arose out of an agreement referred to as Heads of Agreement (“HOA”).  In simple terms, under the HOA the plaintiff was to be employed as the managing director of a company (“CNC”) which the defendant was in the course of acquiring.  The acquisition succeeded in due course.  However, the employment of the plaintiff with CNC came to a premature termination and under the terms of the HOA the plaintiff was entitled to generous compensation in such event.

3. After the trial of this action, the plaintiff was awarded a sum just shy of US$2.29 million with interest and costs.

4. The trial was conducted before Recorder H Wong SC.  The judgment of the learned Recorder (“Judgment”) runs to 65 pages.  In addition, there is a reasons for decision (“Decision”) of 29 pages in which the learned Recorder set out his reasons for refusing an application made in the course of the trial to amend the Amended Defence and Counterclaim by raising a new illegality argument.  Both the Judgment and the Decision (collectively “Judgments”) will be challenged on the defendant’s appeal (“Appeal”).  However, the complaints in respect of the Judgment are confined to quantum, ie, there is no appeal against the findings of facts on the dispute over liability.

5. The guiding principles for an application of this type are trite and undisputed.  This court is required to have an appreciation of the merits of the Appeal to begin with.

6. Hence, I have the unenviable task of trying to understand the Judgments sufficiently so that I can properly determine this application.  However, it is impractical or undesirable for the court to go deeply into the merits and strength of the Appeal: Toeca National Resources BV v Baron Capital Ltd [2013] 5 HKLRD 178 at §6.

7. There are basically 2 grounds of appeal advanced in the submissions of Mr Kat, who appears for the defendant.  Firstly, there is a challenge to the construction of the HOA by the court.  There are two limbs to the challenge.  It is argued that the court erred in awarding no less than US$1.13 million to the plaintiff by taking into account a profit sharing entitlement under clause 8 of the HOA.  This is a matter of construing the HOA.  It has to be said that the HOA is neither a well-drafted document nor a document with much detail. 

8. I believe that it is arguable whether in the event of an early termination of the HOA the plaintiff should be entitled to a share of the profits the earning of which he had played no part.  In clause 4 of HOA, the payment obligation on the part of the defendant for “the balance of the period remaining” was to be discharged by “installments (sic) of 3 months each”.  That may support the argument that the profit sharing entitlement was not intended to be part of the compensation.  Further, with great respect, the analysis of the learned Recorder on this point (Judgment, para 126) is somewhat stark.  There may also be force in the submission that the court had wrongly taken into consideration the subjective intention of the plaintiff in construing the HOA.

9. The second limb to the challenge concerns the starting date of the plaintiff’s employment.  This point is dealt with in para 125 of the Judgment.  I can see no obvious flaw in the analysis of the learned Recorder and I do not believe that this ground of appeal is arguable.

10. I am unable to agree that the challenge to the Decision is arguable.  It was by any standard a very late amendment application.  I see no obvious flaw in the detailed treatment in the Decision on the legal issues.  The court was plainly right to have accepted, inter alia, that the amendment, if allowed, would delay the determination of the action and that such delay constituted prejudice to the plaintiff.

11. In respect of the submission that if the judgment sum is paid to the plaintiff it may not be recoverable should the Appeal succeed, the defendant has adduced no evidence to support the contention.  On the other hand, such risk cannot be entirely ignored.  To try to tip the balance in its favour, the defendant has offered to pay the judgment sum and the accrued interest into court as a condition for the stay.

12. However, in light of the analysis on the merits of the Appeal, it would not be right to order a stay in excess of US$1.13 million.  I believe that the correct balance to be struck in this application is to order a stay of execution in that sum on the condition that it is paid into court together with the interest accrued thereon.  There should be a top-up payment by the defendant in respect of the interest element every 2 months from the date of this order.  Further, the stay is subject to the undertaking by the defendant to prosecute the Appeal with all due expedition.  I grant liberty to apply.

13. The defendant is to bear half of the costs of this application, and the remainder shall be in the cause of the appeal.