FUNG SHING CHUNG v. CHOI KING HUNG

CACV 171/2024, [2024] HKCA 1021

On Appeal From [2024] HKCFI 979

and [2024] HKCFI 1508

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 171 OF 2024

(ON APPEAL FROM HCA NO. 2860 OF 2018)

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DECISION

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Hon Cheung JA (giving the Decision of the Court)  :

I. Introduction

1.  Before this Court is the defendant’s renewed applications by summons dated 12 June 2024 (‘Stay Summons’)  for a stay of execution of the judgment of Au Yeung J (‘Judge’)  dated 8 April 2024 and sealed on 30 April 2024, pending the disposal of his appeal to this Court in CACV 171/2024.  The Stay Summons includes also a stay of a garnishee order pending determination of the appeal.

2.  The plaintiff opposes the applications.  Having considered the papers and written submissions filed on behalf of the plaintiff and the defendant, we consider it appropriate to determine the applications on the basis of written submissions only without an oral hearing pursuant to Order 59, rule 14A(1)  of the Rules of the High Court (Cap. 4A).

3.  In what follows, unless otherwise stated or indicated, we will adopt the abbreviations and nomenclature by the Judge in her judgment dated 8 April 2024 (‘Judgment’).

II.  The Judgment

1)  The plaintiff’s case

4.  The gist of the plaintiff’s case against the defendant is this :

(1)  The plaintiff and the defendant used to be close friends for 30 years.

(2)  On 12 September 2013, the plaintiff lent RMB 8 million to the defendant, at an interest rate of 5% per annum repayable on demand (‘the Loan’).  The Loan was allegedly required by the defendant to repay his business associate, Mr Gatot.  On the instruction of the defendant, the Loan was transferred by the plaintiff’s brother Feng Ke Wai (‘Feng’)  to the cousin of Mr Gatot, Zhang Zi-lian.

(3)  As the defendant only made part repayment, the plaintiff claimed against the defendant for the balance of the Loan and interest.

(4)  The plaintiff relied on three Memoranda dated 13 April 2016, 4 May 2017, and 4 July 2017 each signed by the defendant (‘the three Memoranda’); and another Memorandum (‘the 4^th Memorandum’)  signed by the parties dated 3 August 2018 in support of his claim, by which, it is claimed, that the defendant acknowledged that the outstanding amount of the Loan calculated up to 31 August 2018 was US$1,014,983.32.

(5)  According to the plaintiff, Ms Jessie Chan (‘Ms Chan’)  prepared the four Memoranda, photocopied them after the defendant had signed and gave a copy of each of the four Memoranda to the defendant.

(6)  The plaintiff further said that the defendant had made three partial repayments of the Loan from 2017 to 2018 (‘three  payments’)  which were all reflected in one or more of the Memoranda.

2)  The defendant’s case

5.  The defendant however disputed the existence of the Loan, for the following grounds :

(1)  The defendant admitted that he had signed the 4^th Memorandum but claimed to be intoxicated at that time and was acting under the undue influence of the plaintiff.

(2)  As for the three Memoranda, the defendant alleged that he had only seen those documents for the first time upon their disclosure on 26 August 2020 at the beginning of the present action.  Some two and a half years later, in the subsequent fourth version of his defence dated 27 March 2023, the defendant claimed, for the first time, that the three Memoranda were forged.

(3)  The defendant also denied that there was any partial repayment of the Loan but said that the three payments were to settle prior debts between the parties.

(4)  The defendant claimed to have made loans to the plaintiff at his request, totalling $6,805,817 by six cheques and he asked for the repayment of the loans by way of his counterclaim.

6.  In January 2024, the trial of the action took place before the Judge.  The plaintiff himself and Ms Chan gave evidence.  The defendant gave evidence for himself.  In addition to the factual witnesses, the parties also called their respective handwriting experts as expert evidence, namely Ms Maria Lam (‘Ms Lam’)  for the plaintiff, and Ms Emily Hui (‘Ms Hui’)  for the defendant.

7.  On 8 April 2024, the Judge handed down the Judgment, finding that the Loan was lent to the defendant and he should be held liable for the outstanding amount of the Loan in the amount of US$1,028,053 together with interests and costs.  In relation to the counterclaim, the Judge found that the $6.8 million loan did not exist.  Five of the six cheques represented proceeds of sale of shares to the plaintiff and one was for part repayment of the Loan.

3)  The findings

8.  Specifically, in coming to her conclusion, the Judge found that :

(1)  On balance of probabilities, the plaintiff established a credible case on the existence of the Loan[1].

(2)  The plaintiff had no motive to commit forgery or procure someone to do so.  It was difficult to see why any forger needed to forge three different signatures, thereby exposing himself to greater risk of criminal conviction[2].  On the contrary, the three Memoranda came into existence and were signed as Ms Chan described[3].

(3)  The expert evidence of Ms Hui lacked independence and proper bases for her conclusions and was thus rejected.  The Judge preferred the approach of Ms Lam and accepted her findings[4].

(4)  The Court rejected the defendant’s assertions that the parties were drinking in the morning from a previous night of drinking at the nightclub and was drunk at the time he signed the 4^th Memorandum[5].

(5)  The genuineness of the Loan is reinforced by the three payments, each stated in the 4^th Memorandum[6].

(6)  The defendant’s claim on the six cheques was contrary to the contemporaneous WeChat messages which simply showed that the defendant had never suggested that the plaintiff owed him this amount[7].

III.  The stay application

1)  Procedural background

9.  Not long after the handing down of the Judgment, the defendant on 30 April 2024 filed his Notice of Appeal to appeal against the Judgment.

10.  On 8 May 2024, the plaintiff obtained two garnishee orders nisi and a charging order nisi relating to the Judgment debt.  All of those orders nisi were returnable on 4 June 2024 before a Master.

11.  By a summons dated 17 May 2024, the defendant applied to the Judge for (1) stay of execution of the judgment pending appeal; and (2) stay of the two garnishee orders pending appeal (‘1^st Stay Summons’).

12.  On 31 May 2024, the Judge heard the 1^st Stay Summons and dismissed it on the same day.  She has handed down her written reasons for her decisions.

13.  On 3 June 2024, the defendant filed his Amended Notice of Appeal.

14.  The defendant now renews his applications for a stay of the Judgment and the garnishee orders before this Court by the Stay Summons.

15.  The parties have filed affirmation evidence in relation to the Stay Summons.  Written submissions were filed by the defendant and Lennon and Lawyers, Solicitors for the plaintiff (‘Lennon’).

16.  By a letter dated 13 August 2024, the defendant informed the Registrar of Civil Appeal of additional grounds to the Amended Notice of Appeal (‘the 1^st Letter’).

17.  By a further letter dated 20 September 2024, the defendant informed the Registrar of Civil Appeal that he intended to add one more ground in relation to the Amended Notice of Appeal (‘the 2^nd Letter’). The Registrar of Civil Appeal directed the defendant to file a Supplemental Amended Notice of Appeal incorporating the additional grounds in the 1^st Letter and 2^nd Letter.

2)  The defendant’s position

18.  In sum, it is the defendant’s position for the Stay Summons that :

(1)  There are strong grounds in support of the appeal.

(2)  The plaintiff is not ordinarily residing in Hong Kong.   Also, the plaintiff has two identities, using different names to live in Hong Kong and the Mainland.  Immediate execution of the Judgment might cause the plaintiff to transfer the funds out of Hong Kong.  Without a stay, the appeals will be rendered nugatory.

(3)  The defendant and his family are ordinarily residents in Hong Kong, and he has three properties in Hong Kong amounting to about $76 million.

3)  The plaintiff’s position

19.  Lennon disagreed.  It contended that :

(1)  The defendant does not have strong grounds of appeal.  Particularly, it is untrue for the defendant to allege that the Judge had agreed and admitted that the defendant did not receive the plaintiff’s loan during the hearing of the 1^st Stay Summons.

(2)  In relation to the defendant’s contention that the plaintiff does not ordinarily reside in Hong Kong, it was not supported by any evidence.

(3)  Despite the defendant’s claim that he had substantial assets in Hong Kong, he had refused and failed to honour payment to the plaintiff of the Judgment.

4)  Principles governing grant or refusal of stay of execution pending appeal  

20.  The principles governing an application for a stay of execution of a judgment pending appeal are well established and are not disputed by the parties :

(1)  The applicant is required to demonstrate a ‘good reason’ for a stay of execution.

(2)  Generally speaking, the existence of merely an arguable appeal cannot by itself amount to a sufficient reason to justify a stay.  It is the minimum requirement before a court would even begin to consider granting a stay.

(3)  In other words, if the Court is not convinced that there exist arguable grounds of appeal, no stay will be granted however exceptional the circumstances may otherwise be justifying a stay of execution.

(4)  On the other hand, the existence of a strong appeal or a strong likelihood of success will usually by itself enable a stay to be granted because this would constitute a good reason for a stay.

(5)  In most cases, where the Court is faced with simply the existence of an arguable appeal, it becomes necessary for the applicant to provide additional reasons as to why a stay is justified.

(6)  Commonly, this is done by demonstrating that without a stay the appeal would be rendered nugatory, for example, because of an appreciable risk that the respondent to the appeal would not be able to repay in the event of a successful appeal against a money judgment, or because the failure to grant a stay would have a serious deleterious effect on the applicant.

(7)  In considering an application for a stay pending appeal, it would be impractical and even undesirable for the Court to go deeply into the merits or strengths of the appeal, although the Court must still form a preliminary view of these aspects, see : Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 per Ma J (as he then was)  at [9]-[10].

(8)  While the existence of a strong appeal would tend to lead the Court to exercise its discretion in favour of granting a stay, the threshold is a high one.  The Court has held that for there to be a ‘strong appeal’ such as would justify the grant of a stay without more, the situation must be one which would lead the Court to conclude that something has grievously gone wrong with the process of law in the Court below, or that the appellant is ‘almost bound to succeed’.  Absent such a case, something more needs to be demonstrated: John Joseph Mc Gee v. Nold (HK)  Ltd [2024] HKCA 354 per Barma JA at [30].

5)  Our view

(1)  Strong grounds of appeals in CACV 171/2024?

21.  The defendant advances 11 grounds of appeals in his Amended Notice of Appeal dated 3 June 2024.  The Court therefore needs to assess whether defendant has demonstrated that he has strong grounds of success in relation to his appeal.

22.  The defendant’s contention in the Amended Notice of Appeal may be broadly summarised as follows :

i)  Ground 1 – The Judge had during the hearing agreed to and admitted that the defendant did not receive the plaintiff’s loan and yet she held against the defendant.

ii)  Ground 2 – The Judge was wrong in law to dismiss the defendant’s application to amend the defence and counterclaim to include illegality or circumvention of foreign exchange control in respect of the Loan under Chinese law.

iii)  Grounds 3 to 4 – The Judge failed to accept illegality or circumvention of foreign exchange control concerning the Loan.

iv)  Ground 5 – The Judge had failed to consider the report dated 22 January 2024 by the Guangdong Inspection Centre (‘Report’). She also dismissed the defendant’s summons to adduce his 4^th supplemental witness statement on 13 October 2023 during the pre-trial review.  This caused injustice.

v)  Ground 6 – The Judge disregarded the plaintiff’s incredibility and inconsistent statements which led to errors in her finding of facts.

vi)  Ground 7 – The Judge’s refusal of the defendant’s application for Mr Gatot to give evidence via video link and to subpoena Feng.

vii)  Grounds 8 to 10 – The Judge did not fully understand the case and her factual findings were made without proper basis.

23.  In respect of the additional grounds stated in the 1^st Letter and 2^nd Letter :

i)  The Judge had failed to properly deal with the issues of illegality and circumvention of foreign exchange control.

ii)  The Judge had failed to admit the WeChat messages retrieved from the defendant’s mobile phone as evidence as agreed by the plaintiff’s counsel.

iii)  The transcript of the trial shows that the plaintiff admitted that the 2^nd Memorandum was not signed by the defendant but the Judge did not properly consider the plaintiff’s testimony in this aspect.

24.  These grounds, some couched in different words, were advanced before the Judge.  She had addressed them and held that ‘None of them are arguable, let alone being strong’.  As apparent from the transcript of the hearing, the Judge did not admit that the defendant did not receive the Loan.  She was only dealing with the defendant’s case on the Loan.  In our view the defendant does not have any arguable grounds of appeal.

(2)  Appeal rendered nugatory in the absence of a stay?

25.  Even if, for the purpose of argument, he has arguable grounds of appeal, we do not consider the appeal will be rendered nugatory in the absence of a stay.  There is no offer by the defendant to lodge the judgment sum in Court pending his appeal despite his claim that he has assets in Hong Kong to meet the Judgment.  In respect of the argument that the plaintiff does not ordinarily reside in Hong Kong by reference to his address stated in the witness statements, the Judge had correctly stated that this allegation ‘is not backed up by evidence’.  The fact that a person lives in both the Mainland and Hong Kong is not something extraordinary these days.  The evidence at the trial showed that the plaintiff did come to Hong Kong at times. As to the likelihood of the plaintiff removing the judgment sum out of jurisdiction, in view of the close proximity of Hong Kong and Guangzhou and the availability of legal process to enforce a Hong Kong judgment, we do not accept that the appeal would be rendered nugatory if the judgment is not stayed.

(3)  Staying of the garnishee order pending appeal

26.  There were two garnishee orders before the Judge during the 1^st Stay Summons, in respect of the defendant’s account in HSBC and in Henik Securities Ltd (‘Henik’)  respectively.

27.  The defendant’s HSBC account has a negative balance and the plaintiff did not pursue the garnishee application on that account.

28.  On 12 September 2024, the Court formally made an Order Absolute in respect of the garnishee order against Henik. Lennon wrote to Henik on the same day seeking enforcement of the Judgment against the garnishee order.   On 26, 27 and 30 September 2024, Henik sold the shares in the defendant’s account at the instruction of the plaintiff’s solicitors.

29.  We will not stay the garnishee order against Henik.  The starting point is that the plaintiff, as the judgment creditor, is entitled to enforce the Judgment he has secured against the defendant as a judgment debtor, usually without considering the interests of non-parties except in circumstances such as where the judgment debtor was in the process of being wound up or where liquidation or some form of scheme of arrangement was imminent.   To stay the garnishee order at this point is futile, because most, if not all, of the shares in the defendant’s Henik account had been sold.  In any event, given we do not consider any grounds in the defendant’s appeal is arguable, we do not see any real prejudice the defendant would suffer without a stay of the garnishee order.

IV.  Conclusion

30.  In the premises, the stay application against the Judgment is dismissed and the stay application against the garnishee order is also dismissed.

31.  Costs should follow the event.  The defendant shall pay the plaintiff’s costs to be summarily assessed.  We direct the plaintiff to file a statement of costs within three days (limited to two pages), and the defendant’s to file his objections to the statement of costs within 14 days thereafter (limited two pages).  We will then summarily assess the plaintiff’s costs on paper.

32.  This judgment is written in English given the lower court judgments and documents are in English.  If required, the defendant may make arrangement with the Court for this decision to be interpreted.