ASPIAL INVESTMENT LTD v. BUMPER EAST LTD

CACV 162/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 162 OF 2012

(ON APPEAL FROM HCA NO. 238 OF 2012)

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CACV 162 /2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

(ON APPEAL FROM HCCL NO. 3 OF 2012)

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AND BETWEEN

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(Consolidated by Order of the Honourable Mr Justice Reyes
dated 22^nd day of March 2012)

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REASONS FOR DECISION

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Hon Barma JA (giving the Reasons for Decision of the Court):

1.  On 24 May 2013, this court handed down judgment dismissing the appellant’s appeal against the judgment of Reyes J dated 16 July 2012, by which he dismissed the appellant’s claims against the 1^st to 5^th respondents, and granted a declaration in favour of the 4^th and 5^th Respondents that they are entitled to be registered as the respective owners of the 100 million shares in Mayer Holdings Limited (“Mayer HK”), a Hong Kong listed company, under share certificate numbered MAN 00004970, and the 100 million shares in Mayer HK under share certificate numbered MAN 00004971.

2.  The appellant applied, by Notice dated 5 June 2013, for leave to appeal to the Court of Final Appeal against this court’s order.

3.  The application was made on the basis that an appeal to the Court of Final Appeal lies as of right, pursuant to the second limb of section 22(1)(a) of the Hong Kong Court of Final Appeal Ordinance (Cap. 484), on the basis that the appeal “involves, directly or indirectly, some claim or question to or respecting property … amounting to or of the value of $1,000,000 or more”.

4.  Alternatively, it was submitted that leave should be granted as a matter of discretion pursuant to section 22(1)(b) of the Ordinance, on the basis that the appeal involves questions of great general or public importance, alternatively that the appeal ought otherwise to be referred to the Court of Final Appeal for decision.

5.  The questions of great general or public importance said to arise were set out in the Notice of Motion as follows:-

“(a) In the light of the court’s duty to recognize the primary aim of “secur[ing] the just resolution of disputes in accordance with the substantive rights of the parties” (as laid down in RHC, O.1A, r.2(2)), whether the trial judge by adopting the “minimalist” approach can:

(i) ignore undisputed primary evidence material to the plausibility of the parties’ accounts which are “contradictory and cannot be reconciled”; and/or

(ii) avoid making findings on issues in relation to such undisputed primary evidence relevant to the outcome of the case, even if such issues are contested in another action.

(b) Can parties by agreement override the duties of the court laid down in RHC O1A r2(2)?

(c) In respect of a transaction purported entered into by the sole director of the company on the company’s behalf (“the relevant transaction”):

(i) whether the sole director of a company can clothe himself with apparent authority to enter into the relevant transaction; and

(ii) whether the counterparty(ies) to the relevant transaction could rely on such apparent authority,

when the relevant transaction in question is, on its face, not in the interest of the company.”

6.  The Notice of Motion also sought a stay of execution of this court’s order pending the disposal of the appeal in the event that leave to appeal was granted.  In her written submissions, Ms Cheng SC indicated that if leave were refused, a temporary stay would be sought pending an application to the Court of Final Appeal for leave to appeal.  At the hearing, she also made it clear that a stay of the orders of this court and the court below, in relation to the substantive orders and as to costs, was sought.

7.  At the conclusion of the hearing, we granted leave to appeal and made the orders set out in paragraph 16 below, and indicated that we would hand down our reasons in due course.  These are those reasons.

Whether Appeal lies as of right?

8.  Ms Cheng SC submitted that leave to appeal should be granted as of right, since the dispute before Reyes J and in this court centred on who, as between the appellant and the 4^th and 5^th respondents, was entitled to be registered as the owner of the 200 million Mayer HK shares represented by the two share certificates mentioned in paragraph 1 above, and that it was clear from the evidence before both courts that the value of those shares comfortably exceeded $1,000,000.

9.  In Chinachem Charitable Foundation Ltd v Chan Chun Chuen & Anor [2011] 6 HKC 273, Ribeiro PJ summarized the proper approach to an application for leave to appeal based on the second limb of section 22(1)(a) at paragraph 20 of his judgment.  Sub-paragraphs (d) to (g) are of particular relevance to this application, and are in the following terms:-

“(d) To come within the words “some claim or question to or respecting property or some civil right”, the claim must be a claim to some particular property or to a proprietary right of the requisite value.  Other types of claim are insufficient, even if they are incidental to the enjoyment of property rights which are not themselves the subject matter of the claim.

(e) In considering the threshold amount, the Court focuses on the value of the claim which is the subject matter of the appeal and not on the value of any property or proprietary right which merely has some connection with the claim.

(f) The value of the claim must be clearly quantifiable in the sum of $1,000,000 or more.

(g) The order which the Court would make in disposing of the proposed appeal must have the immediate effect of conferring or imposing on the relevant parties a financial benefit or detriment in the quantified amount. It is not enough to show that such a financial impact is a likely eventual result of the appeal.”

10.  In the present case, subject to being satisfied that the Mayer HK shares which are the subject of these proceedings are of the requisite value, we are of the view that the claim comes within the second limb of section 22(1)(a). The claim is a claim to particular property, namely the 200 million Mayer HK shares.  As the claim is a claim to ownership of the shares (see paragraphs 7 and 19 of this court’s judgment), the value of the claim would be the same as the value of the shares.  The order made by the court would, in our view, confer an immediate financial benefit on the successful party, and an immediate financial detriment on the losing party, in that the former would thereby be declared the owner of the shares.  Insofar as it may have been suggested in Luo Xing Juan Angela v The Estate of Hui Shui See, Willy, Deceased & ors (unreported, CACV 381/2007, 5 June 2007) that a claim for ownership of shares can only be for an unliquidated amount, we are, with respect, unable to agree with that view, and prefer the approach taken in Z v X & Anor (unreported, CACV 166/2011, 26 March 2013) in which regard was had to the value of the shares based on the evidence available to the court.  The position will be different where what is claimed is a valuation of the shares themselves, as will typically be the case in proceedings by a shareholder seeking to have his shareholding bought out under at a price to be assessed.

11.  So far as the value of the shares is concerned, we are satisfied on the evidence that was before this court on the appeal, and the court below at trial, that the 200 million shares in Mayer HK have a value comfortably in excess of $1,000,000.  Leaving aside the fact that the last traded price of the shares before their suspension was $0.123 per share, providing a total value of over $24,000,000, the 4^th and 5^th respondents in fact paid over $20,000,000 for them.  The latest financial statements of Mayer HK also suggest that the value of the shares is not likely to be less than the price paid by the 4^th and 5^th respondents.

12.  We are therefore satisfied that this is a case in which an appeal to the Court of Final Appeal lies as of right.  That being so, it is unnecessary for us to express any view on whether or not leave to appeal should be given on either of the discretionary grounds relied upon.

Stay of Execution

13.  Turning to the question of whether a stay of execution should be granted, it was common ground that whether or not a stay should be granted would be a matter for the court’s exercise of its discretion, under its inherent jurisdiction.  The principles governing the grant of a stay are well known, and are as set out by Ma J (as he then was) in Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84, at paragraph 9 of his judgment.  There, Ma J made it clear that before the court would consider granting a stay, it was necessary for the appellant to show that there was at least an arguable appeal – one with reasonable prospects of success.  Only then would the court go on to consider whether or not a stay should be granted, for example because its refusal would render the appeal nugatory.

14.  It does not follow that because the appellants are entitled to appeal to the Court of Final Appeal as of right, their proposed appeal has reasonable prospects of success.  In our view, it does not, particularly having regard to the fact that the appellants are faced with concurrent findings of fact against them in this court and the court below on the issues on which they must succeed for their appeal to have any realistic prospect of success.

15.  We therefore declined to grant the stay of execution sought.  However, as it may be that the refusal of a stay would render the appeal nugatory, we were prepared to grant a limited stay of execution until the determination of an application by the appellant to a single judge of the Court of Final Appeal for a stay of execution, provided that such an application is taken out within 14 days from today, and proceeded with expeditiously.  It seems to us that such a stay should extend also to the enforcement of costs orders made in this court and below, subject to ensuring that the taxation proceedings in respect of the 3^rd respondent’s costs in the court below, which we understand are currently fixed for December 2013, should not be derailed unless a stay is granted by the single judge of the Court of Final Appeal.

Orders made

16.  We therefore made the following orders on this application:-

(1) Leave to appeal to the Court of Final Appeal is granted pursuant to section 22(1)(a) of the Hong Kong Court of Final Appeal Ordinance.

(2) The application for a stay of execution pending the determination of the appeal is refused.

(3) An interim stay is granted of the orders of this court and the court below, including orders as to costs, until the determination of an application to a single judge of the Court of Final Appeal for a stay of execution, on condition that such an application is made by the appellant within 14 days from today, and proceeded with expeditiously thereafter.

(4) Notwithstanding such interim stay, the dates presently fixed for the taxation of the 3rd respondent’s costs of the proceedings in the Court of First Instance are not to be vacated unless a stay of proceedings has been granted by the single judge of the Court of Final Appeal.

(5) The appellant is to provide each set of respondents with security for the appeal in the amount of HK$400,000.

(6) The costs of today are to be in the costs of the appeal, with a certificate for two counsel.