LEE SHU HANG AND LI SIN MAN SELINE (as the personal representatives of the estate of LEE SAI NAM, deceased) v. KAN LAP KEE (also known as “TERRY KAN”)

CAMP 84/2025, [2026] HKCA 60

On An Intended Appeal From [2024] HKCFI 2836

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 84 OF 2025

(ON AN INTENDED APPEAL FROM HCMP NO 2320 OF 2020)

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J U D G M E N T

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Hon Harris J (giving the Judgment of the Court):

Introduction

1.  This is the Defendant’s renewed application for leave to appeal against the decision of Leung J (“Judge”)  dated 16 October 2024 (“Stay Decision”)  [1], dismissing the Defendant’s application for a stay of the allocatur and the costs orders made on 8 March 2022 and 12 August 2022 in relation to the Judge’s judgment dated 8 March 2022 (“Judgment”)  [2].

2.  Pursuant to Order 59, rule 2B(2)  of the Rules of the High Court (Cap. 4A)  (“RHC”), the Defendant applied for leave to appeal against the Stay Decision before the Judge on 30 October 2024. By a decision (“Leave Decision”)  dated 9 April 2025, the Judge dismissed the Defendant’s application for leave.  Pursuant to Order 59, rule 2B(3)  of the RHC, the Defendant renewed his application on 23 April 2025 before this Court for leave to appeal against the Stay Decision.

3.  We consider it appropriate to determine the Defendant’s application based on the written materials only pursuant to Order 59, rule 2A(5)  of the RHC.

Background

4.  This matter arises from the liquidation of Hong Kong Pak Tat Trading Co (“Pak Tat”)  in HCCW 236/2011.  The Defendant was appointed as one of the Liquidators of Pak Tat on 12 March 2012.

5.  The Plaintiffs are the personal representatives of the estate of Mr Lee Sai Nam, deceased (“Mr Lee”).  Mr Lee was the petitioner who successfully petitioned for the winding-up of Pak Tat.

6.  It is the Plaintiffs’ case that in the course of the liquidation, the Defendant caused Pak Tat to enter into a sale and purchase agreement on 9 December 2016 (“SPA”)  to dispose of its 100% shareholding in Lianda Metal Watchband (Shenzhen)  Co Ltd to Shenzhen Youpeng Investment Co Ltd (“Youpeng”). The Plaintiffs criticised the transaction as commercially unsound as well as illegal and void under Mainland law, and suggested it involved a conspiracy between the Defendant and Youpeng.

HCCW 236/2011

7.  The Plaintiffs took out the following summonses at various stages of HCCW 236/2011:

(1)  By a summons dated 9 January 2017 (subsequently amended and re-dated to 21 August 2019), the Plaintiffs applied to stay the winding-up order against Pak Tat and to discharge the Liquidators;

(2)  by a summons dated 12 September 2017, the Plaintiffs applied for various directions to be given to the Liquidators; and

(3)  by a summons dated 4 October 2018 (subsequently amended and re-dated 8 December 2020), the Plaintiffs applied for the return and/or account by the Defendant of professional fees and expenses incurred in relation to a number of specific matters in the liquidation of Pak Tat on the ground of his alleged misconduct as Liquidator, together with costs on an indemnity basis (“Misfeasance Summons”).  This application was subsequently amended to include a reassessment of the professional fees and expenses already paid by the Plaintiffs to the Defendant and an order for the Defendant to repay the Plaintiffs any sum found to have been wrongfully paid (“Reassessment Application”).

8.  These three summonses were heard before G Lam J (as he then was).  On 23 January 2020, G Lam J handed down his decision and found that the issue of the validity of the SPA was not properly a matter to be determined in winding-up proceedings or by the Hong Kong court.  Accordingly, it was ordered that:

(1)  the winding-up order against Pak Tat be stayed on the conditions that (a)  the Defendant be paid 50% of his taxed costs as Liquidator; and (b)  the Plaintiffs should waive the indebtedness that Pak Tat owed to the estate of Mr Lee; and

(2)  the Misfeasance Summons (along with the Reassessment Application)  be adjourned for further directions.

9.  Upon the above condition (a)  being satisfied, on 15 December 2020, G Lam J ordered that the winding-up order against Pak Tat be stayed permanently and the Liquidators be discharged.  The Misfeasance Summons (along with the Reassessment Application)  was adjourned.

HCMP 2320/2020

10.  Following the stay of the liquidation, the Plaintiffs commenced committal proceedings against the Defendant for breach of an order of the court made in the winding-up proceedings of Pak Tat.

11.  In his Judgment of 8 March 2022, the Judge found the Defendant to be in contempt and consequently made two costs orders dated 8 March 2022 and 12 August 2022 (“Costs Orders”)  against him.  The total amount payable by the Defendant under the Costs Orders was HK$1,134,356.00.  An allocatur[3] (“Allocatur”)  was issued on 20 February 2024 for this sum.  Both the appeals against the Judgment and the sentencing (CACV 108/2022 and CACV 347/2022)  were dismissed.

Stay Summons

12.  On 8 March 2024, the Defendant issued a summons (“Stay Summons”)  seeking a stay of execution of the Allocatur and the Costs Orders pending the final disposal of the appeals against the Judgment and the sentencing (CACV 108/2022 and CACV 347/2022), as well as the final determination of the Misfeasance Summons and the Reassessment Application.  The Defendant asserted a cross-claim against the Plaintiffs for unpaid liquidation fees and expenses.  This cross-claim comprises the following:

(1)  For the period between March 2012 and April 2017, the Defendant claimed for approximately HK$9.0 million in taxed liquidation fees from the Plaintiffs.  The Plaintiffs had made an interim payment of 50% (approximately HK$4.5 million), leaving an outstanding balance of approximately HK$4.49 million.

(2)  For the period between April 2017 and December 2020, the Defendant claimed for a further HK$5.0 million, consisting of HK$3.5 million in time costs and over HK$1.5 million in disbursements (primarily legal costs).

13.  The principal ground for the Defendant’s application was that his cross-claim totalling approximately HK$9.49 million vastly exceeded the judgment debt of approximately HK$1.13 million under the Costs Orders, and that it would be unjust to require him to pay the latter before the former was determined.

14.  By his Stay Decision of 16 October 2024[4], the Judge dismissed the Defendant’s application with costs.  The Judge was not satisfied that it was “so clear” that the Defendant’s cross-claim would exceed the judgment debt, noting the “fluid” nature of the cross-claim due to the pending Reassessment Application[5]. The Judge considered whether enforcement of the Costs Orders would be “abusive or manifestly unjust” and found that that threshold was not met[6]. The Defendant’s application for leave to appeal was refused by the Judge in his Leave Decision of 9 April 2025[7].  Consequently, the Defendant renewed his application for leave to appeal in this Court.

This Application

15.  The proposed grounds of appeal advanced by the Defendant, as refined in his written submissions for leave to appeal dated 23 April 2025, can be summarised as follows:

(1)  the Judge erred in concluding that it was “not so clear” that the size of the Defendant’s cross-claim (for unpaid liquidation fees and expenses, totaling approximately HK$9.49 million)  would exceed the sum payable to the Plaintiffs under the Costs Orders (approximately HK$1.13 million);

(2)  the Judge erred in law by assessing the Defendant’s application on the basis that a stay should be granted only if it would be “abusive or manifestly unjust” to allow enforcement of the Costs Orders; and

(3)  the Judge failed to take into account, or give sufficient weight to, other factors justifying a stay.

16.  The Plaintiffs oppose the leave to appeal.

Legal Principles

17.  Pursuant to section 14AA(4) of the High Court Ordinance (Cap. 4), leave to appeal shall not be granted unless the court is satisfied that (1)  the appeal has a reasonable prospect of success or (2)  there is some other reason in the interests of justice why the appeal should be heard.

18.  The principles governing an application for leave to appeal are well settled.  Under the first limb, the prospect of success must be “reasonable” and therefore more than “fanciful”, without having to be “probable” [8].  This means that the applicant must show more than just an arguable case.  The applicant must demonstrate that the appeal has merits and ought to be heard[9].  As to the second limb, the Court of Appeal may grant leave if the question to be determined is one of general principle, which will be decided for the first time, or a question of importance upon which further argument and a decision of the Court of Appeal would be to the public advantage[10].

19.  As this Court has repeatedly emphasised, where the decision under challenge involves the exercise of a discretion, the threshold for intervention is high.  An appellate court will not interfere with a judge’s exercise of a discretion unless the judge has misunderstood the law or the evidence, or the exercise of his discretion was plainly wrong and falls outside the generous ambit within which reasonable disagreement is possible: see Wong Kar Gee Mimi v Severn Villa Ltd[11]. It is not enough to show that the appellate court might have exercised the discretion differently.

20.  The court’s inherent jurisdiction to stay execution is to be exercised where there are special or exceptional circumstances, to prevent injustice or abuse of process, or to facilitate the administration of justice.  This involves a balancing of all relevant factors, including the risk of prejudice to each party: see S v G[12], Credit Lyonnais v SK Global Hong Kong Ltd[13].

Discussion

21.  The Defendant has advanced 3 grounds of appeal.

Ground 1: Erroneous Assessment of Evidence on the Cross-Claim

22.  The Defendant’s primary complaint is that the Judge erred in his assessment of the evidence and in concluding that it was “not so clear” that the Defendant’s cross-claim for unpaid liquidation fees of approximately HK$9.49 million would exceed his liability under the Costs Orders of approximately HK$1.13 million.  The Defendant submits that the Judge failed to take into account a prior admission by the Plaintiffs that only 60% of the initial fees were challengeable under the Misfeasance Summons, and that the Court had already approved parts of his fees.  However, the Defendant acknowledges that the alleged admission was not referred to before the Judge.

23.  It is clear from the Judgment that the Judge was fully aware of the size of the Defendant’s asserted cross-claim.  The  finding that it was unclear what, if anything, would be payable to the Defendant was the result of the Judge having regard to the nature of the Plaintiffs’ claim, which questions the Defendant’s right to be paid the sums already approved, because of his misfeasance in the conduct of the liquidation.  The entirety of the Defendant’s fees are subject to the Reassessment Application and his own cross-undertaking to repay any sum found to be excessive.  This renders the Defendant’s entitlement uncertain and contingent.  In our view, the Judge was entitled to find that it was not clear whether the Defendant’s entitlement to further payment exceeded what the amount of the Costs Orders.

24.  The Judge indicated that as the Costs Orders were an adjudged liability of the Defendant, the Court would be quite entitled to consider in the exercise of the Court’s discretion imposing a condition for any stay.  A “fair condition” would be ordering the amount of the Costs Orders be paid into court pending the outcome of the Misfeasance Summons[14].  The Defendant made no such offer nor did the Defendant’s counsel make any other proposal.  The Judge cannot be said to be plainly wrong in refusing an unconditional stay when a conditional one was not proposed.

25.  Finally, the Defendant attempts to rely on a new point on appeal, namely, the alleged admission referred to in [21] above.  In [32] of the judgment of G Lam J dated 23 January 2020, he records a submission by the Plaintiffs that 60% of the liquidators’ taxed costs and expenses relate to the 9 matters that are the subject matter of the Misfeasance Summons and that any interim payment should not cover them.  As I understand the argument, the implication is that the balance of 40% is not challenged. This would be a sum of approximately, HK$3,600,000.  It is not, however, clear from G Lam J’s judgment how he factored this into his calculation of the interim payment that should be made.  On the face of the matter, it would appear that it was subsumed into the interim payment, which was paid.  It, therefore, does not necessarily have any relevance in determining how much more, if anything should be paid to the Defendant.  In LehmanBrown Limited v Union Trade Holdings Inc. & others[15] Lam VP (as he then was)  says this in relation to the introduction of new points on appeal:

“Whilst the Court of Appeal obviously has power to entertain new points in an appeal, it is also clearly and firmly established that new points which are fact sensitive or otherwise affect the course of evidence or conduct of the case at the hearing below should not be allowed. Though this principle is usually applied in situations where the new points necessitate further evidence to be adduced, it is not confined to such scenarios. Very often, the raising of new point by one party may lead to the other party raising counter arguments and the consideration of such counter argument may involve factual assessment in a different light from that undertaken by the court below. Sometimes, it may involve a different weighing of factors in the exercise of discretion. Alternatively, the other party may embark on a different course of forensic conduct if the new point were taken earlier. The appellate court, in considering whether the new point would be entertained, is entitled to take these matters into account in order to avoid unfairness to the other party.”

26.  How the Plaintiffs’ apparent acknowledgment in August 2019 (when the hearing before G Lam J took place)  that 40% of the taxed fees and expenses were not challenged, factors into an assessment of whether realistically at least the amount of the Costs Order must be payable to the Defendant is unclear.  In our view to allow it to be raised now would be unfair.

Ground 2: Adoption of an Unduly High Legal Threshold

27.  The Defendant contends that the Judge applied an incorrectly high threshold by asking whether enforcement would be “abusive or manifestly unjust”, rather than applying a broader test of “special or exceptional circumstances”.

28.  We do not consider this ground to be reasonably arguable.  A reading of the Stay Decision as a whole shows that the Judge was alive to the correct legal principles.  The law is clear.  The court should not “prevent a judgment creditor from enjoying the fruits of judgment short of there being abuse or manifest injustice” [16]. We see no abuse or manifest injustice in this case.

Ground 3: Failure to Consider Other Special Circumstances or Balance of Prejudice

29.  Under this ground, the Defendant seeks to re-argue the merits of the balancing exercise, complaining that the Judge failed to give sufficient weight to the potential difficulty of enforcement against the Plaintiffs, the delay he had suffered, and the close relationship between the claims.

30.  This ground has no merit.  An appeal is not a forum for a rehearsal of arguments that were unsuccessful in the court below.  The Judge’s reasons demonstrate that he expressly considered the factors the Defendant now raises: he addressed the alleged difficulty of enforcement but also noted evidence of the Plaintiffs’ assets in the form of substantial landed properties within the jurisdiction ([27] of the Stay Decision); he was also plainly aware of the chronology and the time elapsed between the Costs Orders and the Stay Summons ([15]-[16] of the Stay Decision).  The Defendant’s complaint is, in essence, a disagreement with the weight the Judge assigned to these factors.

Disposition

31.  For the above reasons, in our view none of the proposed grounds of appeal has a reasonable prospect of success.  There is no other reason in the interests of justice for the appeal to be heard.  Accordingly, the application for leave to appeal is dismissed.  We make an order pursuant to Order 59, rule 2A(8)  of the RHC that no party may request this determination to be considered at an oral hearing inter partes.

32.  There is no reason why costs should not follow the event.  Having considered the Plaintiffs’ statement of costs lodged on 7 May 2025 for summary assessment, we assess reasonable fees payable to the Plaintiffs at HK$70,000.  There will be an order nisi that the Defendant pays the Plaintiffs the costs of this application. The order will be made absolute if no application for variation is made by any party within 14 days of the handing down of this Judgment.