ASPIAL INVESTMENT LTD AND ANOTHER v. MAYER CORPORATION DEVELOPMENT INTERNATIONAL LTD

FAMP No 2 of 2013

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO2 OF 2013

(ON APPEAL FROM CACV NO 162 OF 2012)

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Mr Justice Tang PJ:

1.  These proceedings concern the ownership of 200 million shares in Mayer Holdings Limited (“Mayer HK”), a listed company.  The shares were registered in the name of Mayer Corporation Development International Limited (“Mayer BVI”), a BVI company.  Mr Lai Yueh-hsing (“Lai”), was the sole director ofMayer BVI, whose sole shareholder was Mayer Steel Pipe Corporation (“Mayer Taiwan”). 

2.  In HCCL 3/2012, Mayer BVI claimed the return of these shares from the 1^stdefendant,Alliance Financial Intelligence Limited (“Alliance Financial”), who were the custodians of these shares under a custody agreement dated 19 June 2009. 

3.  InHCA238/2012, the plaintiffs, Aspial Investment Ltd and Bumper East Ltd (“A&B”),who are the 4^thand 5^thdefendants in HCCL3/2012 claimed a declaration that they, as purchasers of these shares from Capital Wealth Finance Company Ltd (“Capital Wealth”)(controlled by Lam ChinChun, D3 in HCCL 3/2012), who were authorized by Mayer BVI to sell these shares, were entitled to be registered as owners.  Their case was that Capital Wealth was authorized to sell pursuant to 2 oral agreements made between Lam and Lai, acting for their respective companies, the latter of which was made on or shortly before 24 June 2009.

4.  The two actions were heard together before Reyes J. The critical issue at trial was the existence or otherwise, of these oral agreements. Mayer BVI’s claim was dismissed and A&B succeeded.  On 24 May 2013 the Court of Appeal dismissed Mayer BVI’s appeal. 

5.  On 16 August 2013 Mayer BVI was given leave to appeal to this court   as of right because the shares have a value in excess of $1 million.  The Court of Appeal however refused Mayer BVI’s application for a stay of execution pending the appeal, because it took the view that Mayer BVI’s appeal did not have reasonable prospects of success, since it was essentially an appeal against concurrent findings of fact.  However, it granted an interim stay until the determination of an application to a single judge of this court for a stay. Hence, the application to me for stay which was dismissed on 30 September 2013 for reasons which I now give.

6.  The fact that Mayer BVI are entitled to appeal as of right does not mean that the appeal has reasonable prospects of success.  For the present purpose, I must form a preliminary view on whether the appeal has any realistic prospect of success.  Of course, such preliminary view may be revised when I have had the benefit of full argument.

7.  Ms Teresa Cheng, SC, for the plaintiffs, submits that the appeal has reasonable prospects of success. First,on the basis, that even given the second oral agreement existed,it was void for want of authoritybecause Lai lacked actual, apparent or ostensible authority to bind Mayer BVI.

8.  The Court of Appeal (“CA”) dealt with this argument in these terms: 

“55(2)(e) Further, it was suggested that the respondents had failed to prove that Lai was authorised to enter into the 2^nd Oral Agreement, that none of the HK$42.5 million was paid to Mayer BVI, and that Mayer BVI’s parent company in Taiwan had not instructed or approved the making of the agreement. However, even assuming for present purposes that the burden of establishing Lai’s authority lay with the respondents, it must be borne in mind that Lai was the sole director of Mayer BVI, and would therefore ostensibly be authorised to act for it. As to the HK$42.5 million, there would be no reason for AFIL to think that Flora Kao, Lai’s personal assistant, was not authorised to deliver the instructions concerned. Additionally, given that the Mayer HK shares were owned by Mayer BVI and not its parent company, I do not see that it was necessary for the parent company’s approval or instructions to have been obtained.”

I believe it is difficult to contend that a sole director has no authority to bind the company.   A board of directors can do so. A sole director is the board. There is no evidence that Lai had no authority to bind Mayer BVI under BVI law.

9.  There is of course also, Mr John Litton’s submission that Mayer BVI’s argument is based on the allegation that Lai had given away the shares.  The case found by the judge was that they were in effect “sold” for $42.5 million.  On the facts found by the judge any chance of success on this point is remote.

10.  The other argument relied on by Ms Cheng is the judge’s minimalist approach.  Reyes J explained the need for such approach at paras 104-109ofhis judgment.  He noted that the parties agreed with the approach.   At trial, Mayer BVI was represented by eminent leading counsel though not by Ms Cheng. Complaint after the case has been lost comes too late.  Moreover,I do not believe the approach detracted from the force of the concurrent findings of the courts below.

11.  Ms Cheng also made the point that Reyes J failed to deal adequately or at all, with the issue of the 47million shares.  This matter was dealt with at length by the court of appeal.  They concluded that it had not been demonstrated that Reyes J’s approach was flawed.

12.  For the present purpose, I have come to the view that Mayer BVI has failed to show that the appeal has reasonable prospects of success.  Had leave been required for an appeal, I would have refused leave, in which event, no question of stay would arise. I would not be disposed to grant a stay simply because the appeal is as of right.

13.  I will also say a few words about whether the appeal may be rendered nugatory.  Absent a stay, Ms Cheng submitted that the shares may be registered in the names of A&B and that together with other shares, they have enough to obtain control.  I shall proceed on that basis.

14.  One fear is that the shares may be sold.Trading in the shares of Mayer HK has been suspended and a sale of the shares in the circumstances to a bona fide purchaser of a legal interest(which required registration)is remote.  And, there is a long standing offer of an undertaking by A&B not to sell the shares pending appeal, which offer was repeated before me.

15.  It is said that MayerHK has outstanding actions against Lam for conspiracy to defraud Mayer, and other litigation concerning Capital Wealth, and that once the 200million shares are registered and control obtained, A&B could prejudice MayerHK’s position regarding these actions.  Given the clear conflict of interest, it seems unlikely that any settlement of these actions could be achieved without approval by independent shareholders.  In any event, there is no reason to think that the hearing of this appeal could be long delayed, so I doubt whether any nefarious object could be achieved in the meantime.

16.  On the other hand, there is Mr Litton’s point that A&B should not be delayed in enjoying the fruit of their success. They would not be compensated for any delay caused as a result of a stay. That is also a highly relevant consideration.

17.  Ms Cheng also relied on s26(2) of the Hong Kong Court of Final Appeal Ordinance.  She submitted that  s26 is identical to para 5 of the Order in Council Regulating Appeals from the Supreme Court or Court of Appeal for Hong Kong to His Majesty in Council 1909 and that A.G v Chiu Pak Yue and Another (No 3) [1963] HKLR652 is authority that under those rules, even when the judgment does not require the appellant to pay money or perform a duty, s26(2) required the court to require the person in whose favour the judgment was given to enter into good and sufficient security, for the due performance of such order as the court shall make in respect of the appeal.  She submitted a similar interpretation should be given to s26.

18.  In Secretary for Justice v To Kan Chi and Others (2000) 3 HKCFAR 264, Bokhary PJ said that where the judgment does not fall within s26(1) because it does not require the appellant to pay money or perform a duty, the court has inherent jurisdiction to grant a stay so that its judgment would not be rendered nugatory. With respect, I agree that there is inherent jurisdiction to protect the court's process so that our judgments would not be rendered nugatory. I would not give s26 the expansive interpretation suggested by Ms Cheng. 

19.  As I have said Mr Litton for the respondents has offered an undertaking not to sell or otherwise dispose of the 200million shares pending the disposition of the appeal.  Given the undertaking, this is not a case for any security.

20.  For the above reasons, I have refused a stay.  I now make an order nisi that the respondents are to have the costs of this application, such costs to be taxed unless agreed.