EMAGIST ENTERTAINMENT LTD v. NETHER GAMES (HONG KONG) LTD AND OTHERS

HCA 1659/2012

[2023] HKCFI 598

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1659 OF 2012

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(By Original Action)

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(By Re-Amended Counterclaim dated 24^th December 2018)

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DECISIONS

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1.  There are two paper applications before me:

(i)   the application dated 14 June 2022 by the Emagist Parties(which include Emagist, Boniface, Emagist Entertainment Limited and Emagist Group Limited) for an order that: (a) the injunction granted by DHCJ Woo on 3 January 2013 (“the Injunction”) be uplifted and the parties be released from their respective undertakings given to the court therein; and (b) the sum of US$3,232,677.28 paid into court by Emagist on 20 July 2020 (“the Fortification Sum”) pursuant to the order dated 7 July 2020 with all interest accrued thereon be paid out to Emagist through its solicitors (“the Uplift and Release Application”); and

(ii)  the application by ART and Simon (“the ART Parties”) for stay of execution of the judgment handed down by me on 28 March 2022 (“the Judgment”)^[1]pending appeal (“the Stay Application”).

2.  In the present Decisions, I will adopt the same abbreviations that I used in the Judgment.

3.  Eric has not made any submissions to this court about both applications.

4.  Both applications turn on the question as to whether this court should stay the execution of the Judgment pending appeal.

5.  There is no dispute between the parties about the principles to be applied in considering whether to grant stay of execution of a judgment pending appeal as stated in Star Play Development v Bess Fashion Management Co Ltd[2] and Great Bill Ltd v JFK Holding Co Ltd[3].

6.  I first deal with the question about the merit of the appeal.

7.  As I see it, the present case turns on the determination of various issues of facts, in particular what happened in the Sun Chiu Kee Meeting and the series of events between Boniface, the ART Parties and Eric in respect of the operation of the Game Business throughout the years.

8.  It is trite law that the appellate court would be slow to disturb the findings of fact made by the court below.[4] As I have analyzed the evidence in some details in the Judgment, it would be very difficult for the ART Parties to establish that my findings on fact are plainly wrong or there is any palpable error in making these findings.

9.  Mr Chau, counsel for the ART Parties, has relied on 4 purported errors made by me in making the various findings of fact.  I do not propose to deal with each of these allegations here, save as to say that the ART Parties are repeating some of their submissions argued before me and I have fully considered these arguments in the Judgment.  I have also made it clear in §99 of the Judgment that “subsequent conducts cannot be used as an aid to the construction of any agreement made in the Sun Chiu Kee Meeting or otherwise, but they can assist the court in deciding whether agreement on a certain point had in fact been made”.  As I see it, I was very much entitled to make the various findings of fact which form the basis of the finding of liability against the ART Parties, and there is no merit in the appeal against the Judgment I made in the present case.

10.  Mr Chau submits that the legal relationship between the parties is a matter of mixed law and fact.  I agree.  However, one must not assume that, because there is question of law involved, there is a strong ground of appeal.  As I have mentioned above, the present case turns very much on the determination of the various issues of fact.  Once these factual findings were made, it was quite clear that the Games Business was not operated in the form of partnership as contended for by the ART Parties.

11.  This would have been sufficient to dispose of the Stay Application.  But since the parties have made submissions on the question as to whether the refusal of stay would render the appeal nugatory, I will also give my ruling on such matter.

12.  The ART Parties are concerned that, if Emagist is to be allowed to enforce the Judgment, Boniface, who is now residing in Canada, would be able to misappropriate the money recovered for his own use.  They rely on the history of the operation of Emagist and the observation I made in the Judgment that Boniface was treating Emagist as his own company. Assuming that the ART Parties are to succeed in the appeal, it would be difficult for them to claim back the money.  Further, Boniface had misappropriated money from Emagist in the past.  There is a chance that the ART Parties may not be able to recover the sum misappropriated from Boniface in the future, and so Emagist should not be allowed to enforce the Judgment at this stage.

13.  As I have analysed in the Judgment, even if the Game Business was operated in the form of partnership, it would be quite impossible for the ART Parties to argue that Emagist is or was not the owner of the copyright of the Game.  No matter what was the dispute between Boniface and the ART Parties, the latter were not entitled to “migrate” the Game to their own platform.  Emagist, either as the corporate vehicle of Boniface (as contended for by him) or the “partnership” (as contended for by the ART Parties), would have an unassailable claim to the damages caused by the “migration” of the Game, and so there is no reason to deny Emagist of the fruit of its success.

14.  One must bear in mind that only Emagist (and not Boniface) is allowed to enforce the Judgment.  Though Boniface is the majority shareholder of Emagist Cayman which directly owns Emagist, he is not allowed to use the money of Emagist in whatever way he likes.  There are laws to protect minority shareholders like the ART Parties.  After all, they are the shareholders of Emagist Cayman and there are also other shareholders involved.  The court should leave it to them to take appropriate steps to protect themselves rather than to deny Emagist of the fruit of its success.

15.  Further, the ART Parties are not entitled to treat the stay as an injunction to prevent possible dissipation of assets in anticipation of a yet properly instituted claim for misappropriation of company assets.  In the Judgment, I have expressed the view that there is serious confusion in the formulation of ART’s defence and counterclaim.  I cannot see why the court should grant a stay in anticipation of the alleged risk of dissipation of company’s assets, when there are ways for them to protect their interests under the company law or by way of properly instituted legal proceedings.  One must also bear in mind that no finding has been made in the Judgment as to whether Boniface had misappropriated any money of Emagist in the past.

16.  As Boniface is now residing in Canada, Mr Chau relies on authorities such as Hong Kong Civil Procedure 2023[5] and Wootton v Sievier[6] to support the proposition that execution of judgment may be stayed where the judgment is in favour of a person resident out of jurisdiction.  However, since the judgment is granted in favour of Emagist and not Boniface as a person, I agree with the solicitors for the Emagist Parties that where Boniface is currently living is quite irrelevant.

17.  For these reasons, the “nugatory” argument cannot advance the ART Parties’ case any further and the Stay Application should be dismissed.  I therefore so order.

18.  I then turn to the Uplift and Release Application.  The ART Parties take a neutral position as to whether the Injunction should be uplifted.  However, they oppose the release of Emagist’s undertaking as to damages and the release of the Fortification Sum to Emagist.

19.  As I see it, the same principles should be applied in considering the Uplift and Release Application.

20.  For the release as to the undertaking as to damages, any release should not affect the liability in respect of the undertaking given by the parties prior to the release.  Hence, even if the ART Parties were to succeed in the appeal, that should not affect the liability arising from such undertaking prior to the release.  For the possible future liability, as the Injunction is going to be uplifted, there should not be any such future liability arising from the undertaking as to damages.  Hence, I make an order uplifting the Injunction and releasing the parties from their respective undertakings.

21.  As Emagist succeeds in the trial before me, it should get back the Fortification Sum paid by it into court.  Any objection to the release is in substance a request to the court to stay the execution of the Judgment.  As I have already given my reasons above for refusing the Stay Application, the same reasons should apply for allowing the release of the Fortification Sum back to Emagist.  I therefore so order.

22.  The Emagist Parties also ask for an order that the total sum of US$455,928.39 as set out in the 2 Notices of Payment into Court under order or certificate of Ryan dated 2 and 25 January 2013 respectively together with interest accrued thereon be paid out to Emagist through its solicitors.  It follows from my decision above that such payment out order should be made.  However, since such order has not been expressly sought in the summonses and the ART Parties have not made any specific submission in this regard, I would only make an order nisi for such payment out.

23.  I also make an order nisi that the costs of both applications be paid by the ART Parties to the Emagist Parties.  Both orders nisi shall be made absolute 14 days after the date of the handing down of these Decisions.