廈門新景地集團有限公司 formerly known as 廈門市鑫新景地房地產有限公司 v. ETON PROPERTIES LTD AND OTHERS

HCCL 13/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 13 OF 2011

(TRANSFERRED FROM HCA NO. 961 OF 2008)

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J U D G M E N T

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The applications

1. On 14 June 2012 this court handed down its judgment in this case.  For the detailed reasons given, the plaintiff’s claim failed, and was dismissed against each of the 11 defendants in the action.

2. Such dismissal of the plaintiff’s claim has significance in terms of an injunction order initially granted ex parte by Saunders  J on 27 May 2008, and continued by Order of Burrell J dated 6 June 2008.  The substance of the injunction in question had been to restrain the 2^nd to 5^th defendants from dealing with the shares in the 4^th defendant as held by the 3^rd defendant, whilst the 5^th defendant had been prohibited from diminishing the value of its assets.

3. Paragraph (1) of the ‘Continuation Order’ reads:

“The ex parte Order made by the Honourable Mr Justice Saunders on 27 May 2008 be continued until the final disposal of this action or further order”. [emphasis added]

4. The interpretation of this sentence lies at the core of the present debate, and has spawned two applications:

(a)  By summons dated 24 October 2012, the 3^rd, 4^th and 5^th defendants ask for a declaration that the injunction which was continued by Burrell J “has been discharged by the Judgment dated 14 June 2012”;

(b)  By summons dated 25 October 2012, the plaintiff issued a cross-application, the substance of which is contained in paragraph (1) thereof which requests an Order that:

“The injunction order…ordered to be continued until the final disposal of this action or further order…be continued until the outcome of the Plaintiff’s appeal in CACV No 158 of 2012…is available or further order”.

The issues raised

5. Looked at in the round, three distinct issues thus emerge from these applications:

(i) Had the injunction order remained in place notwithstanding the dismissal of the action after trial?;

(ii) If not, should the Court now ‘declare’ that this was the position?;

(iii) If the earlier injunction order no longer remained in place, should the Court regrant the injunction in its original terms pending the plaintiff’s appeal against the dismissal of its action?

6. This judgment deals briefly with these three discrete questions.

Issue 1

7. For the plaintiff Mr Thomas Lee argued that, whilst the action had been dismissed after trial, the wording of the Order of Burrell J meant that the injunction “had not ceased to have effect”.

8. Mr Lee maintained that the phrase “until the final disposal of this action or until further order” did not mean that the injunctive relief was, or was intended to, expire at or following trial, and that the position would be different if the phrase “until trial or further order” had been used.

9. For the 3^rd-5^th defendants Miss Elizabeth Cheung (whose clients primarily were the subject of this interlocutory injunctive relief) submitted that on a plain reading of the terms of the injunction it was envisaged that it would last only until the determination of the trial, given that the duration of the injunction was stated to be “until the final disposal of this action”, which was, of course, HCA 961/2008, as later transferred to the Commercial List under the reference CL 13/2011.

10. Miss Cheung suggested that it could not have been intended by the plaintiff, which had had conduct of the drawing of the Continuation Order, that the injunction in question should continue until some time after the Judgment and pending appeal, and that an appeal from first instance determination sensibly could not be construed as falling within the rubric “this action”.  She added that had it been the intention for the injunction to continue until after the judgment at first instance, the order easily could have contained the additional words “and the conclusion of any appeal therefrom”.

11. For the 2^nd defendant, Mr Khaw – whose client did not issue its own application and was involved in the injunctive relief by reason solely of the fact that in respect of  the 10,000 shares in the 4^th defendant the 2^nd defendant holds just one share on trust for the 3^rd defendant – submitted that there was no doubt that the action had finally been disposed of, and that the fact that the plaintiff had decided to take out its own application for new relief spoke volumes about the ‘interpretation argument’ and the fact that the plaintiff well knew that the original injunction had come to an end.

12. I do not think there is any real doubt about this first issue: in my view Mr Lee’s linguistic argument fails, and as a matter of interpretation of the terms of the original 2008 Order, the existing injunction fell co-terminus with the dismissal of the plaintiff’s claim after trial.  I so hold.

Issue 2

13. As to whether the court now should respond to the defendants’ summons and “declare” that this is the position, Mr Lee had two submissions antipathetic to the proposition.

14. First, he took what amounted to a jurisdiction point.  He said that this issue had been a matter for trial, and thus, not having been dealt with at the conclusion of the trial, it no longer was open to this court to rule on the matter, and that this issue now properly is within the purview of the appellate court.

15. If I may say so, I do not consider that this is Mr Lee’s best point.

16. This court, the trial court, remains in the position of clearing up/dealing with procedural matters arising from its judgment of 14 June.  One of these matters is an argument seeking to vary the costs’ order nisi that was made in that judgment.  That hearing was held some 10 days or so ago, and a decision thereon is pending; in fact, it was during that costs’ order nisi hearing that Mr Lee first appeared in this case – he had not appeared on behalf of the plaintiff at trial – and, by consent, the issue of the ‘survival’ or otherwise of the injunctive relief granted in May 2008 was deferred to the hearing the subject of this judgment.

17. So I do not consider that this court is functus and thus has no jurisdiction to deal with this subsidiary aspect of the case, which, it seems to me, can be dealt with only when there has been a reasoned determination of the merits after trial.

18. The second point that Mr Lee pursued of a ‘technical’ nature is that the defendants’ summons of 24 October was impermissible in that it sought declaratory relief, and he emphasised that such power should be exercised sparingly and only where justice otherwise cannot be done – and that this was not such a case.

19. I agree with Mr Lee’s proposition that a court should hesitate long and hard before granting ‘declaratory’ relief in its true form, which is an equitable (or statutory) remedy which serves to establish and/or to clarify the substantive rights of a party.  Nor should there be any question of ‘true’ declaratory relief being granted otherwise than in open court.

20. However, that pointedly is not what is happening in this instance.  True it is that the language of the summons uses the term ‘declaration’, but this is mere semantics: as Miss Cheung pointed out, the summons could as easily have used the word ‘order’ instead of ‘declaration’.

21. I agree.  The Commercial Court looks always to the substance and not the form.  That which is happening in this case, no more and no less, is that the defendants hitherto subject to the existing injunctive remedy are seeking clarification of the juridical position, no doubt mindful of the penal notice endorsed on the injunction order.

22. Effectively this is an application ‘ex abundante cautela’, and the relief sought in fact could have been couched in a number of ways absent using the term ‘declaration’; perhaps better would have been if it had not been thus characterized, but that is nothing to the immediate point, which is that, as the context makes clear, this application is not an application for ‘declaratory relief’ in the manner in which that term properly and usually is understood.

23. In my view, therefore, there is nothing in this alternative objection either, and I see no bar in principle to making a confirmatory order to the effect that the injunction as earlier granted no longer subsists.  As a matter of law either it does, or it does not – and in my view it does not.

Issue 3

24. I turn now to the plaintiff’s own application, and the issue of the regrant of the injunctive relief in like form to that initially granted by Saunders J.

25. This is another curious twist in a case which perhaps has had more than its fair share thereof.  Normally the issue of discharge and regrant of injunctive relief arises in instances of material non-disclosure, wherein as a matter of principle the ex parte relief granted is discharged consequent upon such non-disclosure, but the circumstances remain sufficiently compelling for the court, in the exercise of its unfettered discretion, to ‘regrant’ the interlocutory injunctive relief pending trial; that is, that notwithstanding the non-disclosure the balance of convenience nevertheless continues to lie in favour of such regrant.

26. This case could not be further from that situation.  In this instance there has been a 24 day debate at trial of the many and diverse arguments raised by no less than 6 senior counsel, after which the court has delivered itself of a 135 page judgment dealing with every possible actual (and contingent) issue, ultimately concluding that the case as mounted against all 11 defendants must fail.  In the circumstances perhaps I may be permitted to venture the comment that no stone has been left unturned.

27. In light of the manner in which the plaintiff’s case was conducted at trial, it is odd that Mr Lee now should be instructed by the plaintiff to ask the court, by its summons of 25 October, to “hold the ring” pending appeal of the substantive judgment, and therefore to regrant the injunction in its original terms; pointedly no amendment of these terms was canvassed, no further evidence was filed, and accordingly this was an “all or nothing” application.

28. This regrant application effectively is an application for a stay pending appeal.  In my view there are two limbs to the application, although probably they are no more than two sides of the same coin:

first, whether the relevant benchmark for such stay has been attained by the plaintiff/applicant; and

second, whether non-regrant of the identical injunctive relief would render the forthcoming appeal nugatory.

The benchmark: satisfied?

29. There is substantial agreement between counsel as to the legal requirement, which is that the forthcoming appeal must have “a reasonable prospect of success”.

30. This rubric is the subject of comment in the judgment of Le Pichon JA in SMSE v KL , Civil Appeal No 111 of 2009, a matrimonial proceedings case involving the issue of leave to appeal under Order 59, rule 2B, RHC, in which (at paragraph 17 of the judgment) her Ladyship notes that “Reasonable prospects of success involves the notion that the prospects of succeeding must be “reasonable” and therefore more than “fanciful”,  without having to be “probable” “.  Whilst in the earlier case of Star Play Development v Bess Fashion Management Co Ltd [2007] 5 HKC 84, Mr Justice Ma (as he then was) usefully reviewed the principles applicable to stay of execution, and held that the existence of an arguable appeal (that is, an appeal with reasonable prospects of success) was “the minimum requirement” before a court would even consider granting a stay.

31. Is there a reasonable prospect of success on appeal in this case?

32. Mr Lee says that indeed this is the case, whilst opposing counsel demur: they submit that that plainly this benchmark is not satisfied, Miss Cheung noting that had the plaintiff been in position of requiring leave to appeal, it would have been highly unlikely to have obtained such leave given that the grounds of appeal against her client predominantly hinge upon the plaintiff successfully overturning findings of fact of the ‘seeing and hearing’ judge.

33. It is always problematic for the trial judge to make this estimation when, as here, in the Notice of Appeal his judgment comes under the sort of attack which Mr Lee characterized as a “robust”, but at the end of the day – and, pace Mr Lee’s concerns, paying no regard to some of the more colorful adjectives with which certain conclusions/findings within the judgment now are assailed – the court is driven to conclude that the failure of the plaintiff on, I think, every significant point of law and every significant issue of fact that was in question in this case does not make for an optimistic assessment of the plaintiff’s chances in the Court of Appeal, and certainly does not enable this court fairly to conclude that the plaintiff has “a reasonable prospect of success” on any such appeal.  I so hold.

34. There is, however, another element in this equation which in my view supplements and reinforces this conclusion.

Appeal rendered nugatory if no regrant?

35. In Star Play, op cit., Ma J had observed that in addition to the “reasonable prospect of success” standard as the “minimum requirement” for the court even to consider granting a stay, where there existed only an arguable appeal, then “the appellant would need to provide the court with additional reasons as to why a stay was justified, for example that the appeal would be rendered nugatory”.

36. This was a line of argument strongly mounted by Miss Cheung and Mr Khaw, whom each submitted that the non-regrant of the injunctive relief in the terms formerly in place could not, in the particular circumstances of this case, possibly lead to the conclusion that, absent  such regrant, the plaintiff’s appeal would be rendered nugatory.

37. Both counsel argued that the abandonment at trial of the remedy of specific performance (as “inefficacious”), and the election to pursue solely monetary relief in the form of equitable compensation fundamentally had moved the juridical goal posts, and therefore it no longer was clear why it was considered necessary to pursue a proprietary remedy in terms of preservation of the 4^th defendant’s shares, which had been the original raison d’etre of the injunction when specific performance of the agreement between the plaintiff and the 1^st and 2^nd defendants as to the development of the Xiamen site had remained in play; thus, they argued, the balance of convenience now irrevocably was tilted against the regrant of an injunction in like terms to that initially obtained by the plaintiff.

38. In addition to this broad approach, Mr Khaw argued that the plaintiff’s constructive trust claim against the 1^st and 2^nd defendants clearly no longer was sustainable, under either Hong Kong or PRC law, given that at trial there had been acceptance on behalf of the plaintiff that the CIETAC Award could not be taken as equivalent to the grant of equitable relief of specific performance under Hong Kong law, and in fact had confirmed, through its leading counsel, that the plaintiff would seek damages in lieu of performance of the Agreement.

39. These struck me as a compelling submissions, given that there could be no question but that at trial the entire focus of the action had gone from seeking specific performance of the agreement between the plaintiff and the 1^st and 2^nd defendants to seeking monetary compensation in lieu thereof.

40. Mr Lee (whom, of course, had played no part in the trial) had, I think, no ready response to this line of argument, save to trail his coat with the proposition that the decision/concession to change direction at trial to the remedy of equitable compensation and away from specific performance did not necessarily bind his client, the plaintiff, thereby, it seemed to me, implicitly raising the spectre of an appeal being argued upon an entirely different basis from that which unequivocally had formed the plaintiff’s case at trial –  an eventuality which could not be said to be canvassed in the Notice of Appeal which, as Miss Cheung pointed out, requested an order that “judgment on liability be entered in the Action in favour of the Plaintiff for equitable compensation/damages to be assessed against each of D1 and D2 (in lieu of the existing order for the continued performance of their4 July contract with the plaintiff)…”

41. It follows that, notwithstanding Mr Lee’s sterling efforts in a difficult cause, I decline his client’s application to regrant.  I am unable to see that, absent any such regrant, the appeal would be rendered nugatory, and, as I have observed, there was no application (and no evidence underpinning the same) for any alternative form of injunctive relief in the changed circumstances now existing over 4 years later.

Orders

42. Upon the two applications now before the court I therefore make the following orders:

(a)  On the summons of the 3^rd-5^th defendants dated 24 October 2012:

(i)  order in terms;

(ii)  there be no order as to the costs of the 2^nd defendant.

(b)  On the summons of the plaintiff dated  25 October 2012:

(i)  the application be dismissed;

(ii)  the costs of the application be to the 2^nd and the 3^rd -5th defendants, such costs to be taxed if not agreed.

Stay of Orders Pending Appeal

43. Mr Lee has indicated that, should the judgment of the court on these two applications go against his client, he will have instructions to appeal these issues to the Court of Appeal.

44. The issue of the possibility of an interim stay was canvassed with counsel, and no objection was made either by Miss Cheung or Mr Khaw to there being a stay/suspension of the foregoing orders pending the plaintiff seeking the assistance of a single judge of the court of appeal.  This seems to me to be eminently sensible since, absent such stay, this course obviates the prospect of an unseemly dash to the door of an appellate judge.

45. With the benefit of reflection the matter could, I think, more appropriately have been dealt with by relevant undertakings on the part of the defendants (which I recall earlier were offered and accepted at the costs’ nisi hearing on 26 October 2012), but in the event, having discussed the mechanics with counsel, I now make an additional order in the terms following with the clear intention of ‘freezing’ the position for a short interim period, viz:

(i)  There be a stay of the foregoing Orders for a period of 21 days from the date hereof;

(ii)  There be no order as to costs.