SZE KA WAI v. CHOY WAI KA

HCA 1825/2018

[2021] HKCFI 3197

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1825 OF 2018

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DECISION

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A. The two Summonses

1.  This action concerns the ownership of Flat 5, 6^th Floor, Block D, Yan Ming Court, No 100, Po Lam Road North, Tseung Kwan O, Sai Kung, New Territories, Hong Kong (the “Property”).  The plaintiff (“P”) and defendant (“D”) are the registered owners as joint tenants.  P claims that D in fact holds his half share of and in the Property on trust for her.  She seeks a declaration to that effect.  After trial, and by his Judgment handed down on 25 February 2021 (the “Judgment”), Deputy Judge Patrick Fung SC allowed P’s claim and granted the declaration sought.  D was also ordered to transfer all his interest of and in the Property to P as she shall direct.

2.  On 24 March 2021, D filed his Notice of Appeal.  The appeal has been set down to be heard on 17 December 2021.

3.  By summons of 19 April 2021 (the “Execution Summons”), P seeks leave for the Registrar to be approached to execute all documents for the purpose of effecting the transfer of the Property to her.

4.  By another summons of 20 April 2021 (the “Stay Summons”), D seeks a stay of the execution of the Judgment pending appeal.

5.  On 26 May 2021, Deputy Judge M K Liu by consent gave directions on the filing of evidence in respect of both Summonses, and ordered that they be disposed of on the papers.

6.  Parties have pursuant to directions given filed their evidence and submissions. 

7.  Upon this Court’s invitation for clarification, D’s legal advisers on 26 October 2021 confirmed that despite the directions of Deputy Judge Liu, “the Defendant is not prepared to file and serve any written submissions in reply”.

8.  The Execution Summons and the Stay Summons are now placed before this Court for paper disposal.

9.  Counsel for D are Mr Simon Wong and Ms Abigail Liu.  Counsel for P is Mr Timothy Lam.

B.  The Stay Summons

10.  I agree with Mr Lam’s submission that the Stay Summons should be dealt with first, as its outcome would bear directly upon the Execution Summons.

B.1.  The applicable legal principles

11.  In Bright Gold Ltd v Mega Well Development Ltd [2019] HKCA 1440, the Court of Appeal reiterated the principles governing an application for stay pending appeal as follows:

“ The principles governing an application for stay pending appeal are well settled. The leading case in Hong Kong is Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84. It is not necessary for us to recite that judgment at length. For present purpose, we would reiterate the following propositions:

(a) The applicant must show an arguable ground of appeal (viz. one with reasonable prospect of success) before the discretion to grant stay is engaged, see Star Play para 9(6); Sy Chin Mong Stephen v Lo Shing Kin CACV 45/2013, 13 March 2013;

(b) Even if arguable grounds exist, there must be other circumstances justifying the deprivation of the successful party the fruit of the judgment. Sometimes, the applicant may do so by showing the existence of strong ground of appeal. Sometimes, the applicant may do so by showing that the appeal would be rendered nugatory if no stay is granted. In either case, the court must also have regard to the prejudice that could be suffered by the successful party if a stay is granted. In all cases where the discretion is engaged, ultimately it is a balancing process with common sense;

(c) In assessing the strength of the appeal for the purpose of a stay application, it is impracticable and undesirable to go deeply into the merits: see Star Play para 9(5).  A broad brush approach is called for.  Thus, counsel should not attempt to deploy full arguments on law and facts quoting in extenso all the relevant evidence and transcript as if the application for stay is a platform for a rehearsal of the appeal proper.  Generally, with the benefit of written skeleton submissions, the court is able to assess whether an appeal has a high prospect of success without lengthy oral submissions from counsel, MKKWH v RKSH CACV 197/2012, 27 February 2013 at para 3.  Application for stay of execution should not be a dry run of the appeal, see Ming Hsieh v Xu Zhe [2018] HKCA 390, at para 9.”

B.2.  The Affirmations

12.  The Execution Summons is supported by the affirmation of Mr Tse Yuen Ming of 19 April 2021.  Mr Tse is P’s solicitor.  He produces the correspondence between the parties since the Judgment.  He says that D has neglected to comply with the Judgment.  He points to a letter dated 15 April 2021 from his firm to D’s then solicitors whereby P “agrees to make the undertaking not to sell, gift, transfer and lease out the [Property] pending determination of the appeal to the Court.  In so far as mortgage is concerned, our client is prepared to undertake not to mortgage the [Property] for a sum exceeding the existing outstanding mortgage balance”.  P therefore seeks an order in terms of the Execution Summons.

13.  The Stay Summons is supported by D’s 3^rd affirmation of 20 April 2021.  He deals with his grounds of appeal.  He says that he truly and verily believes that his appeal has a real prospect of success.  He asserts that a stay is necessary.  Relevantly, he says at §§21 and 29 that:

“ 21. I verily believe that [P] intends to enforce the Judgment and require me to transfer my interest in the Property to her immediately. If I am to do so, [P] may dispose of the interest of the Property at her own will (by for example, selling, gifting, mortgaging or leasing out). Further, [P’s] creditors (if any) may enforce any debt or judgment and charge against the Property …

…

29. I also consider that if I transfer my interest in the Property to [P] now, even if [P] will not dispose of the Property, there would be nothing to stop [P’s] creditors (if any) to charge on the whole[1] of the Property or apply to sell the whole of the Property …” (emphasis added)

D also gives his view that P’s undertaking is not adequate, as it is not an undertaking to court, and that she has refused to undertake to transfer the Property back to him should the appeal be successful.

14.  P on 23 June 2021 filed her 3^rd affirmation in reply.  She states her view that D’s appeal has no prospect of success.  She states that there is no good reason for any stay.  She says that the reasons relied upon by D for a stay is nothing more than mere speculation.  She highlights her undertaking, which she says at §7 that she “had already given” by inter alia the letter of 15 April 2021 from her solicitors.  She says that she has been paying the monthly mortgage repayment and does not intend to default on repayment.  She also states that she cannot think of anyone who would charge on the whole of the Property or apply to sell the whole of the Property.

15.  D on 21 July 2021 filed his 4^th affirmation in reply.  Amongst other things, he says that at §6 that:

“ Another real concern is that without the ability to gaze into the crystal ball, if I am to transfer my interest in the Property to [P], I cannot eliminate the possibility that [P] will incur debt and then other creditors of [P] may enforce debt owed by [P] against the Property …”

B.3.  Parties’ Submissions

16.  Mr Wong’s submissions in summary are that:

(a)  There are strong grounds of appeal;

(b)  Without a stay, D’s appeal would be rendered nugatory; and

(c)  A stay will cause no prejudice to P.

17.  Mr Lam on the other hand submits that the Stay Summons is misconceived, in that:

(a)  The appeal has no reasonable prospect of success; and

(b)  In any event, even if the appeal is arguable, D has failed to show any good reason for the grant of any stay.

B.4.  Discussion

18.  I consider first of all the strength of D’s appeal.

19.  For the following reasons, I do not accept Mr Wong’s submission that D has strong grounds of appeal.

20.  In his Notice of Appeal, D sets out 5 grounds of appeal, which I have considered for the purpose of forming a preliminary view on their merits.

21.  I agree with Mr Lam that the first 4 grounds in essence all seek to challenge the learned Deputy Judge’s finding of facts, including his evaluation of the credibility of the witnesses and the evidence (failure to consider D’s evidence (Ground 1), failure to assess the evidence objectively (Ground 2), failure to give adequate reasons (Ground 3), and placing excessive weight on what happened on 8 January 2018 (Ground 4)).

22.  I have considered China Gold Finance Ltd v CIL Holdings Ltd & Ors (unrep, CACV 11/2015, 27 November 2015), per Lam VP (as the Permanent Judge then was) at §§14‑16 as to the types of grounds which warrant intervention by appellate courts.  As the Court of Appeal has recently reiterated in Wong Lei Ah v Lee Jim Wing [2020] HKCA 963 at §27:

“ It is well established law that the appellate court will rarely interfere with a trial judge’s assessment of the credibility and evidence of witnesses and his findings of primary facts … This is because the trial judge has the advantage of seeing the witnesses and hearing the evidence directly, thus having a greater familiarity with the evidence and a deeper insight in reaching conclusions of fact than an appeal court whose perception may be narrowed or even distorted by the focused challenge to particular parts of the evidence … Further, the re‑opening of all questions of fact for redetermination on appeal would expose parties to great cost and divert judicial resources … The appellate court will only interfere where the trial judge is shown to be plainly wrong, such as where the finding of fact is one (i) which there is no evidence to support, (ii) which is based on a misunderstanding of the evidence, or (iii) which no reasonable judge could have reached …”

23.  I have considered the Judgment in the light of those 4 grounds of appeal.  I remind myself that it is both impracticable and undesirable to go deeply into the merits.  On a broad‑brush approach, the preliminary view I have reached is that D has not been able to show that the learned Deputy Judge is plainly wrong in the sense as explained in Wong Lei Ah.  Those grounds are at best arguable.

24.  D’s Ground 5 complains about the learned Deputy Judge’s rejection of D’s argument that P should be barred from equitable relief as she did not come to the court with clean hands.  Mr Wong submits that the acceptance of P’s case implies that the purpose of the arrangement of naming D as a paper owner is to mislead the mortgagee bank into thinking that both P and D were beneficial owners and hence facilitate the obtaining of the mortgage loan.

25.  At §71 of the Judgment, the learned Deputy Judge states that:

“ The Defendant has raised a point about the Plaintiff not having ‘clean hands’ in praying for equitable relief. The point is totally without merit and I will not deal with it further.”

26.  In his written submissions, Mr Lam draws this Court’s attention to a number of authorities cited in P’s closing submissions made before the learned Deputy Judge:

(a)  Tinsley v Milligan [1994] 1 A.C. 340, for the proposition that a plaintiff is entitled to recover it, he is not forced to plead or rely on the illegality; and

(b)  Lai Sau King v Lam Charp Fat (unrep, CACV 117/1995, 25 October 1995), wherein Litton VP described the following proposition as being startling and not supported by any authority:

“ That, in an action between a plaintiff and a defendant, the plaintiff’s remedy in equity could be affected by the plaintiff’s own conduct vis-à-vis third parties …”

27.  Bearing in mind those authorities, that P is not relying on the illegality, and that D’s clean hands complaint is based on P’s alleged conduct against a third party mortgagee bank, I am of the view that Ground 5 is at best only arguable.

28.  Given my view above that D’s appeal is at best arguable, it is incumbent upon D to show circumstances justifying why P should be deprived of the fruit of the Judgment.

29.  In this regard, I accept Mr Lam’s submissions, on the basis of the evidence before this Court, that D’s case for a stay is based on mere speculation.  I have set out the relevant evidence above.  D says that P “may dispose” of the Property.  The use of the word “may” is conspicuous.  D has no fact to support that concern.  Quite the contrary, P has given an undertaking as recorded in the letter of 15 April 2021 that she would not.  D then says that P’s creditors “if any” may enforce.  Again, the qualification of “if any” shows that D does not even know whether P has other creditors. P has stated that she cannot think of anyone who would charge on the whole of the Property or apply to sell the whole of the Property.  D then says at §6 of his 4^th affirmation that he cannot predict the future and cannot “eliminate the possibility that [P] will incur debt and then other creditors of [P] may enforce”.  That assertion does not assist D at all. If anything, it demonstrates the speculative nature of D’s case for a stay.

30.  I further accept Mr Lam’s submission that any pre‑appeal transfer by P would be reversed by the Court of Appeal should D’s appeal be successful, so that there is no need for D to commence a fresh action as D alleges is necessary.

31.  Mr Wong submits that a stay will not prejudice P.  In this regard, I accept Mr Lam’s submission that the starting point ought to be that P should not be deprived of the fruit of her success unless justification for a stay has been demonstrated.

B.5.  Disposition of the Stay Summons

32.  For the reasons set out above, I dismiss the Stay Summons.

C.  The Execution Summons

33.  On the evidence before me, I see no reason why P should be deprived of the fruit of her success before the learned Deputy Judge.  It is trite that an appeal does not per se act as a stay.  For the reasons set out above, I have dismissed the Stay Summons.  D otherwise has refused to effect the transfer which the learned Deputy Judge has ordered him to do. The conditions stipulated under section 25A of the High Court Ordinance (Cap 4) have been satisfied.  In the circumstances, an order in terms of the Execution Summons is justified and warranted.  I make an order in terms of the Execution Summons.

D.  Interim stay? 

34.  At §34 of his written submissions, Mr Wong states that in the event of this Court dismissing the Stay Summons and allowing the Execution Summons, it is D’s intention to make an application for a stay before the Court of Appeal. D undertakes to do so within 5 days, and seeks an interim stay of the Judgment and the Order made under the Execution Summons.

35.  For the same reasons set out above, and in the light of the undertaking which P states she has given, I agree with Mr Lam that there is no basis for that interim stay, which I refuse.

E.  Costs

36.  I make a costs order nisi that P shall have the costs of both the Stay Summons and the Execution Summons, with certificate for counsel, to be summarily assessed.