THE WORLD FOOD FAIR LTD AND ANOTHER v. HONG KONG ISLAND DEVELOPMENT LTD

CACV398/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 398 OF 2003

(ON APPEAL FROM HCA NO. 4602 OF 2000)

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J U D G M E N T

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1. The Defendant seeks a stay of execution on the judgment given against it by the Court of Appeal on 23 March 2005 in favour of the Plaintiffs in the sum of $3,114,492 pending the hearing of the Defendant’s application for leave to appeal to the Court of Final Appeal.  No application has as yet been made for the question of interest on the said judgment to be determined.  A Notice of Motion seeking leave to appeal to the Court of Final Appeal was taken out on 18 April 2005 relying on both sections 22(1)(a) and 22(1)(b) of the Hong Kong Court of Final Appeal Ordinance, Cap.484 (“the Ordinance”).

2. The basis of the application is succinctly set out in the affidavit of Mr Dennis Leung in support of it.  In paragraph 9 of that affidavit, it is stated : -

“In view of the dubious financial position of the Plaintiffs, an immediate enforcement of the said Judgment Sum against the Defendant will prejudice the Defendant and will likely render the appeal nugatory even if the appeal is ultimately allowed by the Court of Final Appeal as the Plaintiffs may not be able to pay back the said Judgment Sum to the Defendant.”

The “dubious financial position” of the Plaintiffs consists of the following assertions : -

(1)	During the cross-examination of the managing director of the 1st Plaintiff, he admitted that the 1st Plaintiff was not carrying on any business and had no assets. This led to a successful application to the trial judge by the Defendant that security for costs be provided (a sum of $350,000 was ordered to be paid).
(2)	As far as the 2nd Plaintiff was concerned, reference was made to an action (HCMP 2468/2000) in which the 2nd Plaintiff and two subsidiary companies sought an injunction against a bank to prevent the presentation of a winding-up petition based on failure to pay on statutory demands. These demands were made by the bank following the exercise of powers of sale in relation to certain properties. Although the action against the bank was based on an alleged failure to take reasonable care in obtaining good prices for the properties, the point made by the Defendant regarding this action is that the 2nd Plaintiff had defaulted on its mortgage payments.

3. In resisting the application, Ms Jasmine Yu for the Plaintiffs makes two points : - first, that the merits of the application for leave to appeal to the Court of Final Appeal are very weak; secondly, regardless of merits, it has not been shown that a successful appeal would be rendered nugatory since the 2nd Plaintiff is very much a solvent company.

4. The principles governing applications for a stay of execution pending an appeal to the Court of Appeal are well-known.  I have been referred to Star Play Development Limited v Bess Fashion Management Company Limited, unreported, HCA 4726/2001, 7 June 2002 and Wenden Engineering Service Company Limited v Lee Shing Yue Construction Company Limited, unreported, HCCT 90/1999, 17 July 2002.  On the whole, I think the same principles apply to an application for a stay pending an application for leave to appeal to the Court of Final Appeal.  The Ordinance is silent on the powers of the Court of Appeal regarding the granting of a stay of execution in such a situation but there must be an inherent jurisdiction to do so.  This appears to me to be an important ancillary power that the Court of Appeal should possess to ensure that justice can be done where the circumstances demand.  I have said that “on the whole” the same principles apply in this situation as in a pending appeal to the Court of Appeal, but there is one important difference.  While the imposition of conditions following a refusal to grant a stay pending an appeal to the Court of Appeal (i.e. there can be execution levied) is rare (expect perhaps for a solicitor’s undertaking to repay costs : see Hong Kong Civil Procedure 2004 Vol.1 at paragraph 59/13/2), by contrast, where there is a pending appeal to the Court of Final Appeal, section 26(2) of the Ordinance states : -

“

(2)

Where the Court of Appeal or the Court directs the judgment appealed from to be carried into execution, the person in whose favour it was given shall, before the execution, enter into good and sufficient security, to the satisfaction of the Court of Appeal or the Court, as the case may be, for the due performance of such order as the Court shall make in respect of the appeal.”

In my judgment, where a stay of execution pending an application for leave to appeal to the Court of Final Appeal is refused, the Court should bear in mind the provisions of section 26(2).  I am reluctant to spell out the full extent of the Court’s discretion in any given case but I would have thought that where an application for leave to appeal to the Court of Final Appeal is reasonably arguable but a stay is nevertheless refused (for example, on the grounds that no good reason exists for the granting of a stay), the Court may consider imposing a term such as that found in section 26(2) of the Ordinance.  This appears to be logical : - if leave to appeal to the Court of Final Appeal is eventually granted, the provisions of section 26(2) will apply anyway.  On the other hand, where the Court takes the view that the application for leave to appeal to the Court of Final Appeal will most likely fail, the imposition of a term such as that found in section 26(2) may not be justified.

5. In the present case, the application for a stay should be dismissed unconditionally for the following reasons : -

(1)	The affidavit of the Plaintiffs’ development manager exhibits the most recent available audited financial statements from the 2nd Plaintiff (for the year ending 31 March 2004).  This shows net assets of over $60 million, albeit the auditors’ report states that the auditors have not had sight of the company’s consolidated financial statements nor has the company accounted for its share of the profits from associated companies. Further, an explanation is given in relation to HCMP 2468/2000.  There is also exhibited a letter dated 15 October 2004 from Hang Seng Bank extending to the 2nd Plaintiff fairly large banking facilities of up to $11 million.  I was at first a little apprehensive of the fact that the 1st Plaintiff, if it took the benefit of any execution, certainly does not appear to be a company that could repay the judgment sum, but I was informed by Ms Yu that in the event of any execution and in the event that a court so orders, it will be the 2nd Plaintiff who would be liable to return the money obtained by execution. An undertaking is offered in these terms. Notwithstanding some queries over the 2nd Plaintiff’s accounts, I am far from convinced that the Defendant has discharged the burden of showing that unless a stay of execution were granted, an appeal would be rendered nugatory. It is for the party seeking a stay to make out a positive case to justify the indulgence (and an indulgence it is since a successful party should not lightly be deprived of the fruits of his success), not for the successful party to justify why a stay should not be granted.
(2)	There is another reason. The amount at stake in any potential appeal to the Court of Final Appeal ($3,114,492 with interest and costs) being an unliquidated sum, leave to appeal to the Court of Final Appeal will not be possible under section 22(1)(a) of the Ordinance (the so-called ‘automatic leave’ provision) : see Chao Keh Lung v Don Xia (2004) 7 HKCFAR 260. The apparent merits of the intended appeal to the Court of Final Appeal will thus have to be considered. In my judgment, the Notice of Motion seeking leave to appeal to the Court of Final Appeal does not, apart from one question, identify any questions of great general or public importance. They really only raise questions peculiar to the facts of the case. The only question that might be said to be of any great general or public importance is the argument raised by the Defendant in the appeal that the doctrine of part performance referred to in section 3(2) of the Conveyancing and Property Ordinance, Cap.219 has no application where the Plaintiffs only claim damages rather than specific performance.  However important that question might appear to be, it is one where the Defendant’s contentions have little or no merit. Leave will only be given under section 22(1)(b) of the Ordinance where the question is one of great general or public importance and is reasonably arguable. Finally, in this context, out of completeness, I should add that the “otherwise” ground in section 22(1)(b) is also not engaged.  Nothing exceptional has been demonstrated by the Defendant : cf Chao Keh Lung at 263 (paragraph 9).

6. Of course, my assessment of the merits of the Defendant’s application for leave to appeal to the Court of Final Appeal is but a preliminary one at this stage based on the materials before me in this application.  I have only heard some of the arguments in relation to this application.  No doubt, there will be more when the substantive application is heard by a full Court of Appeal on 15 November 2005.

7. For the above reasons, the application is dismissed upon the Plaintiffs’ undertaking through their counsel that in the event : -

(a)	execution is levied in respect of the judgment sum ordered by the Court of Appeal or any part thereof; and
(b)	any sum for which execution has been levied is ordered by the court to be repaid to the Defendant, the 2nd Plaintiff will be liable to repay any such sum.