LI MINGREN v. QUESTEX DEVELOPMENT INC.AND ANOTHER

HCA 2081/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2081 OF 2013

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1.  This is an application to stay execution of the judgment in favour of the plaintiff handed down on 13 June 2014 following a substantive hearing on 27 May 2014.  The other dates of hearing were extremely short as adjournments were sought mainly on behalf of the 1^st defendant though I decided to grant one adjournment to enable the plaintiff to deal with a suggestion, it appeared to me to be no more than that, that, in effect, he was not a party to the original loan transaction but someone by the name of Li Mingzhong was as his name and signature appeared on a number of material documents. I deal with this later.

2.  In due course on 9 June 2014, Mr Cooney SC for the 1^st defendant sought leave to adduce further affidavit and exhibits but I declined to allow him to do so in view of the lateness of their production and that they added nothing to the defence put forward.  However I read them and treated them de bene esse for the purposes of the argument on that day.  I have already dealt with the position in my original judgment.

3.  Mr Ng, for the 1^st defendant, produced two more affirmations, again at the last minute. , but I refused leave to adduce them, I did not read them, and I made it clear that if he wanted leave to adduce them in evidence, he would have to seek leave from the Court of Appeal in the context of any substantive appeal against my judgment.

4.  In fact, although this is an application for a stay of execution of judgment, that execution had already taken place because the 2^nd defendant, having undertaken to comply with and abide by the court’s decision, has transferred the convertible bonds to the plaintiff on 16 June 2014.

5.  Notwithstanding this Mr Ng seeks an order preventing, effectively injuncting the plaintiff from taking further steps by converting the bonds into shares and then selling them.  He informed me that the bonds do not mature until 2016 and that in any event trading in the shares into which they can be converted, has been suspended since July 2013, now almost a year ago.  He added that the conversion into shares could in fact take place now and the 1^st defendant feared that despite the suspension in trading on the Stock Exchange, the plaintiff may try to sell them outside the official market.  This, he argues, would thus be to the prejudice of the 1^st defendant if it succeeded on appeal.  He then advanced the main planks of such an appeal from what are described as draft grounds of appeal.

6.  Those grounds, in essence, challenge my findings in favour of the plaintiff on the documents in respect of the fact of the loan and the formulation of the documents to record it.  The plaintiff used his brother Li Mingz hong as his agent to take certain fundamental steps on his behalf.  It was clear on the documents that Li Mingzhong was acting as the plaintiff’s agent. Madam Zhu was acting as Zhao Tuanjie’s agent in that her account was designated by him for the receipt of the various tranches of the loan advanced by or on behalf of the plaintiff.  Receipts for the payments were signed by Zhao Tuanjie with his fingerprint alongside.

7.  The defence pleaded denies any loan was made (despite the fact that documents relating to the charge on the convertible bonds were signed and handed over to the plaintiff as the security agreed between the parties.) The plaintiff is identified on documents as the beneficiary of the charge and the loan—ie in simple terminology the 1^st defendant owed the money to the plaintiff.

8.  Mr Ng said that because the Statement of Claim did not plead Li Mingzhong as the plaintiff’s agent and Madam Zhu as the agent of Zhao Tuanjie, the proceedings are defective.  Another suggestion was that Madam Zhu was the plaintiff’s agent.  I regret that I just do not understand the basis for this particular allegation.  However overriding all this is that there is no evidence or any form of statement from Zhao Tuanjie which supports that defence of non‑payment of the loan.  There has been an absolute vacuum of silence which the 1^st defendant through someone called Wang Weinan has sought to fill by alleging that Mr Zhao told him, amongst other things, that he never received any of the loan.  That is valueless.

9.  How a defence could be responsibly drafted and served as a serious document without having formal instructions from Mr Zhao leaves one somewhat bemused, but that must realistically be the actual situation.

10.  Reliance is also placed on what I described as the “rabbit out of the hat”—an opinion from purportedly an expert on PRC law. I have dealt with this.  It concerns the interest provisions in the documents subject to PRC law.  It does not concern the charge document and in any event the defence is that there was no loan!

11.  The last throw of the dice consists of the two documents produced today (20 June).  Leave to adduce them is refused.

12.  I had entertained the thought of ordering payment into court of HK$20 million, the sum secured by the charge which is only half the original loan, on the basis that this would be a real security for the plaintiff who might have to stay his hand until the shares were traded again or dabble in a grey market with significant loss.  Mr Ho argued against this on the basis that since the plaintiff had the judgment and now the security he should be free to take his chance.  I concede the force of this.  I should not try and regulate activity in relation to the convertible bonds and any resulting shares.  I have found that there is no evidence of a defence, significant time has elapsed without any evidence to support a pleading, all the existing documentation is one way, a number of documents from the 1^st defendant are dubious in nature, the defence is in fact a sham, and the exercise conducted by the 1^st defendant is a delaying tactic.

13.  The application is therefore dismissed with costs.  I am minded to order indemnity costs and will do so, unless the 1^st defendant applies to argue against this.

14.  In normal circumstances a refusal of an application for a stay of execution pending a possible appeal would not call for a judgment as detailed as this but the grounds of appeal do not indicate an understanding of my judgment and findings.