XCHRX AMPITTIA INC. v. B-TECH (HOLDINGS) LTD. AND OTHERS

HCA 338/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 338 OF 2001

____________

_____________

D E C I S I O N

_____________

1. This is an application by the 4th Defendant, Thing On Enterprises Limited, made under the provision of liberty to apply generally in an order I made on 16 February 2001. The terms of the order that the 4th Defendant is seeking from me today are as follows:

"Unless the Plaintiff do provide further fortification of its undertaking as to damages in respect of the 4th Defendant by payment into Court a sum of HK$30 million within 14 days from the date hereof, the stay of the Order discharging paragraph 1(b) of the Injunction Order granted by Pang J on 3 February 2001 as varied by Suffiad J on 9 February 2001 made herein on 16 February 2001 by Deputy Judge S Kwan be removed."

2. The background of the matters leading to the application may be given as follows. On 3 February 2001 an injunction was granted by Pang J on the ex parte application of the Plaintiff, Ampittia Inc. It was hybrid in nature. It contained a Mareva injunction restraining the 1st Defendant from disposing of or dealing with assets in Hong Kong or elsewhere, up to the value of HK$16 million. It also contained an interim injunction restraining the 1st to 3rd Defendants from selling the shares of the 3rd Defendant (which is registered owner of a property in Shanghai, hereinafter referred to as "the Shanghai Property") to the 4th Defendant pursuant to an agreement dated 31 January 2001 ("the Agreement") other than at its market value and/or for not less than HK$110 million. For the relationship of the 1st to 3rd Defendants, the dealings between the parties and the Plaintiff's claims against the Defendants, I refer to my Reasons for decision on 21 February 2001. The Plaintiff had given the usual undertaking as to damages to the Court when the injunction was granted.

3. On the return date of the Plaintiff's summons for continuation of the injunction on 9 February 2001, Suffiad J ordered that the injunction be continued until the determination of the Defendants' application to discharge the injunction subject to the variations he made. He also ordered the Plaintiff to provide fortification of its undertaking as to damages by making a payment into court of HK$2 million before 16 February 2001. I heard the application for discharge by the Defendants on 16 February 2001. The Defendants were separately represented. The 1st to 3rd Defendants were represented by one team, the 4th Defendant was represented by another team. The 4th Defendant's application was for discharge of the injunction, alternatively for further fortification of the Plaintiff's undertaking as to damages on the premise that the 4th Defendant might have lost an opportunity to acquire the Shanghai Property at a bargain price from the 1st to 3rd Defendants.

4. At the conclusion of the hearing on 16 February 2001 which was a Friday, I gave decision immediately as completion of the Agreement was to take place on 19 February which was a Monday. I ordered that the injunction granted on 3 February as varied on 9 February 2001 be discharged as against all the Defendants. I did not make any order on the 4th Defendant's application for further fortification which was made in the alternative, although in the course of the submission of leading counsel for the 4th Defendant, I did indicate that I was not receptive to the application for further fortification of the Plaintiff's undertaking as to damages as there was no suggestion on the available evidence that the transaction with the 4th Defendant would fall through. If the injunction was to remain, the only risk that appeared to me at that time was that the transaction might be delayed. In that event, the 4th Defendant should be adequately protected by the security already provided in the sum of HK$2 million.

5. After my decision to discharge the injunction was given, Mr Charles Sussex SC, who appeared for the Plaintiff, sought a stay of my order for discharge pending appeal. He agreed to give an undertaking to the court to file a Notice of Appeal by 4:00 pm on 19 February. Leading counsel for the 1st to 3rd Defendants and leading counsel for the 4th Defendant appeared content with that undertaking and neither had opposed Mr Sussex's application. Accordingly, I granted a stay of my order for discharge pending determination of the Plaintiff's appeal on the undertaking of the Plaintiff's solicitors to file a Notice of Appeal by 4:00 pm on 19 February 2001.

6. While this hearing was going on, another party China United Holdings Limited ("China United"), which is a significant minority shareholder of the 1st Defendant, was waiting outside the court room to apply for a similar injunction against the Defendants if the Defendants should have the injunction discharged. I had arranged to hear China United's application on 17 February. China United's application did not proceed as scheduled because after the conclusion of the hearing on 16 February, all four Defendants gave an undertaking to the solicitors for China United not to complete the sale and purchase before 4:00 pm on 21 February 2001.

7. On 19 February 2001, the Plaintiff filed a Notice of Appeal. I understand that the parties have agreed on the length of hearing of the appeal which was for one day but the hearing date of the appeal has not yet been fixed.

8. On 19 February 2001, the solicitors who acted for the 1st and 3rd Defendants in the sale and purchase wrote to the 4th Defendant's solicitors agreeing to postpone the completion date to 21 February 2001 whilst keeping the terms and conditions of the Agreement unchanged. The solicitors for the vendor concluded their letter by stating that they considered that both parties should co-operate to speed up the process of the necessary practical matters for completion including but not limited to the three matters stated in their letter regarding insurance, disclosure and title deeds.

9. Also on 19 February 2001 China United served a writ against all four Defendants and others in High Court Action No. 762 of 2001, seeking inter alia a declaration that the Agreement was unlawful and an order setting aside the Agreement. On 20 February 2001, China United issued an inter partes summons seeking, inter alia, an injunction to restrain the 1st to 4th Defendants from completion of the Agreement. On the same day, the solicitors for the 1st and 3rd Defendants in the sale and purchase wrote to the solicitors to the 4th Defendant asking the latter to address the practical issues mentioned in their letter of the previous day as a matter of urgency.

10. On 22 February 2001, the 1st to 3rd Defendants made an "abrupt change" in their position regarding the completion of the sale and purchase. On that day, a letter was sent by the solicitors who acted for these Defendants in the litigation (but not in the sale and purchase) to the solicitors for the 4th Defendant in which they alleged that the Agreement was frustrated by reason of these matters: (1) on 16 February 2001, the Court had ordered a stay of the order for discharge of the injunction pending the determination of the Plaintiff's appeal; (2) on 12 February 2001, the 1st Defendant was served with a winding-up petition by another creditor; and (3) China United had threatened to seek a further injunction order restraining the sale of the Shanghai Property in High Court Action No. 762 of 2001. It was contended that in view of these matters the completion of the sale and purchase could not take place as envisaged and as time was of the essence of the Agreement, the recent events had "totally destroyed the basic foundation of the transaction and frustrated the essence of the sale". The solicitors for the 1st to 3rd Defendants offered to return the deposit paid under the Agreement to the 4th Defendant.

11. The 4th Defendant refuted the allegation that the Agreement was frustrated in their reply to the solicitors of the 1st to 3rd Defendants by a letter dated 26 February 2001. The 4th Defendant's solicitors concluded by stating that the vendors had evinced an intention they no longer wished to be bound by the Agreement and that the solicitors had instructions to commence proceedings for specific performance of Agreement and other relief.

12. The solicitors for the 4th Defendant also wrote to the Plaintiff's solicitors on 27 February 2001 enclosing a copy of the letter from the solicitors for the 1st to 3rd Defendants dated 22 February 2001 and seeking further fortification of the Plaintiff's undertaking as to damages in the sum of not less than HK$30 million in view of the allegation of frustration made by the 1st to 3rd Defendants.

13. On 28 February 2001, the 1st to 3rd Defendants' solicitors wrote to the 4th Defendant's solicitors repeating the assertion of frustration having regard to "significant intervening events" that had occurred since 16 February 2001. On the same day, the 1st Defendant made a public announcement stating that the Agreement had been frustrated.

14. A writ was issued by the 4th Defendant against the 1st to 3rd Defendants on 2 March 2001 in High Court Action No. 987 of 2001 seeking specific performance of the Agreement. On the same day, the 4th Defendant wrote to the Plaintiff and the 1st to 3rd Defendants giving notice that they intended to apply for further fortification of the Plaintiff's undertaking as to damages. A reply was received from the 1st to 3rd Defendants on 5 March 2001 stating that they supported the 4th Defendant's application even though there was no community of interest among these Defendants. Also on 5 March 2001, the summons of China United for an interlocutory injunction was adjourned by Yeung J on the undertaking given by the 1st to 3rd Defendants that they would not complete the Agreement without first giving five days' notice in writing to the solicitors for China United. The undertaking was given without prejudice to the contention that the Agreement had been frustrated and it was to lapse automatically upon the expiry of three months from the date it was given being 1 March 2001.

15. In my view, 4th Defendant's application today is in effect an application to vary the condition I imposed when I granted a stay pending appeal on 16 February 2001. I reject the submission of Mr Paul Wu who appeared for the 4th Defendant that he is only seeking further fortification, not a variation of the order made on 16 February regarding stay pending appeal.

16. As stated earlier, the only condition I had imposed in granting a stay was to require the Plaintiff's solicitors to give an undertaking to file a Notice of Appeal by 4:00 pm on 19 February 2001. The 4th Defendant now wishes a further condition to be imposed, namely that a payment into court of HK$30 million is to be made, failing which the stay of the discharge of the injunction, at least that part of the injunction restraining the completion of the Agreement as against the 4th Defendant, is to be removed.

17. This I do not think I have power to do. The order imposing the stay was perfected on 20 February 2001. I accept the submissions of Mr Sussex that once an order has been perfected, a judge is functus officio and has no power to reconsider or vary his decision (In re Suffield and Watts, ex parte Brown (1888) 20 QBD 693 per Fry LJ at 697 and R v. Cripps, ex parte Muldoon [1984] QB 686 per Donaldson MR at 695). There are examples of the application of this principle in the context of stay pending appeal in the following cases. In J Lucas v. Gaedor [1978] RPC 389 at 391, it was stated by Sir David Cairns that "where a stay has been granted the only way of getting rid of it is by appeal" and not by an original motion. In Brentwood Wig Manufactory Limited (No. 2) v. Richard F Poncher & Anr [1966] HKLR 643, it was held by Blair Kerr J that the court below had no jurisdiction to vary the order for a stay pending appeal or to entertain any further application for a stay. In VGM Holdings Limited [1941] 3 All ER 417, it was held by Morton J that once the court had made an order regarding a stay of execution pending an appeal and that order had been passed and entered, the court is functus officio and can make no variation itself. Any variation which may be made must be made by a court of appellate jurisdiction.

18. For the above reasons, as I am functus officio, I must refuse the 4th Defendant's application. As the 4th Defendant may appeal to the Court of Appeal and the Court of Appeal would exercise its discretion on a very different basis because of the events that had occurred after the hearing on 16 February 2001, I do not propose to go into the question how I would have dealt with the 4th Defendant's application if I had not been functus officio.

19. I will hear the parties on costs.