HONG DA DEVELOPMENT & INVESTMENT HOLDING CO LTD v. CHINA AOYUAN PROPERTY GROUP LTD AND OTHERS

HCA1377/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1377 OF 2011

____________________

BETWEEN

____________________

_______________

J U D G M E N T

_______________

1.  On 19 December 2011 I gave judgment refusing to grant an interlocutory injunction in favour of the Plaintiff, Hong Da. There is now before me an application by Hong Da for leave to appeal to the Court of Appeal, or alternatively, for a direction that it is entitled as of right to appeal.

2.  The first point taken by Mr Alan Leong on behalf of Hong Da is that leave is not required.  It is therefore necessary to examine the legislative provisions.  Section 14AA(1) of the High Court Ordinance provides:

“Except as provided by rules of court, no appeal lies to the Court of Appeal from an interlocutory judgment or order of the Court of First Instance in any civil cause or matter unless leave to appeal has been granted by the Court of First Instance or the Court of Appeal.”

Subsection (2) provides:

“Rules of court may specify a judgment or order of any prescribed description to which subsection (1) does not apply and accordingly an appeal lies as of right from the judgment or order.”

These rules of court are set out in Order 59, Rule 21.  Rule 21(1) sets out certain judgments and orders from which an appeal lies as of right.  Where it applies, leave to appeal is not required.  Rule 21(1)(a) refers to a judgment or order determining in a summary way the substantive rights of a party to an action. Rule 21(2) then sets out, without prejudice to the generality of Rule 21(1)(a), judgments and orders that determine in a summary way the substantive rights of a party.  Rule 21(2) does not set out an exhaustive list.  Rule 21(3) provides that:

“A direction as to whether a judgment or order is one that is referred to in paragraph (1)(a) may be sought from the judge who made or will make the judgment or order.”

3.  Pursuant to that sub-rule, the Plaintiff seeks a direction from me as to whether the judgment is within Rule 21(1)(a). 

4.  The most authoritative decision for present purposes is the decision of the Court of Final Appeal in Shell Hong Kong Limited v Yeung Wai Lam Kiu Yip Company Limited (2003) 6 HKCFAR 222.  The issue arose in Shell in the context of the jurisdiction of the Court of Appeal comprising two Justices of Appeal to hear an appeal pursuant to section 34B(4)(a) of the High Court Ordinance.  If the judgment given below was an interlocutory judgment, the Court of Appeal, comprising two judges, had jurisdiction to entertain an appeal from that judgment.  On the other hand, if it was a final judgment, then the Court of Appeal so constituted had no jurisdiction and its judgment was a nullity.  The judge below had determined certain questions of law under Order 14A in favour of the Plaintiff.  At paragraph 31 of his judgment, Mr Justice Chan said as follows:

“In my view, what one can extract from these cases is that where an order or judgment given in an application does not finally dispose of the whole action but only an issue in the action, it is necessary to consider the purpose and substance of the application, the issue dealt with and determined by the court and the effect of a determination of this issue on the rights of the parties, the further conduct of the proceeding and the final disposal of the whole action. A broad commonsense approach should be adopted. If the issue dealt with and determined by the court is “a substantive part of the final trial” (Holmes v Bangladesh Biman Corp[1988] 2 Lloyd’s Rep 120 at p.124); or “a crucial issue” in the case or a point “that goes to the root of the case” (First Pacific Bank Limited v Robert H P Fung[1990] 1 HKLR 527 at p.532), or “a dominant feature of the case” (KorsoFinance Establishment Anstaltv Wedge& Others (unrep., 15 February 1994) at p.7), then the order or judgment, even if it does not finally dispose of the whole action, should nevertheless be regarded as a final judgment.”

5.  In the recent decision of the Court of Appeal in Lehman and Company Management Limited v Effiscient Limited [2011] 5 HKLRD 668, at paragraph 11 Madam Justice Chu, giving the judgment of the Court of Appeal, held that:

“In ascertaining whether the judgment or order is interlocutory or final, the proper approach is that set out in Shell Hong Kong Limited v Yeung Wai Man Kiu Yip Co Ltd (see above). If the judgment or order does not dispose of the whole action, it is necessary to consider the purpose and substance of the application, the issue that has been determined and its effect on the rights of the parties, the further conduct of the proceeding and the final disposal of the whole action.”

6.  Clearly the judgment I gave does not dispose of the whole action.  Further, in my view, it is not a judgment that should be characterised as final, applying the approach as explained in Shell and Lehman.  The purpose of the application before me was to obtain an interlocutory injunction pending the trial of the action.  The refusal of such injunction does not dispose of the action or indeed any issues in the action.  Although in coming to my decision as I did, I considered that there were no serious issues to be tried in respect of the injunctive relief sought, that was part of my reasons for the decision.  An appeal is an appeal against the judgment and order, not against the reasons given.

7.  Indeed, as accepted by the Defendants, on the trial of the action, the trial judge would not be bound by the reasons I gave for refusing the interlocutory injunction.  In my view, the fact that a judgment disposes of an application inter alia by reference to certain views reached on the merits of the substantive issues that arise in the action does not for that reason alone means the judgment is a final judgment.

8.  The order that I made is the order refusing interlocutory injunctive relief and dismissing the application for injunction.  That does not determine Hong Da’s entitlement to any final relief.  If, as a result of the refusal of an interlocutory injunction, a plaintiff later finds it futile to seek final injunctive relief at trial, that is not because his rights have been finally or summarily determined by the judgment refusing the interlocutory injunction, but because the course of events that have occurred by the time of the trial mean that a particular remedy is no longer available.

9.  For these reasons, I direct that the judgment I gave on 19 December does not fall within Order 59, Rule 21(1)(a).

10.  The test as to whether leave to appeal, where required, should be granted is not in dispute.  In Wynn Resorts(Macau) SA v Mong Henry [2009] 5 HKC 515 at paragraph 19, Madam Justice Chu said:

“To meet the ‘reasonable prospect of success’ test, an applicant is required to show more than just an arguable case, but an appeal that has merits and ought to be heard, although he does not have to demonstrate that the appeal will probably succeed.”

11.  It has also been said that even if there are reasonable prospects of success, the court still retains a discretion as to whether or not to grant leave to appeal.  See Ho Yuen Ki Winnie v Ho Hung Sun Stanley, High Court Action No. 391 of 2006 dated 25 May 2009.

12.  In the present case, in seeking leave, Mr Leong on behalf of Hong Da says there is an inconsistency between paragraphs 47 and 48 on the one hand and paragraph 103 of my judgment on the other.  In paragraphs 47 and 48 I rejected Mr Tong’s argument on behalf of the 1st, 4th and 5th Defendants that the counter-guarantee was impliedly superseded by the confirmation letter.  In paragraph 103 I rejected Mr Leong’s argument that the terms Hong Da contends for are to be implied into the counter-guarantee.

13.  The fact that I found the creation of the confirmation letter not sufficient to compel the conclusion that the counter-guarantee was impliedly superseded is, in my view, not inconsistent with the view I have come to about the implied terms contended for by Hong Da.

14.  Mr Leong also refers to clause 6.1 of the shareholders’ agreement and the minutes of board meeting held on 2 December 2009.  In coming to my decision as I had, I have given due consideration to these matters.  Hong Da argues that clause 6.1 requires Aoyuan Property to repay the loan.  Mr Leong says paragraph 94 of my judgment shows that I misunderstood his argument as not being based on clause 6.1.  That is not correct.  I found no support for his contention in that clause or in the whole of clause 6.

15.  A new argument has been raised in paragraph 20 of the draft notice of appeal, where Hong Da argues that the counter‑guarantee may mean compensation in kind so that Hong Da can call for Aoyuan Property to transfer its shares in Century Profit as compensation.  But, in my view, this does not support the injunction applied for.

16.  Mr Leong also raises a number of arguments which I have already dealt with in my judgment of 19 December and need not be repeated here. 

17.  Moreover, while it is true that I found no serious issues to be tried in respect of injunctive relief, I also found that my discretion ought to be exercised against the grant of injunction for the reasons I gave in paragraphs 171 to 172 of the judgment. 

18.  There is no dispute that the principles applicable to an appeal against a grant or refusal of an interlocutory injunction are governed by the decision of the House of Lords in Hadmor Productions Ltd v Hamilton [1983] 1 AC 191.

19.  I have given careful consideration to the proposed grounds of appeal and Mr Leong’s exposition of them this morning.  Despite Mr Leong’s valiant effort, I am not persuaded there is sufficient prospect of success to warrant the grant of leave.

20.  Under section 14AA(4)(b) of the High Court Ordinance, one of the two alternative grounds for granting leave to appeal is that:

“There is some other reason in the interests of justice why the appeal should be heard.”

In this respect, Mr Leong says that Hong Da wishes to exercise the “right of redemption” by tendering payment of 47.31 per cent of the ICBC loan on 13 January 2012 and ask for release of Hong Da’s share mortgage, and that such offer is not conditional upon whether Hong Da obtains leave to appeal.

21.  Zhen Fu’s position, as I understand it, is that it welcomes such payment by Hong Da and that there will be no further question of enforcing the Hong Da share mortgage if Hong Da indeed makes such payment by 13 January.  If Hong Da does make the payment as indicated, the application for injunction and the intended appeal may well become academic.  However, I am unable to see why this is a reason “why the appeal should be heard”.

22.  The application for direction under Rule 21(3) is therefore disposed of in the manner I have described, and the application for leave to appeal is accordingly dismissed.  In the circumstances, there cannot be any injunction to be granted by me pending the appeal.  I am, however, prepared to grant an injunction if necessary until 20 January for Hong Da to apply for leave to appeal from the Court of Appeal or a single judge there and any consequential directions it may be advised to seek.  It may be that such injunction is unnecessary if the Defendants can give an assurance that the sale of shares will not take place within that period of time.

(Further discussion re undertaking and submissions re costs)

23.  Costs to the Defendants.

(Discussion re undertakings)

24.  There will be an undertaking from the 2nd, 3rd, 6th and 7th Defendants to the effect, essentially, that they would not dispose of the Plaintiff’s shares in Century Profit until 20 January 2012 or the earlier dismissal of an application for leave to the Court of Appeal (if any).

(Discussion re certificate for counsel)

25.  There will be certificate for two counsel.