TREASURE SPOT FINANCE COMPANY LTD v. HO KWAN CHEONG AND OTHERS

HCMP 738/2022

[2025] HKCFI 2929

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 738 OF 2022

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D E C I S I O N

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1.  Introduction

1.1  By their summons dated 13 March 2025 (“Summons”), the 1^st, 3^rd and 5^th Defendants (“Relevant Defendants”) seek a stay of execution of my judgment handed down on 5 February 2025 (“Judgment”)[1] pending appeal. By the Judgment, I acceded to the Plaintiff’s claims for money judgments against the Relevant Defendants and orders for vacant possession of various properties.

2.  The present application

2.1  The Notice of Appeal (“NOA”) of the Relevant Defendants dated 5 March 2025 advance, in gist, the following grounds:

(1)  I had erred in rejecting the existence of the Alleged Common Understanding as:

(a)  Mr Yu was well aware of D1’s financial position and thus did not have the financial resources to repay the 1^st Loan without resorting to the underlying collateral. Without the Alleged Common Understanding, the loan arrangement was nonsensical, as P could at any time from 2016 onwards reposess the Properties and take over the Development Plan from D1;

(b)  The 1^st Loan was originally in the sum of HK$6,440,000 on 14 May 2015 but had increased to a principal sum of HK$39,000,000 by 28 May 2018. D1 was already overdue in his repayments as from about December 2017. No reasonable lender in the circumstances would (i) lend so much money to D1, (ii) delay enforcement until 13 June 2022 when these proceedings were commenced and (iii) lend more to D1 after and despite D1 stated defaulting in repayments unless the Alleged Common Understanding existed;

(c)  D1’s evidence was credible and consistent with the documentary evidence;

(d)  I should have made an adverse inference against P regarding the existence of the Alleged Common Understanding, as P failed to call Mr Lau.

(2)  In respect of the Development Plan, P and Mr Lau were well aware that D1 was inexperienced in the development of properties in the New Territories. On the other hand P and Mr Lau (and their related companies such as Ratio (“Associated Companies”)) were well experienced in the development of properties in the New Territories. Therefore, P and Mr Lau had some control and involvement in the Development Plan.

(3)  P, the Associated Companies and Mr Lau all stood to benefit in respect of the Development Plan, in that (a) P would be able to continue to lend to D1 in respect of the Development Plan and earn interest, (b) the Associated Companies would obtain income and profit from the work generated under the Development Plan and (c) Mr Lau as the shareholder of these companies would obtain shareholders’ dividends from those companies.

(4)  Apart from the above, Mr Lau desired to invest in the area and D1 would inform Mr Lau of opportunities that he would otherwise not have knowledge of. The Alleged Common Understanding therefore made commercial sense as it was a win-win situation.

(5)  In the light of the above, I should have held that the Alleged Common Understanding was factually believable and existed.

2.2  In D1’s affirmation filed in support of the Summons, he contends that the Relevant Defendants’ appeal grounds are arguable, and that absent a stay, the appeal would be rendered nugatory, in particular as regards the orders for vacant possession of the various properties.

2.3  At the hearing, D1 submitted that 6^th Property is a residential property in which D3 is residing.

3.  P’s position

3.1  P has not filed any evidence to oppose the Summons and disputes D1’s contention advanced at the hearing that the 6^th Property is the residential property of D3.

3.2  P further points out that by a letter dated 20 March 2025, P had offered to consent to the Summons on the basis that HK$62 million (being part of the money judgments) is paid into court. At the hearing, D1 told me that the Relevant Defendants were only in the position to pay HK$100,000 into court.

3.3  As P’s offered term was not accepted by the Relevant Defendants, it is necessary for the present application to be determined on the established principles.

4.  The applicable principles

4.1  The applicable principles are not in dispute: Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 §§6 to 10. In summary:

(1)  Whether or not to grant a stay is within the discretion of the court. Unless the applicant can justify a stay of execution, one will not be ordered. The practice of the court is that justification can be demonstrated only if good reasons exist;

(2)  A good reason can exist in a variety of forms. It will be wrong to set out any exhaustive definition of what would constitute a good reason, but, commonly, reference is made to factors such as whether the absence (or existence) of a stay would render an appeal nugatory (thus bringing into focus the relative prejudice that may be caused to the appellant and to the respondent by a stay of execution) and the merits of the appeal;

(3)  In determining the question whether or not an appeal would be rendered nugatory, the court must first have regard to the nature of the order that is the subject matter of the appeal. If the order appealed against is a money judgment, the court will require evidence as to why the levying of execution will result in the appeal being rendered nugatory, such as, for example, an appreciable risk that the respondent to the appeal would not be able to repay in the event of a successful appeal. Sometimes, the nature of the order will by itself almost be determinative of the question. Where the relevant order is, for example, an injunction (and particularly so if it is a mandatory injunction), it may well be that, without a stay, an appeal would be rendered nugatory in the event of a successful appeal;

(4)  That said, whatever the nature of the order or judgment appealed from, the court will still require evidence as to why an appeal will be rendered nugatory in the event of a stay not being granted. The requisite quality of the evidence will, of course, depend on the nature of the order or judgment appealed against;

(5)  Where it is said that the levying of execution would result in financial ruin or serious financial consequences for the appellant, the court will require good evidence to support this contention, such as the production of accounts or other documents to justify the assertion. A bare assertion is unlikely to meet with much sympathy where more substantial evidence is available;

(6)  An appeal being rendered nugatory does not mean in all cases that without a stay, the appellant faces financial ruin or the loss of all his property. Demonstrating that the failure to grant a stay would have a serious deleterious effect is enough;

(7)  While it is impractical and even undesirable for the court in dealing with an application for a stay of execution to go deeply into the merits and strengths of an appeal, it must however form a preliminary view of these aspects;

(8)  The existence of merely an arguable appeal cannot by itself amount to sufficient reason to justify a stay. The existence of an arguable appeal (that is, one with reasonable prospects of success) is the minimum requirement before a court would even consider granting a stay. In other words, however exceptional the circumstances may be otherwise justifying a stay of execution, if the court is not convinced that there exist arguable grounds of appeal, no stay will be granted;

(9)  Conversely, however, the existence of a strong appeal or a strong likelihood that the appeal would succeed, will usually by itself enable a stay to be granted because this would constitute a good reason for a stay;

(10)  Often, the court will be faced with simply the existence of an arguable appeal. Here, it becomes necessary for the appellant to provide additional reasons as to why a stay is justified. The demonstration of an appeal being rendered nugatory is one example, albeit a common one. Where it is demonstrated that an appeal would be rendered nugatory if a stay was not granted, the court may require no more than the existence of an arguable appeal. Correspondingly, where it cannot be shown that an appeal would be rendered nugatory if a stay were not granted, the court will require, in the absence of any other factors, the appellant to demonstrate strong grounds of appeal or a strong likelihood of success;

(11)  It is important to stress that the court must not at any stage forget the position of the successful party. It is always relevant to consider the prejudice that would be caused to the successful party (the respondent in the appeal) in the event a stay is granted and if necessary, to impose conditions so as to minimize the prejudice caused to him. A fortiori, the court must consider any contention that the appeal would be rendered nugatory to him (in the event the appeal is dismissed) should a stay of execution be imposed;

(12)  Ultimately, the court embarks on a balancing exercise and uses its common sense, but bearing in mind at all times the starting point that the successful party is not to be deprived of the fruits of his success.

4.2  It is plain that the appeal grounds advanced by the Relevant Defendants are all directed at factual findings made in the Judgment. It is trite that an appellant seeking to overturn a factual finding on appeal faces a high hurdle, and an appeal on facts would only be entertained on narrow and well-defined circumstances. As the Court of Final Appeal said in Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336, in considering an appeal against a primary finding of fact, the question for the Court of Appeal is whether, even though it did not have the advantages enjoyed by the trial judge who received the evidence at first hand, it is nevertheless satisfied that his conclusion on the facts was “plainly wrong”. The Court of Appeal would intervene only if so satisfied. If not so satisfied, the Court of Appeal would defer to the trial judge’s conclusion even if in some doubt as to the correctness of the trial judge’s decision on the facts.

4.3  Further, it is not the function of an appeal to allow an unsuccessful litigant to reargue the case afresh without regard to the conduct of the case and the Court of Appeal will only disturb a judgment below if there are errors on the part of the judge below: Lei Chaohui v Registrar of Persons Tribunal & Ors, CACV 119 of 2013, 30 October 2017 §30.

5.  Analysis

5.1  In my view, the Relevant Defendants have not demonstrated the existence of an arguable appeal (that is, one with reasonable prospects of success) which is the minimum requirement before a court would even consider granting a stay. Even proceeding on the basis that the orders for vacant possession are orders of the nature that would normally render an appeal nugatory absent a stay, if the court is not convinced that there exist arguable grounds of appeal, no stay will be granted.

5.2  By way of an overarching observation, the grounds of appeal essentially seek to reargue the matters advanced at the trial. See Judgment §4.6 where I had set out the arguments advanced on behalf of the Relevant Defendants.

5.3  All of the matters identified in the appeal grounds were duly considered in the Judgment. See Judgment Sections 5 and 6. The grounds of appeal do not seek to engage my reasons for finding against the existence of the Alleged Common Understanding set out at Judgment Section 6.

5.4  As regards the appeal ground premised on adverse inference, I had expressly dealt with the issue at Judgment §§4.11 and 4.12. No error has been identified in the NOA.

6.  Conclusion

6.1  For the above reasons, I dismiss the Summons and make a costs order nisi that the Relevant Defendants do pay to P the costs of and occasioned by the Summons to be summarily assessed by paper disposal.

6.2  P is to lodge and serve its Statement of Costs within 3 days hereof and the Relevant Defendants are to lodge and serve their Statement of Objections to P’s within 3 days thereafter. Summary assessment will then be conducted on the papers.