CHOW HOW YEEN MARGARET AND OTHERS v. WEX PHARMACEUTICALS INC. AND ANOTHER

HCA 537/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 537 OF 2013

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D E C I S I O N

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1.  By a judgment dated 13 January 2017, this court found that fraudulent misrepresentation and deliberate concealment of the fraud were established against the defendants and ordered damages against them. The defendants lodged an appeal in CACV 33/2017. This is the defendants’ application for stay pending appeal. The grounds are that the appeal would be rendered nugatory if the defendants are to pay the damages to the plaintiffs now.

Legal principles

2.  The legal principles are well established.  An appeal does not operate as a stay of execution: Order 59, rule 13(1)(a).

3.  The court is reluctant to deprive a successful litigant of the fruits of the litigation pending the appeal.  The applicant has to demonstrate good reasons for a stay of execution.  The court must form a preliminary view of the merits or strength of the appeal.  The existence of merely arguable grounds of appeal cannot by itself amount to sufficient reason to justify a stay; it is the minimum requirement before a court would even begin to consider granting a stay.  The applicant has to provide additional reasons why a stay is justified, eg that the appeal would be rendered nugatory.  If there are not even arguable grounds of appeal, no stay of execution will be granted.  See Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84, §§7-10, Ma J (as he then was).

Application of the legal principles

4.  Mr Carolan submits that the plaintiffs’ claims could only have succeeded in respect of 40,000 shares purchased based on the pleaded case, and there was absence of an essential ingredient to their claim in deceit.  The grounds of appeal were numerous but can be classified as follows:

(i) That the court erred in finding that it was the making of the Share Agreement which resulted in the investments and not the CP Representation which had only induced the Distribution Agreements.

(ii) That the court erred in finding that being induced to enter into the Distribution Agreements and Share Agreement would cause the plaintiffs to buy the number of shares it did (Notice of Appeal §§(1)(a), (2), (6), (8)(a)-(d), (f)-(j) and (9)(a)-(c)).

(iii) That the court erred in finding that the GlobalMed Representation was a fraudulent misrepresentation (Notice of Appeal §(10)).

(iv) That the plaintiffs’ pleadings were inadequate in that they only pleaded that the purchase of shares was made in consideration of the “licence free grant of the Peru distribution rights”. In other words, the plaintiffs had failed to plead a case of reliance on the CP Representation (Notice of Appeal §§(4), (5), (6), (8)(e) and (9)(d)) (the “Pleading Point”).

(v) The court erred in ordering the amount of loss and damage it did (Notice of Appeal §(7)) (the “Damages Point”).

5.  The first 3 Points are essentially appeals against findings of facts.  The affirmation of Mr Benjamin Lau, solicitor of Baker & Mckenzie for the defendants, does not even say that the grounds are arguable.  Nowhere is it even alleged that this court was “plainly wrong” to justify interference by the Court of Appeal: Ting Kwok Keung v Tam Dick Yuen & ors (2002) 5 HKCFAR 336, §42.

6.  The Pleading Point likewise has no merits.  Mr Remedios and Ms Yvonne Ngai have extracted §§21, 22, 25, 31, 34, 38, 39 and 48 of the re-re-amended statement of claim (“SOC”) in their skeleton submission.  Those paragraphs, amongst others, pleaded clearly that although §21 of the SOC pleaded that the shares were purchased pursuant to the Share Agreement, the inducement came from the misrepresentation as to the existence and ownership of the China Patent. Without the misrepresentation, the plaintiffs would not have subscribed to the private placements. 

7.  At the trial, Mr Carolan have raised various issues about the failure of the plaintiffs in pleading the essential elements of the cause of action in fraudulent misrepresentation.  In §40 of the judgment, this court held that Mr Carolan’s submission that the plaintiffs have not pleaded material issues was wrong throughout.  He runs similar arguments now, again ignoring or misreading, amongst others, the pleas in the preceding paragraph. 

8.  With regard to the Damages Point, the error in the judgment came about because of the wrong reference by the court to a prior schedule of agreed damages submitted by the parties at the trial.  The figures have since been amended by consent.  Mr Carolan further submits that the plaintiffs’ claim should be limited to the value of 40,000 shares.  This may be a point of law, but having regard to my findings on facts, I find it to be nothing more than being arguable.

9.  My preliminary view is that there is only one arguable ground of appeal with little prospect of success.

Additional reasons for stay

10.  The defendants say that if they are successful in the appeal, there is a risk that the plaintiffs would fail to return the amounts of the judgment sum and interests to the defendants. 

11.  Clearly the defendants have no case for a stay against P1 (Ms Chow). She has landed properties in Hong Kong worth more than the judgment debt.  At the end of his submission, Mr Carolan limited his application to P2 and P3 only.

12.  With regard to P2 and P3, the defendants say that:

(a) P2 and P3 are corporate vehicles of Ms Chow with no substantial assets of their own.  Ms Chow had a record in prior proceedings (“the Winland proceedings”) of allowing another entity (Winland) to go into liquidation leaving the defendants’ taxed costs unpaid (“ground 1”);

(b) Ms Chow has offered no personal undertaking to return judgment sums paid to P2 or P3 if the defendants were to succeed in the appeal (“the undertaking”) (“ground 2”).

13.  In respect of ground 1, Ms Chow has provided evidence to show that each of P2 or P3 is not impecunious as each beneficially owns landed properties in Hong Kong worth much more than the judgment sum due to each of them.  The defendants have no evidence in rebuttal. 

14.  Further, the plaintiffs in the present case were not parties to the Winland proceedings.  The defendants here cannot show that Winland could but evaded the judgment debt, as opposed to being impecunious and hence unable to pay the judgment debt.

15.  Ground 1 fails.

16.  Ground 2 is a misleading half-truth.  The defendants offered to pay the judgment debts into court pending the appeal in exchange for the undertaking from Ms Chow.  Ms Chow readily agreed to give the undertaking subject to the defendants informing her of the terms of the undertaking.  Had this been pursued, the present hearing could have been avoided. However, the defendants backed out.   There was no sign of the defendants having the means to make a payment-in.  They were simply playing delaying tactics 14 years after they first deceived Ms Chow.  Ground 2 fails.

Conclusion

17.  This is but the defendants’ desperate try-on to avoid paying the judgment debt pending appeal.  On a nisi basis, I dismiss the application with indemnity costs to the plaintiffs, to be taxed if not agreed. There shall be certificates for Mr Remedios and Ms Ngai.

18.  I thank counsel for their assistance.