XCHRX NTERNATIONAL MEGA CAR SHOW LTD. v. INTERNATIONAL TRADEMARK CO. LTD.

HCA 5934/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5934 OF 2000

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D E C I S I O N

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1. There are two applications before me. The first is the Plaintiff's summons taken out on 16 November 2000 under Order 59 rule 13 of the Rules of the High Court seeking a stay of execution of my order dated 1 November 2000 pending the determination of the Plaintiff's appeal. The second application is the Defendant's summons filed on 24 November 2000 under Order 29 rules 10 and 11 seeking interim payment of HK$4 million or such other sum as the Court thinks fit on account of the damages being mesne profits in respect of the counterclaim on the ground that the Defendant has by my order made on 1 November 2000 obtained interlocutory judgment for damages to be assessed.

2. For the background and the dispute between the parties, I refer to my decision handed down on 1 November 2000. In the order I made with that decision, I struck out the Plaintiff's claim and entered final and interlocutory judgment on the counterclaim in these terms:

(1) the Plaintiff is to deliver up vacant possession to the Defendant of these premises in the Hong Kong International Trade and Exhibition Centre ("HITEC") being the portion of Basement 1 ("B1"), Units 14 and 16 of the ground floor ("Units 14 and 16") and the portion of Basement 3 ("B3");

(2) the Plaintiff is to pay the Defendant the sum of HK$3,288,188.32;

(3) the Plaintiff is to pay the Defendant mesne profits for B1, Units 14 and 16 and B3 at such rate to be assessed from 1 July 2000 until the delivery up of vacant possession; and

(4) the Plaintiff is to pay the Defendant damages to be assessed.

3. For the relevant events after my decision on 1 November 2000, they may be set out as follows.

4. On 2 November 2000, the Defendant's solicitors gave notice of the decision to the Plaintiff and the sub-tenants and occupiers of the leased premises demanding that they should vacate the premises by 10 November 2000. The notice was posted up at conspicuous places of the leased premises with an announcement in Chinese that the Defendant would from 3 November 2000 cease providing services to B1 and B3 including electricity, air-conditioning and escalators, although basic illumination would be provided as a matter of safety.

5. Following the notice and announcement and on the same day, the Plaintiff's solicitors wrote to the Defendant's solicitors stating that they had standing instructions from the Plaintiff to lodge an appeal against my decision and they would apply for a stay of execution of the judgment pending appeal. In order to avoid any application for interim injunction against the disconnection of facilities, the Defendant's solicitors were requested to advise the Defendant to refrain from doing so. The Defendant's solicitors replied by a letter of the same date stating that the Defendant was entitled to recover vacant possession by virtue of the decision and was not obliged to provide facilities to the leased premises at its own costs when the arrears payable by the Plaintiff stood at more than HK$8 million. By that letter, the Defendant offered to the Plaintiff that they would consent to the Plaintiff's application for a stay pending appeal provided that the Plaintiff was to pay the arrears of rent as at 18 October 2000 in the sum of about HK$8 million and estimated mesne profits for November 2000 of approximately HK$1.1 million on 4 November 2000 and that the Plaintiff was to undertake to pay mesne profits for subsequent months by cashier order on the first day of each month until the determination of the appeal. The Plaintiff's solicitors were requested to reply by 3 November 2000 if the Plaintiff would agree to those terms.

6. No reply from the Plaintiff's solicitors was received on 3 November 2000 or subsequently.

7. Accordingly, on 3 November 2000, the Defendant's solicitors wrote to the Plaintiff's solicitors stating that as no reply had been received, the Defendant would cease to provide facilities and services to the leased premises as of that day. On 3 November 2000, the air-conditioning and lighting (but not the basic illumination) for B1 and B3 were turned off by the Defendant.

8. On 9 November 2000, the Plaintiff filed a Notice of Appeal.

9. On 10 November 2000, Mr Cheung Yuen Sing, the general manager of the Plaintiff, asked Mr Wong Wai Chuen, a credit manager of the Defendant, regarding the hand-over procedure of B1 and B3. Mr Wong provided to Mr Cheung the relevant forms but Mr Cheung did not return the forms to the Defendant.

10. According to Mr Wong, the Defendant had recovered possession of B1 and B3 by 10 November 2000, but not of Units 14 and 16. According to Mr Cheung, the Defendant had forcibly entered B1 and B3 on 11 November 2000 and commenced to dismantle the Plaintiff's existing decoration and partition. Be that as it may, it is not in dispute that the Defendant has recovered possession of B1 and B3.

11. On 11 November 2000, the Defendant's solicitors served a statutory demand on the Plaintiff demanding payment of the judgment debt of HK$3,288,188.32 plus interest.

12. On 14 November 2000, the Defendant entered into a tenancy agreement regarding B3 with Saleslink (Marketing Services) Limited ("Saleslink") whereby B3 was let to Saleslink for 3 years from 20 November 2000.

13. On 16 November 2000, Saleslink took possession of B3 as well as B1 because under a tenancy agreement with the Defendant dated 18 May 2000, the Defendant had agreed to let B1 to Saleslink when the Defendant had recovered possession of B1 from the Plaintiff. I should mention that under the licence agreement between the Plaintiff and the Defendant, which is in dispute in these proceedings, the licence granted to the Plaintiff in respect of B1 was to expire on 30 November 2000. By the tenancy agreement between the Defendant and Saleslink dated 18 May 2000, B1 was to be let to Saleslink until May 2003.

14. Meanwhile, on 15 November 2000, the Plaintiff filed a notice of setting down of the appeal. I understand that the date for the hearing of the appeal has not been fixed.

15. On 16 November 2000, when Saleslink has just taken possession of B1 and B3, the Plaintiff served the summons seeking a stay of execution of the judgment pending appeal.

16. On 17 November 2000, the Defendant's solicitors wrote to the Plaintiff's solicitors seeking clarification if the stay application was in respect of the whole judgment including the judgment for possession or merely the monetary judgment. As no response was received from the Plaintiff's solicitors, a similar letter was sent by the Defendant's solicitors on 21 November 2000. There was no response from the Plaintiff's solicitors up to the date of the hearing of this application.

17. When Mr Earnest Cheung appeared on behalf of the Plaintiff today, I asked him to clarify the Plaintiff's position on its application for a stay. He has told me that the Plaintiff seeks a stay of execution of the entire judgment, including the judgment for possession of all the leased premises. However, if the Court should take the view that a stay of execution should not be ordered in respect of the judgment for possession of B1 and B3, he would not seek an order regarding the possession of Units 14 and 16 and would merely seek a stay of the money judgment. Mr Cheung has also informed me that whether his application for a stay is of the entire judgment or just the money judgment, he is asking the Court to grant a stay with no conditions imposed.

18. The Plaintiff's grounds on the application for a stay pending appeal are twofold. Firstly, it is submitted that the Plaintiff has an arguable case on appeal. Secondly, if no stay is granted pending appeal, the Plaintiff would face financial ruin, which would mean that the appeal would be rendered nugatory.

19. On the merits of the appeal, the main thrust of the Plaintiff's case against the Order 14 decision is that its assertion of a "revised compromise agreement" is an issue that should go to trial. I had rejected the submission made by the Plaintiff in respect of a revised compromise agreement as incredible and not supported by consideration. The merits of the Plaintiff's case on appeal is ultimately a matter for the Court of Appeal. For the purpose of this application, what I ought to do is to look at the matter broadly. I am prepared to say that the Plaintiff's case on appeal is not unarguable. However, my view is that the prospects of success are not particularly strong or impressive.

20. On the exercise of my discretion whether to grant a stay pending appeal, I am guided by the approach adopted in 2 cases of the English Court of Appeal, Linotype - Hell Finance Limited v. Baker [1993] 1 WLR 321 and Winchester Cigarette Machinery Limited v. Payne and Another (No. 2), 10 December 1993 (Lexis transcript) and the decision of Litton JA (as then was) in World Trade Centre Group Ltd and Another v. Resourceful River Limited and Another CACV 70/93, 12 May 1993. The relevant factors and the guidance provided in these cases may be summarized as follows.

(1) The starting point is the entitlement established by the judgment of the lower court after that court's determination of the parties' rights. One starts with the assumption that a successful plaintiff is not to be prevented from enforcing his judgment even though an appeal is pending. There must be good reason to deprive a successful plaintiff of the right to enforce his judgment and the mere existence of an arguable ground of appeal is not by itself such a reason (Winchester).

(2) The court has an unfettered discretion to order a stay. The discretion is not circumscribed and should be exercised judicially, having regarded to all the circumstances of the case. This may cover a wide range of situations, including a wide variety of judgments appealed against (Winchester).

(3) Different orders may be appropriate where the judgment includes some possessory or mandatory order or requires some further procedural steps to be taken as opposed to a simple money judgment. Where the orders are of the former kind, considerations of the balance of convenience may be relevant, whereas they are most unlikely to be relevant where the judgment is a simple money judgment (Winchester).

(4) In relation to a money judgment, it has been recognized that it is relevant that the appellant might be unable to recover from the respondent the sum awarded in the event of the judgment being set aside on appeal, as in Atkins v. Great Western Railway Company (1886) 2 TLR 400. However, to say that this is the only ground for stay of execution would be far too stringent a test today (Linotype and Winchester).

(5) It is also relevant that the appellant can say that without a stay he would be ruined, regardless of the outcome of the appeal or that the appeal would be impossible or academic (Linotype and Winchester).

(6) If the appellant is able to demonstrate he has very strong grounds of appeal, that something has grievously gone wrong with the process of law in the court below, then the court hearing the application for a stay would be inclined to make such order as to ensure that the appeal would not be rendered nugatory in the meanwhile and may not examine very closely the financial situation of the appellant. On the other hand, if the grounds of appeal appear weak, then the court would look more closely into the alleged impecuniosity and prospective financial ruin (World Trade Centre Group Limited).

(7) In any case, the terms of Order 59 rule 13 must be recognized. The appellant must show some special circumstances which take the case out of the ordinary so that the ordinary rule should not apply and a stay should be granted. If showing that such circumstances exist involves making good factual submissions, the facts have to be made good by evidence (Winchester).

21. Guided by the above, I look at the grounds put forward by the Plaintiff in urging a stay.

22. In respect of the Plaintiff's application for a stay of the judgment for possession of the leased premises, I should consider the balance of convenience here. B1 and B3 have been let to Saleslink under legally binding agreements, and Saleslink have taken possession of these premises since 16 November 2000. In my view, the balance of convenience is not with the Plaintiff. I should not grant a stay of execution of the judgment for possession of B1 and B3 which would have affected the rights of a third party legally acquired.

23. As for the stay of the money judgment, I take into consideration these matters.

24. The liquidated part of the judgment debt is about HK$3.28 million, of which HK$2.5 million is for rental from June 1999 to October 1999, arrears which have been owing for quite some time. There has been no offer from the Plaintiff to pay the arrears of rent or any part of the arrears as a condition for a stay pending appeal.

25. For the merits of the appeal, I have indicated that they are not particularly good. I would therefore need to scrutinize the financial condition of the Plaintiff closely. This is dealt with in a single paragraph in the 4th affirmation of Cheung Yuen Sing which is as follows:

"Due to the stoppage of air-conditioning and lighting at the premises, the Plaintiff's sub-tenants have so far refused to pay the Plaintiff the outstanding rent. This puts the Plaintiff in serious cashflow problem. Relying on the said decision of Deputy Judge Susan Kwan, the sub-tenants of the Plaintiff have refused to pay any outstanding debts owing to the Plaintiff. Even before the said decision was handed down, the representative of Saleslink have been telling the Plaintiff's sub-tenants that the Plaintiff would soon be evicted and they should not pay anything to the Plaintiff. The Plaintiff is on the verge of financial ruin. Its position will be beyond salvage by the time the appeal is disposed off unless execution of Deputy Judge Susan Kwan's aforesaid order is stayed for the time being."

26. In my view, the evidence of the alleged financial ruin is wholly inadequate. There is no audited financial statement of the Plaintiff. No accounts have been produced of any receipt of rent from the Plaintiff's sub-tenants at any time. Since the commencement of this action, the Plaintiff has not paid rent from 1 July 2000. The Court has no idea what rent, if any, had been collected from the sub-tenants from July 2000, if not before.

27. All that I know about the Plaintiff company is that it has an authorized share capital of HK$10,000.00. In the return filed in the Companies Registry in February 2000, 100 shares were issued to Mr William Cheung and Madam Yeung Yin Yee Rita. On 5 October 2000, 9,900 shares were allotted, of which 7,400 shares went to the general manager Mr Cheung Yuen Sing.

28. I cannot accept a bland assertion of financial ruin without hard facts and figures. I am not satisfied on this evidence that if no stay of execution of the judgment is granted, the Plaintiff's appeal will be stifled because of imminent financial ruin.

29. I should also mention that there is no suggestion that if the appeal is successful, the Defendant is not in a position to repay such sums that should not have been paid.

30. For the above reasons, I dismiss the Plaintiff's application for a stay of execution of the judgment pending appeal.

31. I turn to the Defendant's application for interim payment.

32. Mr Cheung has informed me that if the court is against him in his application for a stay, he has no submission to make regarding the Defendant's application for interim payment and he has no quarrel with the amount of interim payment sought by the Defendant. In that case, I make an order on the Defendant's summons that the Plaintiff should pay the Defendant interim payment in the sum of HK$4 million on account of the damages being mesne profits in respect of the counterclaim. I will hear the parties on costs.