LCC v. LTLA

CACV 281/2022

[2023] HKCA 416

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 281 OF 2022

(ON APPEAL FROM HCMC NO 4 OF 2019)

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D E C I S I O N

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Hon Au JA (giving the Decision of the Court):

1.  This is an application for stay of execution of the Ancillary Relief Order made by Queeny Au-Yeung J dated 24 June 2022 (“the Order”). By way of the Order, the Judge ordered the respondent husband (“H”)  to pay ancillary relief to the petitioner wife (“W”)  in the lump sum of $292m by four tranches up to 19 April 2023, in accordance with a payment schedule broken down as follows:

(1)  $10m within 14 days of the Order;

(2)  $94m within 14 days of the Order;

(3)  $94m by 19 October 2022;

(4)  $94m by 19 April 2023 (including the value of the matrimonial home).

2.  It is common ground that the H would have to monetise some landed properties to pay the lump sum.

3.  On 22 July 2022, the H appeals against the Order to this court by way of a Notice of Appeal.  In the latest Re-Amended Notice of Appeal, he has advanced nine grounds of appeal against the Order.  These grounds are mainly directed against the amount of the lump sum and the schedule of payments, which can be summarized as follows:

(1)  Size of the Lump Sum Ground (Grounds 1, 4 - 7);

(2)  Mechanism for Payment Ground (Grounds 2 and 3);

(3)  Vacation of Registration Ground (Ground 8);

(4)  Transfer of Companies Ground (Ground 8); and

(5)  Equalization Ground (Ground 9).

4.  In the prospective appeal, the H seeks to set aside the Order and replace it with an order for a payment schedule of a total sum of approximately $202m, or $211m, or $218m (depending on which ground or grounds the H succeeds in his appeal)  as follows[1]:

(1)  $10m within 14 days of the Order,

(2)  $60m on or before 17 January 2023;

(3)  $45m on or before 17 February 2023;

(4)  $50m on or before 30 October 2023;

(5)  $20m on or before 31 January 2024; and

(6)  About $16.8m or $26.63m or $33.4m on or before 31 July 2024.

5.  After reviewing the parties’ respective written submissions, we noticed that the parties had reached an agreement under which the H would, by February 2023, have (a)  further paid the W a total sum of $105,000,000 from the sale proceeds of certain landed properties and (b)  transferred the matrimonial home to the W in partial satisfaction of the Order.  Supported by the updated information now inserted in the application bundles, the parties through counsel have confirmed that by now the W has already received a total sum of $115m and the H has also effected the transfer to the W of the matrimonial home free of encumbrances (valued around $36m).

6.  Taking into account all the payments that have already been made by the H so far (including value of the transferred matrimonial home), as of today, the total unpaid part of the Order is about $141m.

7.  The principles governing an application for a stay of execution are well settled and not disputed.  They were summarized by Lam VP (as he then was)  in Ng Yuk Pui Kelly v Dung Wai Man and Others [2021] HKCA 134 at [8] as follows:

(1)  The applicant must show an arguable ground of appeal (viz. one with reasonable prospect of success)  before the discretion to grant a stay is engaged;

(2)  Even if arguable grounds exist, there must be other circumstances justifying the deprivation of the successful party the fruit of the judgment, such as the existence of strong grounds of appeal or that the appeal would be rendered nugatory if no stay is granted.  In either case, the court must also have regard to the prejudice that could be suffered by the successful party if a stay is granted.  In all cases where the discretion is engaged, ultimately it is a balancing process with common sense; and

(3)  In assessing the strength of the appeal for the purpose of a stay application, it is impracticable and undesirable to go deeply into the merits.  A broad brush approach is called for.  The application for stay of execution should not be a dry run of the appeal.

8.  As Ma J (as he then was)  observed in Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 at [9], the court would inevitably have to form a preliminary view on the merits and strengths of the appeal.  If the court is faced with simply the existence of an arguable appeal, it becomes necessary for the appellant to provide additional reasons as to why a stay is justified.  In the context of a money judgment, if the appellant seeks to demonstrate that the appeal would be rendered nugatory without a stay, the court will require evidence as to why the levying of execution will lead to that result, such as an appreciable risk that the respondent to the appeal would not be able to repay in the event of a successful appeal.  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.

9.  Bearing these principles in mind and after reading the papers before us, for the present purposes, we are of the preliminary view that the H has arguable grounds of appeal (and we would put no higher than that).  We should and would not say more about the merits at this stage.  We will therefore turn to focus on, as the above principles suggest, the contentions as to whether the H would suffer financial ruin or serious financial consequences if a stay is not granted pending appeal.

10.  In this respect, the H’s evidence in his affirmation essentially says he will suffer serious financial consequences if not ruin if a stay is not granted as follows:

(1)  The W has made genuine and repeated threats that, if the H fails to comply with the payment schedule in the Order, she would seek to appoint receivers over the companies that hold the various properties which the H will need to monetize in order to realise sufficient funds to meet the payment obligations under the Order.  See: H’s 3^rd Affirmation, paragraphs 32 and 33, W’s Affirmation, paragraph 15(iv)  and 25.

(2)  If the W proceeds with such enforcement steps, there is a real risk that the banks will terminate their general banking facilities (which facilities are secured by the properties)  provided to the H or the companies, as a result of which the H would not have the cash flow to maintain himself, the W, the companies’ staff and to repay the outstanding liabilities owed to other financial institutions. The H further says he may then lose all the landed properties on which he has been heavily reliant on to derive rental incomes.  Further, those landed properties inside the pot will be seized to be sold by mortgagees and considerable costs would be incurred, in which case, his proportionate share (50.5%)  of the pot as intended by the Judge in making the Order will become significantly less.  H’s 3^rd Affirmation, paragraphs 33 - 35.

11.  In this respect, Mr Man SC for the W argues that the H has failed to provide any credible or documentary evidence in support of the alleged serous financial consequences or ruin, which therefore remain bare assertions only.  See: paragraph 35 of W’s written statement of opposition.

12.  In our view, the above risks and potential dire financial consequences on the H are supported by evidence and not remote:

(1)  W has confirmed in her affirmation evidence that she would resort to appointment of receivers as a way to enforce the Order.  W’s Affirmation, paragraphs 15(iv)  and 25.

(2)  It also appears that many of the properties are subject to general banking facilities to provide finances to the H and the companies for his and the companies’ use. See H’s affirmation as well as eg, H’s solicitors’ two letters both dated 26 September 2022, with the attached banking facilities documents.  [A2/381-426].

(3)  Further and in any event, the W has not in evidence rebutted or challenged what the H has deposed to at paragraph 33 of his 3^rd affirmation about the risks that if the banks terminate the general banking facilities upon any appointment of receivership over one of the companies, (a)  he would have cashflow problems to maintain himself, the W, the companies staff and pay outstanding liabilities to other financial institutions, and (b)  he may lose the landed properties as the banks may proceed with forced mortgagee sales.

(4)  In the premises, it is not a remote and unsupported possibility that before the disposal of the appeal, the W may seek to appoint receivers over the companies (as confirmed by the W at paragraph 25 of her affirmation), which would trigger the banks to terminate those banking facilities secured by the properties, which in turn would lead to various adverse financial consequences that the H has deposed to.

(5)  If that occurs, we accept that, if a stay pending appeal is not granted, the H would suffer serious financial consequences if not ruin in the way as he has set out in his affirmation.

13.  W’s counsel further argues that the H should do his utmost to comply with the Order, such that the W would not apply (or would not succeed in applying)  for a receiver.  See paragraph 35 of the statement of opposition.  We are however satisfied with the evidence filed for the present purposes that the H has diligently tried to monetize the assets.  See generally paragraphs 14 - 17 of H’s 4^th affirmation, and Table 1 (Exhibit “LYLA-3”). The Judge has also made the same observation at [8] of her decision in refusing a stay.

14.  At the hearing, Mr Man SC has emphasized in his oral submissions the fact that the H did not first take out an extension of time application to comply with the Order before the Judge is a weighty factor that this court should take into account against the exercise of discretion in favour of the application, in particular in relation to the issue of whether the H could demonstrate financial ruin if a stay is not granted.

15.  With respect, we are unable to agree.

16.  Given that the H seeks to reduce the actual amount of the payment, and / or at the least change the payment schedule as ordered to avoid hefty judgment interest, we are of the view that it is a proper course for the H to lodge an appeal.  Moreover, since at least some of the grounds of appeal are reasonably arguable as we have indicated earlier, we also do not think it is inappropriate for the H to take out a stay application pending appeal.  Viewed in this context, the fact that the H did not take out an extension of time application first does not amount to such a factor that would weigh against this application as contended by Mr Man SC.

17.  On the other hand, as mentioned above, the W by now has received a total of some $115m in cash.  The matrimonial home (with a value of about $36m)  has also been transferred to the W free of encumbrances.  It is therefore unlikely that she will suffer any prejudice if a stay is granted in the interim pending the disposal of the appeal.  In particular, if the appeal is to be fixed to be heard with an early date as we are prepared to so direct, and the W is to be compensated with judgment interest if eventually the appeal is dismissed.

18.  In the premises, on balance, we find it appropriate to exercise our discretion to grant a stay of execution of the Order pending the determination of the appeal.  As offered by the H, the stay would be subject to the condition that he would continue to make payments in accordance with the payment schedule now set out at paragraph 3 of the Re-Amended Notice of Appeal[2] until the appeal is disposed of.

[discussion between the court and counsel on the directions for applying to fix the date of hearing of the appeal]

19.  We further order that the costs of this application be in the cause of the appeal, with certificate for two counsel.