HCA 1794/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1794 OF 2009

____________

BETWEEN

____________

__________

R U L I N G

__________

1.  This application for a stay of execution pending appeal to the Court of Appeal has been very well argued on both sides. I have not found the matter entirely straightforward.

2.  This will be an appeal against two orders. Firstly, one dated 15 June this year dismissing the Defendant’s appeal from an order by Master Levy granting her conditional leave to appeal on the Plaintiff’s summons for summary judgment under RHC, Order 14.  The condition was that she should bring into court the entire amount of the claim of $1,657,491.40.  The second ruling which is being appealed is my refusal to lift that condition, it having been submitted that the Plaintiff did not have the financial ability to pay that amount.  That ruling is dated 10 September.  

3.  On the first limb of the appeal, it will be submitted that the matters raised by the Defendant were sufficiently strong to justify unconditional leave to appeal.  On the refusal to remove the condition, it will be said that I erred in not setting aside the condition and that now not to grant a stay of execution will render the Defendant’s appeal nugatory.

4.  The principles to be applied when considering whether to grant a stay of execution have been set out by Ma J (as he then was) in Star Play Development Ltd v Bess Fashions Management Co. Ltd, HCA 4726/2001 at paras. 6-10 of the judgment in the course of which Ma J referred to the relevant authorities in Hong Kong and in England.  I will repeat these principles here:

“6. Though in the court’s discretion whether or not to grant a stay, it is important to bear in mind that the starting point is RSC Order 59, rule 13(1):

‘Except so far as the court below or the Court of Appeal or a single judge may otherwise direct –

(a) an appeal shall not operate as a stay of execution or of proceedings under the decision of the court below;

(b) no intermediate act or proceedings shall be invalidated by an appeal.

7. In other words, unless the defendant 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.

8. Good reason can exist in a variety of forms. It will be wrong to set out any exhaustive definition of what would constitute good reasons, 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.

9. In the context of these two factors, I would make the following observations:

(1) In determining the question whether or not an appeal would be rendered nugatory, the court must of course 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, though, 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. Similarly where, as in the present case, the relevant order is one for the possession of premises, again it can readily be appreciated that without a stay of execution, more often than not, it is likely than an appeal would be rendered nugatory: see Ketchum International plc v. Group Public Relations Holdings Limited [1997] 1 WLR 4 AT 10H.

(2) 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.

(3) I now deal with a common facet relied on in any argument relating to an appeal being rendered nugatory, namely that of financial ruin or serious financial consequences. Where, as in the present case, 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: see the observations of Mr Justice Litton, JA in Word Trade Centre Group Limited v Resourceful River Limited, unreported, 12 May 1993, Civil Appeal 70 of 1993, Court of Appeal, at 3-4.

(4) 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: see Caine Tai Investment Company Limited v Ayala International Finance Limited [1983] 1 HKC 163, a decision of the Court of Appeal which made reference to Wilson v Church (No. 2) [1879] 12 Ch. D. 454.

(5) How relevant then is the court’s consideration of the merits or strength of the appeal? In my view, 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. This I believe to be an inevitable consequence of the starting point I have earlier mentioned in referring to Order 59, rule 13(1).

(6) The existence of merely an arguable appeal cannot by itself amount to sufficient reason to justify a stay. It can be put this way : 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.

(7) 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 : see World Trade at 2; Winchester Cigarette Machinery Limited v Payne (No. 2), unreported, 15 December 1993, English Court of Appeal (a case referred to by the Court of Appeal in Fung Wai Kwong William v The Insider Dealing Tribunal [2001] 1 HKC 44).

(8) In most cases, the court will not be dealing with the extreme situations I have referred to. Often, it 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. Here, 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. This I understand to be the sentiment found in authorities such as World Trade at 2 (in a passage cited with approval by the Court of Appeal in Fung Wai Kwong William at 48) and Mabul Properties Corporation v Ahmed, unreported, 24 June 1987, English Court of Appeal.

(9) I have so far referred to the position of the appellant, 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 minimise 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.

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: see Winchester Cigarette Machinery, per Gibson L.J.”

5.  In this matter, it may be helpful to begin at the end, as it were, and to consider matters that have occurred since I handed down the first judgment in June, which is that the Plaintiff has taken out an application to have the Defendant removed as the deceased’s administratrix and replaced by a neutral and professional administrator.  This application is currently before Lam J and I am also told that at the learned judge’s suggestion or encouragement, and I hope that I do not misrepresent the position because this is what I was told by Mr Deng for the Plaintiff, that summons has been amended to add a prayer for the estate to be bankrupted.  In these circumstances, Miss So, for the Defendant, submits that if I do not grant a stay the sanction for not paying the amount of the claim into court will take effect and judgment will be entered.  In such circumstances, it is almost inevitable that the estate will be bankrupted with the result that the trustee in bankruptcy will have to consider whether to pursue the appeal.  Miss So submits that the chances are that the trustee will not take that course.  In such circumstances, what she says is that a perfectly good appeal will have to be abandoned.

6.  She invites me to balance that terminal situation with any prejudice that may befall the Plaintiff, which will be minimal.  There is in existence an injunction granted by Saunders J in January this year which relates to the proceeds of sale of the properties held by the estate protecting the full extent of the claim and in addition the Plaintiff has obtained a charging order absolute in respect of properties as yet unsold by the estate. In such circumstances, Miss So submits that the condition requiring the Defendant to bring into the court the entire amount of the claim is unnecessary. The Plaintiff is amply protected by the injunction and by the charging order absolute and when one puts into the scales the consequences of not granting a stay, as I have just described, the scales must fall heavily in favour of a stay.

7.  This attractive submission is countered by Mr Deng who has drawn attention to the realistic worth of the injunction and the charging order.  There are outstanding mortgages on the estate in favour of the Hang Seng Bank.  The gross value of the estate stands at $14 million but once one takes into account outstanding mortgages that leaves over about $1.2 million which continues to be reduced by accumulating interest and legal costs.  At present, Mr Deng says that his client’s costs are in the order of $500,000.  Therefore, if one adds the full amount of the claim to the estate’s debt burden, it is probably bankrupt.  The injunction and the charging order are for all intents and purposes worthless. 

8.  Mr Deng submits that the estate, as represented by the Defendant, should be left to take its own course.  There is very good reason to say that the Defendant’s sons are more than able to pay the amount of the claim into court and the appeal could then proceed.

9.  In this regard, Miss So has submitted that I adopted the wrong approach in my ruling of 10 September which had proceeded on the basis that the Defendant had not demonstrated that she could not raise the amount claimed from the other beneficiaries, her sons, who it would appear are funding this litigation on her behalf.  They have been notably silent.  It would have been simple for them to file evidence of their means if they wished to say that, like their mother, they could not afford to make the payment into court.

10.  It strikes me that there is much manoeuvring going on in the background so far as they are concerned.

11.  I have not lost sight of Miss So’s submissions about the correctness of my judgment in refusing to give unconditional leave to defend but it seems to me that nothing that she has said on the merits of that decision causes me to say that the appeal is so strong as to require me to grant a stay for that reason alone.

12.  Ultimately, what has caused me to pause is whether there is such a risk of the estate being bankrupted if I do not order a stay, when compared to the prejudice imposed on the Plaintiff by the grant of a stay of execution.  I have decided that where the Defendant has fallen so well short of showing that she, representing as she does the estate which includes the beneficiaries for these purposes, cannot raise the amount of the claim to pay into court, that she and the beneficiaries should be left to take their own course as to whether they wish to pay-in, which will lift the threat of bankruptcy or, to go down with the ship as it were, by not paying-in.  This is entirely in their hands.  Had I considered that, on the evidence as it was presented to me in September, there was any prospect of the Defendant not being able to raise the amount, I would have given her relief at the time.  Nothing has happened since which causes me to doubt that.  The Defendant and the estate must now decide for themselves how to proceed.  I do not propose granting a stay until the appeal is heard.

13.  Nevertheless, what I am willing to do is to grant a temporary stay for 21 days to enable the Defendant to do two things. Firstly, to file her notice of appeal which she undertakes to do by noon on Friday (12 November 2010) and secondly, this is the real purpose for the temporary stay, to get in front of a single justice of appeal to apply for a stay until the disposal of her appeal if that is what she is minded to do.

14.  As to costs, it has been agreed that in the event of my refusing the application, costs will be to the Plaintiff which is the order that I make.

Discussion

15.  Assessed costs of $35,000 agreed.