BEI NI LTD v. CORNWELL (HONG KONG) LTD

HCA 923/2022

[2023] HKCFI 2749

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 923 OF 2022

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D E C I S I O N

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1.  By paragraph 1 of the plaintiff’s Summons dated 27 July 2023 (“Summons”), the plaintiff seeks a direction from this court pursuant to Order 59, rule 21(3) of the Rules of the High Court (“RHC”) that this court’s Judgment dated 13 July 2023 (“Judgment”)^[1] is a judgment that is referred to in Order 59, rule 21(1)(a) RHC, from which “an appeal lies as of right”, ie: “a judgment or order determining in a summary way the substantive rights of a party to an action”.

2.  On 11 August 2023, Huatai’s solicitors wrote to the court indicating that Huatai maintains a neutral stance with regard to the plaintiff’s application under the Summons.

3.  The relevant test is set out and described by the Court of Appeal in Bright Shipping Ltd v Changhong Group (HK) Ltd[2019] 2 HKLRD 220.  The court held that the applicable test in Hong Kong for determining if a decision/judgment is interlocutory or final is the application approach (§§5, 7):

“This involves an examination of the nature of the application to see whether the order made upon such application would, whether it fails or succeeds, determine the whole action. In considering the nature of the application, it is necessary to look not only at its form, eg, under which order or rule of court it is made, but also the purpose and substance of the application and the issues to be determined by the court.” (Emphasis supplied)

4.  In the present case, while the application was in the form of an application for leave for payment of a sum out of court, the core issues that fell to be determined by this court concerned (a) the characterization of the Huatai Share Charge and (b) accordingly, the priority as between the Huatai Share Charge and the P Charging Order.  These are issues which concern the substantive rights of the plaintiff and Huatai in respect of the Charged 2185 Shares/the Sum.

5.  In short, Huatai contended that the Huatai Share Charge was a fixed charge.  Although the defendant could dispose of its shares in the Margin Account, any proceeds were applied automatically to reduce its indebtedness to Huatai.  Huatai retained sufficient control over the Margin Account such that the Huatai Share Charge was a fixed charge.

6.  On the other hand, the plaintiff contended that the Huatai Share Charge was a floating charge, in circumstances where the Margin Account had been operated in a manner where the defendant was free to dispose of the Charged 2185 Shares (and other securities) prior to the P Charging Order.  The Huatai Share Charge crystallised only after the P Charging Order nisi was obtained on 14 October 2022.  P Charging Order therefore had priority over the Huatai Share Charge.

7.  In deciding that the Huatai Share Charge was a fixed charge and accordingly ranks ahead of the P Charging Order in priority, the Judgment finally determined an issue on the substantive rights between the plaintiff and Huatai.  This issue in question (ie priority and characterization of the Huatai Share Charge) is an issue on the merits as opposed to procedural in nature.

8.  The effect of a determination of this issue on the rights of the parties is that the P Charging Order ranks behind the Huatai Share Charge, and the plaintiff loses out in terms of its proprietary interest in the Charged 2185 Shares/the Sum.

9.  In the premises, I agree that “an appeal lies as of right” from the Judgment, being “a judgment or order determining in a summary way the substantive rights of a party to an action”.

10.  Accordingly, I give a direction pursuant to Order 59, rule 21(3) RHC that this court’s Judgment is a judgment that is referred to in Order 59, rule 21(1)(a) RHC.

11.  I further order that the costs of and occasioned by the Summons be costs in the cause of the appeal.