THE BANK OF EAST ASIA, LTD v. LABOUR BUILDINGS LTD AND OTHERS

CACV 33/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 33 OF 2008

(ON APPEAL FROM HCMP NO. 769 OF 2002)

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D E C I S I O N

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1.  This is an application for stay of execution of a judgment sum which totals more than $90 million, essentially on a mortgage.  The trial lasted 40 days or more and the judge had no hesitation in giving judgment for the Plaintiff.  There are some $14 million in costs which are owing which brings the total amount to over $100 million altogether.

2.  The application for stay this morning, comes after a long history of interim applications, which have all been refused - or ultimately refused, at any rate.  This morning, it is put on the basis that the 1st Defendant has entered a sale and purchase agreement for $160 million which would not only pay off the bank what it is owed, plus the costs, but would also pay the 2nd Defendant $28 million in respect of the hotel guesthouse licence which it now has.

3.  The person who is apparently behind the purchase is a financier and what his interest is one does not know.  It is likely that others are behind this purchase.  Alternatively, it is possible that the purchaser might want to sell the building on and act as a confirmor.  It may be that the entity behind this sale and purchase is the Far East International Holdings Limited, in respect of which company the purchaser, or the person who is behind the purchaser, which is a newly formed company, owns 15 per cent.  That entity, the Far East International Holdings Limited, has had hotel interests for some time.

4.  But all this is no more than speculation because as Mr Whitehead has pointed out we have absolutely no evidence from Mr Sin, who is behind the new company, as to what his intention is and how he intends to raise money.  Clearly, looking at his assets, he is going to have to raise a considerable amount of money in order to finance the purchase of this building.

5.  To my mind, however, this boils down to a very simple point.  When these applications for a stay were first made, it was on the basis that the 1st Defendant was in danger of losing an asset, namely, the building, and the building had a certain amount of value to it over and above the cash value which it owed the bank.  It might be said that it also had a sentimental value.  Nevertheless it was put on the basis it was carrying on a business in conjunction with 2nd Defendant.  That business is a hotel business, which apparently was only started as a means of raising money to finance the litigation itself.

6.  In my view, this really comes down to this - that now, this application is not put on the basis of wanting to preserve an asset.  It is wanting to get more money out of the sale of this building, which event is now considered to be inevitable.  In my view, there is no reason to suppose that if the stay is not granted and the worst comes to the worst - the bank sells the building - the bank will not sell it for the maximum amount that it could.  Indeed, there is nothing to stop the purchaser dealing with the plaintiff, and if this is a genuine purchase, the purchasing company can come along and deal with the plaintiff and I have no doubt the plaintiff would be very happy to sell it, if there is a proper sale which goes through.

7.  On the face of it, I am not convinced today that the sale and purchase agreement is not something which the purchaser could get out of, if for no other reason I am not entirely convinced that some loophole cannot be found on the basis that there has to be a transfer of the hotel licences which might not go through because they are subject to government approval.

8.  In those circumstances, I do not consider that the stay should be granted and I refuse the application for a stay.