HERAEUS LTD v. CHU KENG MING

HCMP 1324/2024

[2025] HKCFI 4133

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1324 OF 2024

________________________

________________________

________________________

___________________________________

REASONS FOR DECISION ON STAY

___________________________________

1.  This is D’s application by summons dated 6 August 2025 (the “Stay Summons”)  for a stay of execution of the Order of this Court made on 21 May 2025 (the “Order”)  on P’s application for an order for sale of the 1^st Property. At the conclusion of the hearing, the Stay Summons was dismissed for the reasons appearing below.

2.  The relevant background to the Order is set out in the Reasons to which reference should be made. The nomenclature used in the Reasons for Judgment dated 22 May 2025 (the “Reasons”)  is adopted.

3.  Having declared that D owed P the sum of HK$22,934,624.14 million (the “Sum”), the Court ordered the sale of the 1^st Property which would enable P to recover the Sum in whole or in part out of the proceeds of sale. To that end, D was required to deliver up vacant possession of the 1^st Property within 30 days of the Order[1].

4.  §4 of the Order provides as follows:

“4. The 1^st Property be sold with vacant possession, by public auction or private treaty, at such price and on such terms as the Plaintiff thinks fit with a reserve price of HK$54,900,000 (the ‘Reserve Price’)  in the open market;”

5.  D filed his Notice of Appeal on 18 June 2025 (“NOA”)  raising 2 grounds of appeal, namely, that this Court erred in:

(1)  setting the reserve price at HK$54.9 million; and

(2)  omitting to reflect P’s duty of good faith in conducting the sale of the 1^st Property.

Chronology of key events between 12 June 2025 and 6 August 2025

6.  This chronology is derived from inter partes correspondence exchanged between the respective solicitors for the parties during that 8 week period mentioned above:

(i)  On 12 June 2025, D offered to pay the Sum into Court and that upon such payment the parties would jointly take out an application to set aside the Order.

(ii)  On 13 June 2025, upon receiving P’s response, D set out his offer in greater detail, inter alia, specifying 18 July 2025 as the date for payment of the Sum together with interest accrued up to that date and:

D further agreed to pay the costs of and occasioned in implementing his offer as well as costs of the originating summons as assessed by the Court summarily (the “Offer”).

(iii)  On 18 June 2025, D filed the NOA.

(iv)  On 19 June 2025, D informed P that, notwithstanding the NOA, the Offer still stood.

(v)  On 24 June 2025, P made a counterproposal to D (the “Counter Offer”)  for

(a)  D to pay P on 18 July 2025 the sum of HK $23,622,421.53[2] (the “Agreed Sum”);

(b)  D to place with P’s solicitors P’s costs of the originating summons to be stake held pending summary assessment; and

(c)  upon settlement, the parties would jointly apply for a permanent stay of execution of the Order and an order discharging the Charging Orders.

(vi)  On 14 July 2025, D accepted the Counter Offer subject to an amendment relating to the costs of the OS.

(vii)  On 16 July 2025, P accepted D’s proposed amendment.

(viii)  On 18 July 2025, D failed to make payment of the Agreed Sum.

(ix)  P’s letter to D on 22 July 2025 recorded D’s failure

(a)  to deliver up vacant possession of the 1^st Property within 30 days of the Order (by 20 June 2025); and

(b)  to pay the Agreed Sum to P by 18 July 2025.

Applicable principles

7.  The relevant principles when considering an application for a stay of execution pending appeal are those set out by Ma J (as he then was)  in Star Play Development Limited v Bess Fashion Management Co Ltd [2007] 5 HKC 84 at §§6-10.

8.  As noted in Liberty International Insurance Limited v Chan Shuk Fan [2025] HKCFI 3825, the Court of Appeal re-formulated them in  Bright Gold Limited v Mega Well Development Limited [2019] HKCA 1440 at §13[3]:

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

(b)  Even if arguable grounds exist, there must be other circumstances justifying the deprivation of the successful party the fruit of the judgment. Sometimes, the applicant may do so by showing the existence of strong ground of appeal. Sometimes, the applicant may do so by showing 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;

(c)  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. Thus, counsel should not attempt to deploy full arguments on law and facts quoting in extenso all the relevant evidence and transcript as if the application for stay is a platform for a rehearsal of the appeal proper. Generally, with the benefit of written skeleton submissions, the court is able to assess whether an appeal has a high prospect of success without lengthy oral submissions from counsel. Application for stay of execution should not be a dry run of the appeal.”

9.  Where the appellant relies on the strength of the grounds of appeal alone for a stay of execution, as Kwan JA explained in Ming Hsieh v Xu Zhe [2018] HKCA 390 at §§9-10, the requisite strength must be such that the court takes the view that “something has grievously gone wrong with the process of law in the court below”, or in other words, the appellant is “almost bound to succeed” in the appeal. Otherwise, something more needs to be shown by the appellant to justify a stay.

10.  Since the relief sought involves the exercise of the Court’s discretion, the parties’ conduct is necessarily a factor to be considered.

D’s application

11.  D does not challenge the key holdings of the Order which are:

(a)  the declaration of D’s indebtedness to P; and

(b)  that the 1^st Property be sold.

12.  Mr Ray Kwan, counsel for D, made his oral submissions on the 1^st ground alone. The 1^st ground of appeal relates to the setting of the reserve price at HK$54.9 million.

13.  In his skeleton, Mr Kwan directed his criticisms at the Court’s “adoption of P’s report, despite objective inaccuracies apparent on its face (e.g., misidentification and omissions)[4]” when “P’s valuation ‘does not accurately reflect the true market value’ leading to an undervalued reserve price that risks prejudice to D[5].”

14.  At the hearing, Mr Kwan handed up 3 enlarged plans attached to the assignment to illustrate his point that the 1^st Property is a “stand-alone independent house” and not, as described by P’s valuer, a “semi-detached house”. It was said that that led to the low valuation of $54.9 million and by adopting that as the reserve price, it would inevitably lead to a fire sale.

15.  Mr Adrian Lai (counsel for P)  relied on Re Cheung Kwan [2021] HKCA 282 where Kwan VP held (at §31)  that where the grounds of appeal essentially seek to overturn the evaluation of evidence and findings of fact made by the judge, even though the findings were based on affidavit evidence and contemporaneous documents rather than oral evidence, the appeal court should be reluctant to interfere with the lower court’s finding of fact.

16.  Kwan VP then concluded (at §33)  that

“…, this court should be reluctant to interfere with the judge’s evaluation of the evidence, unless it is demonstrated that the judge had fallen into palpable errors in the findings of fact. The appellate process is not designed to give a litigant a platform to repeat submissions made in the court below on the evidence and factual aspects in the hope of persuading the appeal court to come to a different view from the primary judge (WYSL v FHCBA [2019] HKCA 814 at §42).”

17.  Applying Re Cheung Kwan, §§27-35 of the Reasons set out the Court’s evaluation of the evidence and its finding in setting the reserve price. It is wrong to characterise the process simply as the “adoption of P’s report”.

18.  As D has not identified any palpable error made by the Court, I see no merit in the 1^st ground of appeal.

19.  The 2^nd ground is that the Court’s recognition that P, in exercising its power of sale, had a duty of good faith to obtain the best price possible, cannot be reconciled with or is contradicted and undermined by the “broad discretion”[6] granted to P to sell at any price above the reserve price of HK $54.9 million.

20.  §4 of the Order requires the sale to be “in the open market”. Properly read, the discretion conferred by §5 is subject to P’s duty of good faith stipulated in §4. As Mr Lai pointed out, the price is determined by the market, not the reserve price.

21.  The 2^nd ground is also not arguable.

Appeal rendered nugatory

22.  D’s skeleton also makes the point that the appeal would be rendered nugatory if a stay is not granted as the very subject matter of the appeal would be irreversibly defeated.

23.  The absence of an arguable appeal tilts the balance against a stay, bearing in mind that the starting point is that the successful party is not to be deprived of the fruits of success: see Lam Sik Shi v Lam Sik Ying, unrep., CACV 79/2010, 25 May 2010.

24.  Assuming, for present purposes, that D’s submission is correct and he has an arguable appeal on the 1^st ground, the Court has to engage in a balancing exercise. In so doing, the conduct of the parties is a relevant factor. In that context, the following matters are particularly pertinent:

(i)  As recorded in the Reasons at §40-42, D made a proposal to P for a settlement a week prior to the hearing on 21 May 2025 which P accepted, but D never followed through to implement the agreement which would have rendered the hearing unnecessary.

(ii)  A week before the date for giving vacant possession of the 1^st Property, D made a proposal for settlement that would have avoided its sale. Despite having accepted P’s Counter Offer (as amended)  on 16 July 2025, D failed to honour the settlement agreement without offering any explanation.

25.  They support the inference that D never intended to implement the settlement agreement. Rather, the timing of the offer referred to in §24 (ii)  above and D’s assurance[7] that the Offer still stood despite the NOA filed the previous day served no purpose other than to initiate negotiations at the last minute and prolong the date for giving vacant possession. But for this ruse, D should have given vacant possession to P on 20 June 2025, more than 11 weeks ago.

Conclusion

26.  In those circumstances, there is no valid reason for granting a stay of execution.

27.  P applied for indemnity costs. The Guarantees stipulate that costs are to be on a full indemnity basis. P is clearly entitled to indemnity costs. I would add that D’s conduct described in §24 above cannot be condoned and would have merited an award of costs against D on an indemnity basis.

28.  Directions were given for D to lodge his list of objections (limited to 2 pages)  to P’s statement of costs provided at the conclusion of the hearing. Summary assessment shall take place in Chambers.