LAM ROGERIO SOU FUNG v. TAN SOON GIN GEORGE

CACV 85/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 85 OF 2011

(ON APPEAL FROM HCA NO. 2576 OF 2005)

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BETWEEN

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(By Counterclaim)

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J U D G M E N T

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Hon Yeung VP (giving the Judgment of the Court):

1.  The plaintiff by counterclaim (Lam Rogerio Sou Fung) successfully claimed against the defendant (Tan Soon Gin George) for the return of five items of antique porcelain (a Guyuexuan Vase, the Deep Dish and the Quail Dishes, the Stemcup and the Double Gourd).

2.  It was the plaintiff’s case that the five items were lent to the defendant, but despite repeated demands, had not been returned.

3.  At a public auction held on 23 October 2005, the Guyuexuan Vase was sold for HK115,480,000; the Stemcup for HK$3,256,000; and the Double Gourd for HK$5,720,000. After deducting the necessary expenses, the net proceeds were HK$103,000,000, HK$2,800,000 and HK$5,000,000 respectively.

4.  The net proceeds for the Stemcup and the Double Gourd, totaling HK$7.8 million had been paid to the defendant or his nominee company “Ironwood Overseas Limited”. The net proceeds for the Guyuexuan Vase, having been paid into court by Sotheby’s Hong Kong pursuant to an order dated 26 May 2006 made in HCA2545/2005 (an Interpleader Action taken out by Sotheby’s Hong Kong), remain in court.

5.  The Deep Dish and the Quail Dishes remain in the custody of Christie’s Hong Kong after an unsuccessful attempt to sell them on the defendant’s instruction.

6.  In a judgment dated 5 May 2011, Chu J (as she then was) declared that the five items of antique porcelain are the plaintiff’s properties and ordered the defendant to pay to the plaintiff HK$103,000,000 as damages for conversion of the Guyuexuan Vase, HK$2,800,000 as damages for conversion of the Stemcup, HK$5,000,000 as damages for conversion of the Double Gourd.

7.  Chu J further ordered the defendant and/or Christie’s Hong Kong to forthwith release the Deep Dish and the Quail Dishes to the plaintiff.

8.  There were also nominal damages orders and costs orders against the defendant.

9.  The defendant had, on 16 May 2011, filed a Notice of Appeal, seeking to reverse Chu J’s orders. The appeal is due to be heard on 10-11 January 2012.

10.  There were then two applications before Chu JA (sitting as an additional Judge of the Court of First Instance), one taken out by the defendant to stay the execution of the Judgment dated 5 May 2011, and the other taken out by the plaintiff for the payment out of the sums paid into court by Sotheby’s Hong Kong in HCA2545/2005.

11.  On 26 July 2011, Chu JA dismissed the defendant’s application to stay the execution of the Judgment dated 5 May 2011 as well as an application for an interim stay pending a renewed application to the Court of Appeal. Chu JA also ordered the payment out to the plaintiff/his solicitors the sums paid into court by Sotheby’s Hong Kong with interest.

12.  Chu JA further ordered the defendant to pay to the plaintiff forthwith the sum of HK$379,404, being costs incurred by Sotheby’s Hong Kong in HCA2545/2005, which had been deducted from the sale proceeds of the Guyuexuan Vase.

13.  Chu JA had doubts that the defendant’s proposed appeal had any reasonable prospect of success although she was prepared to assume that it was arguable. Chu JA rejected the defendant’s suggestions that the plaintiff was impecunious or that he was a man of low commercial morality, saying that the defendant had not discharged the burden of establishing such allegations.

14.  Chu JA concluded that the defendant had failed to show good reasons for staying the judgment and that the plaintiff should not be deprived of the fruits of his litigation.

15.  On the basis that unless the Judgment dated 5 May 2011 is stayed, the plaintiff will take out bankruptcy proceedings against him, the defendant renews his application for a stay before this court on an urgent basis. The defendant indicates his willingness to pay into court the net proceeds of the Stemcup and the Double Gourd together with the sum of HK$379,494, which had been deducted by Sotheby’s Hong Kong as its costs in HCA2545/2005.

16.  Mr Gerard McCoy SC, on behalf of the defendant, reiterates the position that the defendant has an arguable appeal, that is one with a reasonable prospect of success and that without a stay, there is a risk of the appeal being rendered nugatory. Mr McCoy, in his written arguments, takes us to the findings of Chu J and suggests that the judge was wrong to have found, as she did, that the defendant had borrowed instead of acquiring, as a private collector, the five items of antiques from the plaintiff. Mr McCoy suggests that the judge had erred on the completion date of the Gammon House transaction and that such error would have significant impacts on her other findings.

17.  Mr McCoy further emphasizes that there is a risk that the defendant may not be able to recover the judgment sum from the plaintiff in the event of a successful appeal as there are reasons to believe that the plaintiff is impecunious despite the assertion of his renowned wealth. Mr McCoy points out that the plaintiff owns no landed property and suggests that in view of his hostility against the defendant, there is a great temptation to place the judgment sum beyond the defendant’s reach.

18.  The plaintiff, in his earlier affirmations, says that he is a well-known collector of Chinese ceramics with a value in excess of HK$400 million as well as a collector of Ming furniture and modern paintings with a value of over HK$100 million.

19.  Mr Russell Coleman SC, on his behalf, emphasizes that the plaintiff should not be deprived of the fruits of his litigation by locking up funds to which, under the judgment, he is entitled. He suggests that the defendant has failed to satisfy the minimum requirement for the court to consider granting a stay, namely the existence of an arguable appeal. In any event, Mr Coleman suggests that the defendant is unable to establish that there is an appreciable risk of the appeal being rendered nugatory.

20.  The applicable principles for staying the execution of a judgment are well established and not disputed. It may not be necessary to recap those principles.

21.  A successful litigant should not be deprived of the fruits of the litigation and an order staying the judgment should not be considered unless there are reasonably arguable grounds of appeal. Chu JA was prepared to assume that the defendant’s appeal is arguable, i.e. one with a prospect of success. We think Chu JA was too generous to the defendant in her approach.

22.  For an application of this nature, it is not normally necessary or desirable for us to express too strong or definite a view on the likelihood of a successful appeal. However, we must point out that the judgment against the defendant primarily rests on the assessment of the credibility of witnesses.

23.  We have considered the judgment together with what is termed “Critique of Chu J’s reasons for holding in favour of (the plaintiff)”. We do not agree that the criticism against Chu J’s judgment has been made out. Chu J gave many reasons for rejecting the defendant’s evidence, mainly on its inherent improbabilities. Chu J had also pointed out the defendant’s irreconcilable and contradictory evidence. Certain parts of his evidence were proved to be untrue. Chu J was driven to the conclusion that the defendant had made up his evidence as he went along.

24.  Chu J might have been confused with regard to the completion date of the Gammon House transaction. The confusion arose out of the defendant’s confused evidence and the firm, but slightly misleading submission of his counsel. In any event, Chu J had decided the case on a much wider basis.

25.  Chu J had analyzed the plaintiff’s evidence, with the defendant’s criticism of such evidence in mind. The judge’s conclusion was that his evidence, in its totality, had a ring of truth and was inherently probable.

26.  In particular, the judge referred to a temporary receipt, kept by Mr James Lally, the president of Sotheby’s USA, which showed that the plaintiff’s proposed to sell some of his collection, including the Deep Dish, the Quail Dishes and the Double Gourd in May 1983. The receipt was only given to the plaintiff’s solicitors by Mr Lally in 2007. The judge rejected the suggestion of collusion between Mr Lally and the plaintiff and the judge was right to have relied on such evidence.

27.  There are just too many flaws in the defendant’s evidence and Chu J was fully justified in preferring the evidence of the plaintiff to that of the defendant. Chu J’s overall analysis of the evidence cannot be faulted. We are not persuaded that the defendant’s appeal has a reasonably arguable chance of success.

28.  We accept that the plaintiff does not have any landed property and there is no positive assertion that his liquidity position is strong.

29.  We do not profess to have any special knowledge about the antique market, but prices of antiques, particularly those of Chinese porcelain, are “seasonal”, with huge fluctuation in months, if not weeks in recent years. We accept that an expectation that the collection of an antique connoisseur would be liquidated voluntarily during his life time may not be too easily met and therefore the value of the collection means little in terms of his actual liquidity. In Chinese history, there are known cases of antique collectors who would rather live without food than without the “company” of their collection.

30.  We also accept that we are concerned with a significant amount of cash, over HK$110,000,000 and that without a stay of execution, the defendant may have some difficulty in recovering the whole or part of the sum if his appeal is successful.

31.  We further accept that a stay of execution will not result in any material prejudice to the plaintiff, a man of substantial wealth (on his own case), when the only effect of a stay is that his enjoyment of the fruits of the litigation will be delayed by 5 to 6 months.

32.  However, we are firmly of the view that on the materials before us, including counsel’s submission, the defendant’s appeal does not have any reasonable prospect of success.

33.  There is no valid foundation upon which we can even begin to consider granting a stay of execution [see the judgment of Ma J (as he then was) in Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 at p 89A-B].

34.  The defendant’s application is therefore dismissed with costs to be taxed.