LIBERTARIAN INVESTMENTS LTD v. THOMAS ALEXEJ HALL

CACV 54/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 54 OF 2011

(ON APPEAL FROM HCA NO. 2533 OF 2006)

________________________

BETWEEN

________________________

________________________

REASONS FOR JUDGMENT

________________________

Hon Fok JA (giving the Reasons for Judgment of the Court):

1.  On 6 February 2012, we handed down our Judgment dismissing the appeal and cross-appeal. We made an order nisi that the defendant pay two-thirds of the plaintiff’s costs to be taxed if not agreed, with a certificate for two counsel.

2.  By notices of motion both dated 5 March 2012, the defendant and the plaintiff respectively sought leave to appeal to the Court of Final Appeal from our Judgment.

3.  There were also three further summonses issued by the defendant.  First, by summons dated 20 February 2012, the defendant applied to vary our costs order nisi.  Secondly, by summons dated 10 April 2012 (in HCMP 664/2012), the defendant applied for an extension of time for leave to appeal against the costs order of Stone J dated 25 March 2011.

4.  Thirdly, by summons dated 5 March 2012, the defendant applied for the continuation of a stay of execution of the Amended Judgment of Stone J dated 25 February 2011 granted by Yuen JA on 8 April 2011 until after final determination of the defendant’s appeal to the Court of Final Appeal (if leave were to be granted).  By that summons, the defendant also applied for the payment out of the difference between the sum which this Court ordered to be paid by the defendant to the plaintiff and that which Stone J ordered to be paid.

5.  At the hearing, we determined each of those various applications and indicated we would give our reasons in due course, which we now do.

Leave to appeal to the CFA

6.  The effect of our Judgment was to set aside the judgment of Stone J to the extent of £813,190.03.  That sum was part of the amount which Stone J and this Court considered the defendant was obliged to pay to the plaintiff as proprietary restitution on the basis that the defendant owed fiduciary duties to account to the plaintiff for the funds transferred by the plaintiff to the defendant.

7.  On the parties’ respective notices of motion for leave to appeal to the Court of Final Appeal, we were satisfied that each of the appeal and cross-appeal respectively involves, directly or indirectly, some claim or question to or respecting property amounting to or of the value of HK$1,000,000 or more and we therefore granted leave, pursuant to s. 22(1)(a) of the Hong Kong Court of Final Appeal Ordinance (Cap. 484), to the defendant and the plaintiff in terms of paragraph 1 of their respective notices of motion.

8.  Such leave is granted on the basis of the usual condition as to the provision of security in the sum of HK$400,000 by each of the defendant and the plaintiff respectively within 28 days from the date of handing down these Reasons for Judgment.

9.  We ordered that the costs of the applications for leave to appeal will be costs in the cause of the appeal and cross-appeal respectively.

Variation of costs order nisi

10.  The defendant contends that by a written offer dated 17 December 2007, made on without prejudice save as to costs terms, he offered to pay the sum of £9,000,000 inclusive of costs in full and final settlement of the plaintiff’s claim.

11.  Accordingly, the defendant submits that the costs order of both the action and the appeal should be varied to an order that the determination of the question of those costs should be adjourned until after the completion of the taking of the account pursuant to our Judgment.

12.  This argument was addressed to Stone J following the trial below and he rejected it by his Decision on Application to Vary Costs Order Nisi dated 25 March 2011.  Since that exercise of discretion by Stone J was not separately appealed by the defendant in its Notice of Appeal also dated 25 March 2011, the defendant applied for an extension of time in which to appeal by his summons dated 10 April 2012.

13.  We did not consider that an extension of time was strictly necessary, but in the event, for the reasons set out below, we were not minded to interfere with the Judge’s decision on costs and so it was not necessary to make any order on the summons dated 10 April 2012.

14.  We did not consider that the “without prejudice save as to costs” letter should be taken into account as a Calderbank offer in the present case because, in our view, first, the defendant could have protected his position as to costs by making a payment into court pursuant to s. 62 of the Trustee Ordinance (Cap. 29) but did not do so.  Additionally, although a payment in under RHC O.22 could not, strictly, have been made at the time of the without prejudice save as to costs letter, the position after the introduction of the Civil Justice Reform was such that the defendant could have made a sanctioned payment or offer under the terms of the new RHC O.22 but did not do so.

15.  Secondly, in agreement with the view of Stone J, we regard that letter as merely being in the nature of an invitation to treat rather than an outright offer to settle.

16.  Further, and in any event, we are not persuaded by the defendant that it was unreasonable for the plaintiff not to have accepted the offer at the time it was made since at the date of the offer it was not known if the defendant had purchased the third tranche of TSE shares, nor was it known what the defendant might have done with the plaintiff’s funds in respect of which he owed fiduciary duties.

17.  In the circumstances, we declined to vary our costs order nisi and dismissed the appeal against Stone J’s costs order of 25 March 2011.

18.  The defendant’s summons to vary was therefore dismissed with costs to the plaintiff.

Stay of execution and payment out of balance

19.  The sum of £6,387,990.94 has been paid by the defendant to the plaintiff’s solicitors and is held by them on an undertaking to keep that sum in their client account until after determination of the defendant’s appeal to this Court.

20.  This payment was pursuant to the order of Yuen JA and the undertaking was given as a condition of her grant to the defendant of a stay of execution of Stone J’s judgment.

21.  The defendant sought a continuation of that stay of execution pending the final determination of the defendant’s appeal to the Court of Final Appeal (if leave were to be granted).

22.  Given the fact that (i) there was no evidence as to the amount of the plaintiff’s assets within the jurisdiction, (ii) the plaintiff is a company incorporated in Jersey with a relatively modest authorised share capital of £10,000 and (iii) the likelihood, in view of Mr Woods’ death in January 2008, that any sum paid out to the plaintiff would likely be distributed out of the company, we considered it would be appropriate to continue the stay granted by Yuen JA until determination of the defendant’s appeal to the Court of Final Appeal, subject to a similar undertaking as that given as a condition of her order, namely that the plaintiff’s solicitors keep the sum in their client account until after determination of the defendant’s appeal to the Court of Final Appeal.

23.  As a result of our Judgment, the amount which the defendant was ordered to pay to the plaintiff by way of interim amount was varied downwards by £813,190.03.  The defendant sought an order that this amount be released from the sum held by the plaintiff’s solicitors and be paid to the defendant’s solicitors.

24.  We considered that it would be appropriate to order the release of the sum of £813,190.03 held by the plaintiff’s solicitors since this is the logical consequence of our Judgment.  Although it was not proposed in the summons that it be so paid subject to any condition, it is clear that if this sum were released to the defendant’s solicitors it would remain subject to the worldwide Mareva injunction which the plaintiff obtained against the defendant.  Further, in answer to the plaintiff’s concern that the defendant might seek to use this sum to pay his legal costs, Mr Wright expressly acknowledged that it was accepted by the defendant that he was only entitled to use his own money for legal fees.

25.  On the defendant’s summons seeking a stay of execution, we therefore granted an order in terms of paragraphs 1 and 2.  We ordered that the costs of that summons be in the cause of the defendant’s appeal to the Court of Final Appeal.