BRILLIANT GREAT INVESTMENT LTD v. HANG HEUNG CAKE SHOP CO LTD

HCA 395/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 395 OF 2011

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REASONS FOR DECISION

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1. The Defendant company trades as a cake shop and is a licensee occupying certain property.  The Defendant’s business has operated from the licensed premises for over 30 years, using them as a factory.  The license fee for the occupation of the premises is payable monthly at a rate of $250,000.00.  The Defendant ceased payment of the license fees in or about mid December 2009 and, in March 2011, the Plaintiff commenced proceedings seeking the unpaid license fees, mesne profits, and an order for the vacant possession of the property.

2. The Defendant gave notice of intention to defend the claim following which the Plaintiff made an application for summary judgement.  That application was successful and judgement was entered by the Master on 5 December 2011.

3. On 15 December 2011 the Defendant filed a Notice of Appeal against that judgement.  No further evidence was served by the parties, but at the hearing before me on 29 March 2011 the Defendant sought leave to withdraw the appeal and a stay of execution of the judgment, a summons having been filed on 27 March under the inherent jurisdiction.  I indicated to the parties at the conclusion of the oral hearing that I was not persuaded that it would be appropriate for me to accede to the Defendant's application for the stay. These are the reasons for my decision.

4. The factual background to this stay application was the negotiations which had been on foot prior to the Plaintiff’s claim in these proceedings by which the Defendant sought to purchase the premises so as to ensure its ability to remain in occupation.  These matters were canvassed in the evidence adduced in the summary judgment application.  Those negotiations were slightly complicated in the way they were conducted, via a director of the Plaintiff (Mr Simon Tam) who, it is said, agreed to secure the agreement of the corporate shareholders of the Plaintiff to sell their shareholdings to the Defendant.  The Defendant alleges an agreement was reached for the sale in the sum of $51 million.  That is disputed, but what is not disputed is that a stage was reached at which there was a payment of a sum of $14 million made by the Defendant to the Plaintiff's Solicitors, which according to the Defendant was by way of a deposit.

5. The Defendant’s case is that there was a condition precedent to the sale which was the settlement of a claim made against the Plaintiff in HCA 1741 of 2009.  That claim was settled but, according to the Defendant the corporate shareholders of the Plaintiff then sought to increase the sale price for the property.  There was no agreement as to a revision of the sale price forthcoming from the Defendant and in late July 2011 the solicitors acting for the Plaintiff in the putative sale returned the sum of $14 million to the Defendant.

6. The above circumstances are of course amplified in the affidavit evidence and it was an issue before the Master as to whether these circumstances gave rise to a triable issue.  At the hearing before me however (following the withdrawal of the appeal) this was not an issue.  The decision for me was as to whether the Plaintiff, in whose favour judgment had been entered, and which judgment was no longer subject to challenge, should be deprived of the benefit of that judgment.

7. The basis on which the Defendant supported its application for a stay was, in effect, to enable it to negotiate with the Plaintiff to undertake further negotiations for the sale of the premises.  As an alternative to the negotiation approach the Defendant stated that its intention was to commence proceedings seeking the enforcement of the agreement which it says was reached previously for the sale of the premises.  Neither of these avenues have been pursued by the Defendant since about September 2011 it appears.  The Defendant was willing to undertake to make a substantial payment to the Plaintiff by way of a deposit which would also act as security for the monetary element of the judgment against the Defendant.

8. The law in regard to stay applications under the inherent jurisdiction allows for a flexible exercise of discretion to stay execution in appropriate circumstances.  Notwithstanding that flexibility however the circumstances are only likely to be such as to call for the exercise of the discretion if not to act would either give rise to injustice or abuse, or would demean the court or hamper the administration of justice.  See Credit Lyonnais v SK Global Hong Kong Ltd [2003] 4 HKC 104 at 107.

9. Applying those principles to the facts of this case it seems to me that the ‘best’ the Defendant is able to establish is that the enforcement of the judgment will (or may) result in unfortunate commercial consequences for the Defendant.  The validity of the judgment is not no longer challenged, and the Defendant has had a significant period of time over which to seek to resolve its commercial situation.  There is no question of unfairness, much less abuse or injustice arising in enforcement of the judgment.

10. For those reasons I felt myself unable to accede to the Defendant’s application for a stay and that part of the summons was dismissed.  For completeness I record that I allowed the Defendant’s application to withdraw the appeal against the judgment.

11. In the circumstances the costs of the application were ordered in favour of the Plaintiff.  These were made the subject of a gross sum assessment, in the sum of $100,000.