OSK ASIA FUTURES LTD. v. LAM CHI BIN STANLEY

HCA 10335/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10335 OF 2000

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D E C I S I O N

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1. This is D1's appeal against the Master's order dated 22 May 2001 whereby the learned Master dismissed D1's application for a stay of execution pending the determination of D1's appeal against the order of 20 April 2001 giving him conditional leave to defend this action.

2. The plaintiff brings this action against D1 and D2. According to the Statement of Claim dated 6 December 2000, the plaintiff is and was a member of the Hong Kong Futures Exchange Limited and has been carrying on the business of dealing in futures and options contracts. D1 was the plaintiff's former client who opened a futures/options trading account.

3. According to the plaintiff, on 13 October 2000, the plaintiff expressly told D1 he could only commence trading after sufficient margin deposits had been provided. As a result, on that day, D1 deposited a cheque in the sum of $2.5 million into the plaintiff's bank account.

4. Further, on the same day, D1 instructed the plaintiff to sell 250 Hang Seng Index Futures October contracts at open (14,460 points) which instruction was executed by the plaintiff accordingly. The market moved adversely against D1 subsequently. In the afternoon of 13 October 2000, D1 telephoned the plaintiff and informed the plaintiff that all the HSI contracts were to be transferred to D2, which was also a member of the Hong Kong Futures Exchange Limited carrying on the same business as the plaintiff.

5. It is the plaintiff's case that a binding agreement was reached between it and D2 that the plaintiff would give up and D2 would take up the HSI contracts.

6. This appeal is not concerned with the propriety of the order dated 20 April 2001 giving conditional leave to defend but only related to the dismissal of D1's stay of execution application.

7. Plaintiff's counsel has fairly accepted that the merits of the substantive appeal are usually not of crucial importance to an application of this kind. I do not consider that the facts of this appeal justify a departure from that general rule.

8. The plaintiff opposes this appeal on the following main grounds:

(1) there must be good reasons for depriving the plaintiff from obtaining the fruits of a judgment or order;

(2) D1 has not demonstrated that complying with the order of 20 April 2001 would cause him serious prejudice;

(3) accordingly, no good reasons have been shown by D1.

9. As a matter of principle, the plaintiff's point (1) above is correct. However, whether or not "good reasons" had been shown depends ultimately on the circumstances of each case.

10. In the present case, if the stay of execution is granted, the risk of prejudice to the plaintiff is that it will not be able to enter judgment against D1 (if D1 should fail to comply with the condition) between now and 16 July 2001 (the date fixed for hearing of the substantive appeal). On the other hand, depending on my determination on the adequacy of D1's evidence regarding the likely prejudice to him, the risk of prejudice to D1 may be that judgment in the sum of about $9 million will be entered against him (with the usual consequences regarding enforcement) if he defaults in paying $2.5 million into court.

11. D1 has argued that he will be financially ruined if he is required to comply with the said condition of payment into court. I do not understand how this can be so. However, since D1 is not legally represented, and may not be articulate in his language, I consider what he meant to say is that if there is no stay of execution, he will not be able to comply with the said condition. This in turn will result in judgment being entered against him and this will bring about financial ruin to him.

12. D1 has filed 2 affirmations respectively dated 4 May 2001 and 5 June 2001 in support of this appeal. In his 4 May 2001 affirmation, D1 deposed that he would not be able to comply with the order of 20 April 2001 without depriving himself of all working capital or selling his investment in the mainland at an undervalue. In 5 June 2001 affirmation, D1 deposed to the assets he owns, especially the amount of available cash in the bank accounts. A number of criticisms have been levied by the plaintiff against D1's affirmations. Despite these, I conclude that D1 has adduced sufficient evidence to show that if the order of 20 April 2001 was not stayed between now and 16 July 2001, he would suffer serious prejudice.

13. I have taken into account the following matters in reaching this conclusion:

(1) the time period between the order of 20 April 2001 giving conditional leave to defend and today is relatively short (a period of about 1 1/2 months). This would have an adverse effect on the quality of the evidence which D1 was able to adduce in support of this appeal;

(2) information regarding the most substantial piece of asset, namely, the $34 million worth of investment in the mainland, was volunteered by D1. With this in mind, I do not agree with counsel's submission that (a) D1 has been less than full and frank in the disclosure of his overall financial situation, (b) D1 has not been genuine in deposing that he had been unable to obtain finance to meet the condition of payment into court;

(3) it is often difficult to prove a negative. In the context of an application for a stay of execution, this means that it is often difficult to conclusively demonstrate that one does not have the means to comply with the condition imposed in an order (or other types of judgments).

14. For the above reasons, I will allow the appeal and order that there be a stay of execution of the order of 20 April 2001 relating to the payment of $2.5 million into court until 16 July 2001 or further order (whichever is the earlier).