WU JIUNN-DER v. FESL TRADING LTD

DCCJ 792/2024

[2024] HKDC 1432

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 792 OF 2024

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DECISION

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Introduction and Procedural Background

1.  By Inter Partes Summons dated 16 August 2024, the Intervener (“IV”) seeks a stay of execution of the Garnishee Order Absolute (“GOA”) made by Master B Mak (“the Learned Master”) on 9 August 2024 until further order of the court.

2.  After hearing an ex parte application of IV on 15 August 2024, Her Honour Judge Phillis Loh granted: (1) leave to IV to join in these proceedings for the purpose of appealing to a judge against the GOA; and (2) interim stay of execution of the GOA until the hearing before me today (“the Interim Stay”).

3.  On 16 August 2024, IV filed a Notice of Appeal against the making of the GOA by the Learned Master to be heard by me on 3 October 2024.

4.  On 22 August 2024, through my clerk, I indicated to the Plaintiff (“P”) and IV that I was minded to continue the Interim Stay up to 3 October 2024 and to vacate today’s hearing.  If any party had any objection to this proposed course, submissions were to be lodged for consideration by me on paper.

5.  By letter from P’s solicitors dated 26 August 2024, it was submitted as there exists no arguable appeal the Interim Stay should not be continued and the hearing before me today should not be vacated. 

6.  By Plaintiff’s Skeleton Submissions dated 26 August 2024 (“P’s Skeleton”), Mr Wong, counsel for P, indicated therein that P’s stance was that IV’s appeal is unarguable and the Interim Stay should be lifted. 

7.  Given the stance of P, the hearing proceeded before me today.

Applicable Principles and Analysis

8.  The applicable principles for the exercise of the discretion to grant a stay of execution are not disputed. 

9.  As Ma J (as he then was) held in Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84, in order to justify a stay of execution, one had to demonstrate that good reasons existed.  Whilst the learned judge held that it would be wrong to set out exhaustively what would constitute good reasons, commonly, reference is made to factors such as whether the absence or existence of a stay would render an appeal nugatory and the merits of the appeal (see §§7-8).  See also Hong Kong Civil Procedure 2024, Vol 1, §59/13/1.

10.  I do not think P has disputed that the absence of a stay would render the appeal nugatory.

11.  Plainly, now that the GOA has been sealed and served on the Garnishee, if there is no stay of execution of the GOA, the sum of US$252,470.71 with interest and HK$7,130 fixed costs would be paid to P.  The Garnishee had already informed IV by letter dated 23 July 2024 (“Garnishee’s Letter”) that the funds of the Defendant (“D”) held with the Garnishee are insufficient to meet the judgment sum (US$100,000 with interest and HK$7,130 fixed costs) which IV has obtained against D (“D’s Judgment Debt”).  As deposed in IV’s supporting affirmation, P being a resident in the US and there being no information as to whether P has assets within Hong Kong, there is an appreciable risk that P would not be able to repay any monies paid to P if following the hearing of the appeal, I take the view that the GOA was wrongly granted.  On the other hand, if IV’s appeal is unsuccessful, if the monies remain in the hands of the Garnishee in the meantime, P should have no difficulty in enforcing the GOA.

12.  Where there is an appreciable risk that the respondent to the appeal would not be able to repay in the event of a successful appeal, such the appeal would be rendered nugatory, the court may require no more than the existence of an arguable appeal: see Star Play Development Ltd, §9(8) and The Yerrid Law Firm v Qiansbaizi Trading Ltd & Anor (China Citic Bank International Ltd, Garnishee) [2021] 5 HKC 256, §§20-21.

13.  Of course, if the court is not convinced that there exists arguable grounds of appeal, no matter how exceptional the circumstances justifying a stay of execution, no stay will be granted: see Star Play Development Ltd, §9(6).

14.  I now turn to the matters which Mr Wong submitted rendered IV’s appeal unarguable in paragraphs 29-34 of P’s Skeleton.

15.  Firstly, it was submitted that the Learned Master was “of course” entitled to make the GOA without hearing from IV when he elected not to take out a Summons for leave to attend the hearing on 9 August 2024.  Whether or not the Learned Master was entitled not to hear IV in the absence of any Summons no doubt will be a matter to be argued before me at the appeal.  At the very least, I take the view it is arguable that IVshould be heard when it comes to the Learned Master’s notice that IVhad asserted a claim over the funds held by the Garnishee. 

16.  See Hong Kong Civil Procedure 2024, Vol 1:

(1)  At §49/6/1:

“It is the garnishee’s duty to acquaint the court with any claim or lien known to him… But though the garnishee does not make the suggestion, if in fact, comes to the master’s notice and is not unreasonable, he ought not to make the order absolute…”; and

(2)  At §50/9A/23:

“The general principles governing the exercise of the discretion to make a charging order may be summarized as follows:

…

3. For the purpose of the exercise of the court’s discretion there is, in general, no material difference between the making absolute of a charging order nisi on the one hand and a garnishee order nisi on the other.

4. In exercising its discretion the court has both the right and the duty to take into account all the circumstances of a particular case, whether such circumstances arose before or after the making of the order nisi.

5. The court should exercise its discretion as to do equity, so far as possible, to all the various parties involved, that is to say, the judgment creditor, the judgment debtor and all other unsecured creditors. …”

17.  Secondly, whilst it is correct that at the time of the hearing before the Learned Master no winding-up proceedings has been commenced against D, given that IV had served a statutory demand on D on 7 August 2024 and according to the Garnishee’s Letter there is insufficient funds to satisfy D’s Judgment Debt, it is arguable that winding-proceedings are imminent and there is some prospect of a true pari passu distribution taking place such that the court ought to decline to make the garnishee order absolute.

18.  In Wardley Ltd v Aik San Realty Ltd [1985] 2 HKC 695 whilst the court refused to discharge a charging order absolute in the case of a company in a position of near insolvency but there had not been any winding-up proceedings commenced, it is arguable that that case is distinguishable from the present case where winding-up proceedings are imminent.

19.  Mr Chan, counsel for IV, also referred me to the Court of Appeal decision in Credit Lyonnais v SK Global Hong Kong Ltd [2003] 4 HKC 104 at §8(4) where Ma CJHC held:

“The only situation in which the courts have appeared to take into account broader interest when considering question of execution, have been where the judgment debtor was in the process of being wound up or where liquidation or some form of scheme of arrangement was imminent…”.

20.  See also Paloma Company Limited v Capxon Electronic Industrial Company Limited [2020] HKCFI 754 at §§48-49 where the Hon K Yeung J applied “the imminence test” in Credit Lyonnais.

21.  Whilst Mr Wong sought to persuade me that there must have been the presentation of a winding-up petition in order for liquidation to be imminent, I am of the view that this will have to be argued at the appeal.  The threshold of an arguable appeal has been met by IV.

22.  Finally, in paragraphs 35-36 of P’s Skeleton (“one further reason why the interim stay should be lifted”) it was suggested that there was injustice to P if the stay is not lifted in that IVcould present a winding-up petition which would “muddy the waters”.  However, in an appeal against master’s decision is a hearing de novo, I could exercise the discretion afresh so I do not accept there is any muddying of waters. 

23.  As for the “three final points for this Honourable Court’s consideration” in paragraphs 37-39 of P’s Skeleton, these are all really matters for submissions at the appeal and do not render the appeal unarguable.

Disposition and orders

24.  For the above reasons, I will order that the Interim Stay be extended to 3 October 2024.  Costs of this application, with certificate for counsel, be in the cause of the appeal.