CHEN JINHUI v. HUANG YUEXIA, the person appointed to represent the estate of WONG KAM SAN, Deceased AND OTHERS

HCA 1524/2012

[2022] HKCFI 1829

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1524 OF 2012

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DECISION

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1.  After trial, this court entered judgment in favour of the plaintiff against the defendants on 19 March 2021 (“the Judgment”). The defendants have lodged appeal. This is the application by the 4^th, 5^th and 6^th defendants for stay of execution pending the appeal. Unless otherwise specified, the defendants will collectively be referred to below as the relevant defendants.

BACKGROUND

2.  The background of the case was set out in the Judgment in writing dated 19 March 2021.  I adopt the same definitions and abbreviations in the Judgment.  For the present purpose, it suffices to recapitulate that this court found, amongst other things, that Chen (the plaintiff) was and is the beneficial owner of 80% shares in Hawkins (the 5^th defendant), which had been transferred (by the other defendants) first to Lead Success (the 4^th defendant) and then to Superfine (the 6^th defendant).  This court granted declaration that Lead Success and Superfine held such shares in Hawkins on trust for Chen.

3.  This court also made an order for the transfer of the 80% of Hawkins’ shares by Superfine to Chen or in default, payment of their value as follows (“the Order”):

“253. …Superfine do transfer, and take all steps to procure the transfer of, 80% Hawkins’ shares to Chen, failing which a partner of the solicitors for Chen may be named and empowered to execute the necessary documents for the transfer.

254.     In default of transfer of the shares as aforesaid (… in 90 days), each of Wong, Lead Success and Superfine shall jointly and severally pay to Chen 80% of the value of Hawkins’ shares, which is assessed at RMB115 million x 80% = RMB92 million.  Credit shall be given to RMB60 million pursuant to the Letter of Undertaking, which shall in turn be reduced by the interest accrued on the sum of RMB21,925,140 at the prevailing official interest rates in the PRC from 11 January 2003 until full payment.”

4.  The defendants appeal.  The notice of appeal lodged by the relevant defendants was dated 14 April 2021.

5.  By letter dated 22 July 2021, Chen through his solicitors formally demanded Superfine to execute all necessary documents for effecting the transfer of the shares to Chen; and to procure the board of directors of Hawkins to (i) approve the transfer; (ii) to register the transfer and Chen’s name into the registers of transfer and members of Hawkins and (iii) to issue and deliver a share certificate for the shares to Chen.

6.  In response, the relevant defendants took out their summons for stay of execution on 30 July 2021 (“the Stay of Execution Summons”).  In support, the alleged adverse impact of the transfer of the shares was pointed.  Instead, the status quo pending the appeal was proposed and, if required, undertakings would be offered.  This is one of the applications before this court now.

7.  On 16 August 2021, acting pursuant to the Judgment, a partner of the solicitors for Chen proceeded to execute the instrument for the transfer of the shares from Superfine to Chen.  The instrument was stamped on 20 August 2021.

8.  By letter dated 30 December 2021, the solicitors for Chen wrote to Hawkins requesting it to register the transfer in 2 months pursuant to section 151(1) and (2) of the Companies Ordinance, Cap 622 (“CO”).  The request was not heeded to.

9.  By letter dated 21 January 2022 from their present solicitors, Lead Success, Hawkins and Superfine for the first time denied Chen’s entitlement to the transfer of the shares on the ground that the 90-day period referred to in the Judgment (ie by 17 June 2021) has lapsed or ceased to subsist before the execution of the instrument of transfer.  By letter dated 26 January 2022, the solicitors for Chen replied to such contention, which will be discussed below.

10.  Chen has a contingency plan.  That is if this court accepts his opponents’ contention so that his entitlement to the transfer of the shares was subject a 90-day time limit, then he would ask this court to extend such time so as to recognise the executed instrument of transfer mentioned above.  For that, he took out his summons on 27 January 2022 (“the Time Extension Summons”).  Naturally, Lead Success, Hawkins and Superfine oppose that.  This is contingently the other application before this court.

11.  For the purpose of arguing the parties’ summonses, both sides also took out summons for leave to rely on further affirmation evidence.  Counsel confirmed during the trial that no issue would be taken about each other’s application.  It follows that the affirmations, including the recent ones, are all in for the present purpose.

THE STAY OF EXECUTION SUMMONS

The principles

12.  The Stay of Execution Summons was taken out pursuant to O59, r13 of the Rules of the High Court, Cap 4A. Counsel for Chen succinctly summarised the following applicable principles, which this court adopts:

(1)  An appeal does not operate as a stay of execution of the order below: see r13(1)(a).  No intermediate act or proceeding shall be invalidated by an appeal: see r13(1)(b).

(2)  A successful party is not to be deprived of the fruits of his success in the litigation.  The burden is on the appellant to show that a good reason exists to justify a stay, otherwise no stay will be ordered.  See Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 at §§7; 10.

(3)  The appeal must carry a reasonable prospect of success.  A merely arguable appeal cannot, by itself, amount to sufficient reason to justify a stay: see Star Play (above) at §9.  A strong likelihood of success in the appeal will usually justify the grant of a stay, but that happens only where the court shares the projection of the likelihood that the court below was plainly wrong: see Wenden Engineering Service Co Ltd v Lee Shing Yue Construction Ltd, HCCT 90/1999 (17 July 2002) at §6.

(4)  A broad-brush approach is called for.  Application for stay of execution should not be turned into a dry run of the appeal: see Bright Gold Ltd v Mega Well Development Ltd [2019] HKCA 1440 at §13.

(5)  Even if a reasonable prospect of success in the appeal can be shown, the appellants must also satisfy the court by evidence that such appeal will be rendered nugatory in the event of a stay not being granted: see Star Play (above) at §9.  The court must have regard to the prejudice that may be suffered by the successful party if a stay is granted.

The parties’ arguments

13.  The parties’ arguments cover the following issues:

(1)  Whether or not there is still execution of the Judgment that could be stayed pending the appeal.

(2)  Whether the appeal has no reasonable prospect of success.

(3)  If the answer to (2) is yes, whether the appeal would be rendered nugatory if no stay is granted.

(4)  Whether stay would subject Chen to significant prejudice and risk of losing the fruits of his success as a result of a stay.

Issue (1)

14.  The relevant defendants’ solicitors by affirmation in support of the Stay of Execution Summons explained why the transfer of the shares in execution of the Judgment should be stayed pending the appeal.  Their stance has since changed in that they now argue that Chen’s entitlement to the transfer of the shares pursuant to the Judgment has lapsed prior to the execution of the instrument of transfer on the ground that the 90-day time limit under the Judgment has expired.  Chen has since been entitled only to payment of the value of the shares pursuant to the Judgment.  If this is right, what Lead Success, Hawkins and Superfine are seeking to stay is not the transfer of the shares but the payment obligation.

15.  Chen disputes that the above is the effect of the Judgment.  He also argues that by the execution of the instrument of transfer, which he was entitled to do at the time pursuant to the Judgment, there is in fact nothing left under the Judgment, insofar as transfer of the shares is concerned, to be executed or stayed.  What remains is the registration of the transfer, which is a matter of his statutory right under sections 151 and 152 of the CO.  As mentioned, Chen exercised such right by lodging the transfer with Hawkins at the end of December 2021.

16.  The parties became engaged in argument in respect of the proper construction of the terms of the Judgment and the Order.

17.  To this court being responsible for the Judgment and the Order, this is not an issue of construction of their terms.  If there were any genuine doubt about the proper understanding of the terms and effect, the parties would have been expected to seek clarification from this court. That was never done.  It now makes no better sense for this court to purport to resolve this as a construction issue than to say what this court in fact intended by the terms of the Judgment and the Order.

18.  This court is acutely aware of the legitimate constraint.  On the one hand, explanation of the Judgment and the Order is necessary and actually inevitable as part of the reasons for this decision.  On the other hand, this court should refrain from elaboration tantamount to furthering the reasons for the Judgment.

19.  The starting point is that Chen was found to be the beneficial owner of the 80% Hawkins’ shares since 15 April 2011.  The declaration to the same effect was granted to recognise that beneficial interest.  Such interest did not arise or take effect because of the declaratory relief.  On this basis, Chen was granted the further relief, namely, the transfer of the shares or failing which, payment for their value.

20.  What this court set out in §253 of the Judgment was the not an unusual mechanism for enabling Chen to effect the transfer even in the event of default on the part of Superfine.  In doing so, this court never intended to subject Chen to deprivation of his entitlement to the transfer of the shares to any time limit.  A period, namely 90 days, was referred to in §254 of the Judgment.  The time was set, again not for the purpose of disentitling Chen to the transfer of the shares, but for the purpose of first defining default on the part of Superfine, which carries the obligation of effecting the transfer, and second, triggering the entitlement of Chen to payment of the value of the shares by the relevant defendants, including Wong (the 1^st defendant), as an alternative if Superfine defaults in effecting the transfer.

21.  It would be a matter of Chen’s election between the alternative remedies if he failed in obtaining the transfer of the shares in 90 days.  To say that he would effectively lose his entitlement to elect after 90 days is not the intention or within the contemplation of this court.  Apparently those acting for Chen understand that.  Hence his counsel’s submission that Chen simply had no right to, and had no right to elect, for the monetary relief within 90 days.

22.  Chen made his election by deploying the mechanism of execution of the instrument of transfer in August 2021, when he could still do so pursuant to the Judgment.  In the circumstances, the premise for his summons for the Extension of Time Summons dated 27 January 2022 does not exist.  Taking the risk of being hypothetical in achieving completeness of this decision, this court would have been prepared to extend the time, and thereby relieving Chen of the deprivation of the entitlement to the transfer of the shares, in the event that the relevant defendants’ contention in respect of the terms and effect of the Judgment and Order were correct.

23.  Insofar as the transfer of the 80% Hawkins’ shares is concerned, it is argued on behalf of Chen that the Judgment and the Order in such respect has been executed by the execution of the instrument of transfer in August 2021 pursuant to the mechanism stipulated under the Judgment and the Order.  What remains is the registration of the transfer, which is a matter of the operation of sections 151 and 152 of the CO.  As such, there is nothing to stay.

24.  Briefly, section 151 sets out the mechanism whereby the parties to a transfer of the shares in a company may lodge the transfer with the company.  The company must register the transfer or alternatively refuse for reasons, if requested by any of the parties.  Breach of the section entails criminal sanction on the company and its responsible person.  Section 152 empowers the court to order the company to register the transfer upon application by either party to the transfer.

25.  Chen is right.  §253 of the Judgment refers to the transfer of the 80% Hawkins’ shares, which Superfine was obliged to do and to take all steps to procure.  What that would entail, as that paragraph continued to make clear, would be its execution of the necessary documents for the transfer to Chen.  Whilst it may be said that Superfine should be in a position to also procure Hawkins to register the transfer, registration of the transfer by Hawkins, let alone reference to Hawkins, was not mentioned in that paragraph (or the following one in the Judgment).  Registration, as it is argued on Chen’s behalf, would be taken care of as a matter of the statutory right of Chen under sections 151 and 152 of the CO.  If necessary, Chen would be entitled to take out an application for an order of the court against Hawkins for the registration of the transfer pursuant to section 152 of the CO.

26.  On this basis, upon the execution of the instrument of transfer of the 80% Hawkins’ shares pursuant to the mechanism set out in §253 of the Judgment, that part of the Judgment was satisfied.  Registration of the transfer is not part of the Judgment that calls for execution or, for the present purpose, stay of execution.  Whether or not Hawkins or the other relevant defendants may be in a position to resist an application by Chen under section 152 on the basis of the pending appeal against the Judgment is not before this court.

27.  It follows that there is no question of the present application by the relevant defendants being one for stay of execution of the Judgment for payment of the value of the 80% Hawkins’ shares under §253 of the Judgment.

Issue (2)

28.  Be it the order as to the transfer of the Hawkins’ shares or payment of their value that the relevant defendants are seeking to stay, the merits of the appeal are relevant.

29.  According to the notice of appeal, the relevant defendants seek to challenge against (i) this court’s findings in relation to the 6/9/2005 Letter and the 8/9/2005 Letter (or collectively “the September 2005 Letters”) (§§1-4) and the availability of the defence of bona fide purchaser for value without notice to them in the circumstances of this case (§5), as well as (ii) this court’s grant of remedies which is said to be based on failure to have regard to the contributions made by the Yu/Bao camp to Hawkins (§§6-7).

30.  As to whether the remedy of transfer of the 80% Hawkins’ shares was unconscionable ((ii) above), this is not really argued in counsel’s submission on behalf of the relevant defendants.  In any event, the entitlement of Chen to such remedy was conceded on behalf of the other defendants, and the point was not taken on behalf of the relevant defendants at the trial.  The parties’ arguments focus on this court’s findings ((i) above).

31.  The principles are trite.  In an appeal against findings of fact, the appellate court will intervene only if it is satisfied that the findings being impeached are plainly wrong: see Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336.  As mentioned, a broad-brush analysis instead of a dry run of the appeal is expected for the present purpose.

32.  Concerning the findings in relation to the September 2005 Letters, this court intends not to repeat the host of evidence, both factual and expert opinion, that has entered into consideration in respect of the contemporaneous existence and authenticity of the documents, which were set out in the Judgment and now industriously by counsel for Chen in their written submission in detail.  Suffice to say that this court is not impressed about the prospect of success in the argument that such findings, be they those of the primary facts or by inference, are either unsupported by evidence or the result of erroneous understanding of the evidence so as to disentitle this court from making on the balance of probabilities.  As such, they could not be plainly wrong.

33.  In respect of their appeal against the findings of fact discussed above, the relevant defendants took out an application to the Court of Appeal for leave to adduce new evidence for the purpose of the appeal.  The application was first taken out by summons on 7 December 2021.  Subsequent change of mind brought about application to amend the summons by way of their summons dated 24 January 2022, which was followed by yet another summons dated 31 January 2022 for further amendments.  It is fair to say that by the proposed amendments, the original terms of the application are effectively abandoned.  As of the date of the present hearing, Chen had yet to have the opportunity of stating his opposition to such application with evidence in support before the Court of Appeal.

34.  The delay and change on the part of the relevant defendants so caused rendered it quite clear that the issue of whether or not the relevant defendants may rely on the new evidence on appeal remains uncertain as of today.  The significance is that they likewise may not rely on the new evidence for the purpose of the Stay of Execution Summons.

35.  I do not agree that the relevant defendants may expect this court to somehow take into account such new evidence by assuming the likelihood of success of such pending application before the appellate court in their favour.  That would be speculation, and never the correct approach for a matter like that now before this court.  One simply ask what if this court in determining the Stay of Execution Summons takes into account such new evidence but the appellate court eventually refuses leave to allow such evidence in.  The fact that Chen was as of the date of the present hearing yet to have the opportunity of setting out his opposition with evidence in support adds to the inappropriateness of adopting the approach proposed on behalf of the relevant defendants.

36.  As to this, counsel for the relevant defendants came up with a proposal, namely to adjourn the Stay of Execution Summons until after the appellate court has ruled on their application for leave to rely on new evidence on appeal, while in the meantime to grant an interim stay of execution of the Judgment.

37.  The proposal is not accepted.  As mentioned, the state of affairs in respect of the admissibility of the new evidence was known prior to the present hearing.  So was the stance of Chen.  Had the relevant defendants taken the view that the new evidence would be crucial to the determination of the Stay of Execution Summons, they would have fixed the hearing or sought to adjourn the hearing already fixed until after the determination of their application for leave to rely on such evidence by the Court of Appeal.  The proposal now made was not mentioned in the written submission of the relevant defendants.  It was not even sounded out in the course of the oral submission on their behalf.  It was raised for the first time in the oral submission on their behalf in reply.

38.  If an interim stay of execution is granted upon such adjournment, the relevant defendants would have achieved their purpose whilst the Stay of Execution Summons is yet to be determined.  Further, even without an interim stay of execution, mere adjournment of the present hearing in such manner would be tantamount to acceding to a request for a second chance of arguing the matter all over again.  This cannot be right.  The excitement so caused to Chen’s side by such proposal in such manner at the hearing is therefore understandable.

39.  That aside, it may be said that the prospect of obtaining leave from the Court of Appeal to rely on the new evidence is not without doubt.  In view of what was said above, this court only intends to be brief in this respect.

40.  The three conditions under Ladd v Marshall [1954] 1 WLR 1489 need no introduction. 

41.  Now the relevant defendants essentially seek to rely on the new evidence that is said to cast light on the alleged forgery of the September 2005 Letters.  There are said to be recently obtained documents which have previously been seized by the Mainland authority.  There is also new evidence in relation to alleged pre-signing and pre-chopping of blank Shunfeng letterhead by Wong (the 1^st defendant) as well as the alleged fact of scrapping of the actual chop of Shunfeng prior to the date of the letters.  All, the relevant defendants say, tend to prove that the September 2005 Letters and specifically the chop on the 8/9/2005 Letter were forgery.

42.  In view of their relationship, the consideration of the first of the Ladd v Marshall condition, namely that it was not possible to obtain the new evidence with reasonable diligence for the trial, concerns not only the position of the relevant defendants but also that of the other defendants in obtaining the evidence.  The difficulty in overcoming this condition is readily apparent.

43.  Authenticity of the September 2005 Letters was squarely an issue to be resolved at the trial.  As explained in the Judgment, it was not that the defendants did not adduce any evidence at all regarding the issue.  Much would need to be explained as to why the step that the relevant defendants now say that has recently been taken to obtain and to trace the new evidence could not have been taken before the trial.

44.  The fact, as mentioned in the Judgment, was that notwithstanding taking issue as to the authenticity of the 6/9/2005 Letter, the relevant defendants did not seek to adduce any expert evidence.  That was so, notwithstanding the evidence of handwriting experts from not only Chen, but also the other defendants, which, albeit unexpectedly, cast light that favoured the proof of the authenticity of the letters.

45.  Witness who was expected to possess relevant knowledge, including Madam Liu, also gave evidence.  However, the assertion that the 8/9/2005 Letter was a product of the alleged practice of Wong pre-signing and pre-chopping documents in blank or what was stamped on the document came from a fabricated chop, as the actual one had been destroyed by then, was not even pleaded or raised in the witness’ evidence.  Evidence in respect of the alleged practice of Wong in pre-signing document in blank was adduced in the context of the authenticity of the 10/1/2003 Confirmation.  Evidence in respect of his alleged practice of also pre-chopping document in blank, the parties should recall, was sought to be adduced by way of a last-minute application on behalf of the other defendants in the course of the oral evidence, which this court dismissed outright with explanation in the Judgment.  In any event, it was still not in the context of the 6/9/2005 Letter.

46.  Against this background, it would appear that the path of satisfying the other two Ladd v Marshall conditions is likewise far from straightforward.  I say no more on this.

47.  Whether or not the relevant defendants can avail the defence of bona fide purchaser for value without notice in the circumstances is a question of both law and fact.  As far as the law is concerned, the key is whether the purchaser must pay his or her value in full before notice of the prior equitable interest in order to entitle him or her to take free of such interest.  On that, what counsel for the relevant defendants refers to in their written submission as the relevant authorities (starting from Tourville v Naish (1734) 3 P Wms 307) and legal texts (including the very much discussed Lewin at §41-118) were indeed discussed in detail in the Judgment.  In the course of that, this court also cared to avoid confusion between the issue and the notion of sufficiency of consideration which concerns the validity of a contract.

48.  Now counsel for the relevant defendants seek to raise a point of law on the basis of the remark by Lewin that is said to cast doubt or reservation about the requirement of full payment of value before the purchaser may avail the defence of “equity’s darling”.  However, not only was this court acutely aware of such remark, but the analysis of the same was also set out in the Judgment.  Counsel also highlight that the statements in this regard in some of the authorities were obiter.  However, the trail of references and analysis of such line of authorities both in the cases and legal texts lends weight to the understanding of the notion as this court concluded.  With respect, this court is not convinced about the prospect of proving that wrong in law on appeal.

49.  Whichever way the question of law discussed above is answered, the situation of the relevant defendants would not materially change if they are fixed with notice of Chen’s existing beneficial interest in Hawkins’ shares in view of the September 2005 Letters, which predated Superfine’s contractual acquisition of the shares.

50.  All matters considered, including those specifically discussed above, this court does not find that the relevant defendants manage to demonstrate the necessary degree of prospect of success of the appeal that would justify the deprivation of the fruit of success obtained by Chen after trial.

51.  What follows is discussion for the sake of completeness.

Issue (3)

52.  By their solicitor’s affirmation, the relevant defendants project the adverse impact if the execution of the Judgment is not stayed pending the appeal.  It is said that through the controlling shareholdings in Hawkins, Chen would gain control over Shunfeng, and act contrary to its interest.  For instance, Chen did not know how to run the company.  It is also suggested that Chen may dispose of his shares in Hawkins or cause Hawkins to dispose of its shares in Shunfeng in order to settle his debt owed to third parties.  There would be grave difficulty to recover the shares or their value from Chen if the appeal is successful, as Chen is resident outside Hong Kong.

53.  This court is not impressed that the above projection is real or incapable of being addressed pending the appeal.

54.  It may not be entirely accurate to suggest that Chen has had no prior involvement or knowledge in the business operations of Shunfeng.  For what is worth, Chen has been director of Shunfeng during the period between 1997 to 2007.  In any event, Shunfeng is supposed to be managed by its board, the composition of which is at the moment subject to a freezing order in the Mainland imposed in mid-April 2021, which will be discussed further below.  The evidence shows that Chen has written to the Mainland directors, seeking their support and continued good faith to act in the interests of Shunfeng.  The alleged risk of Chen taking steps to sabotage the business of Shunfeng is not substantiated by concrete evidence, and on its face contrary to Chen’s own interest.  That Chen through his lawyer issued in May 2021 a newspaper announcement declaring his rights pursuant to the Judgment, in my view, is neither here nor there in terms of whether or not the normal management or operation of the business could therefore be interfered with.

55.  The alleged risk of Chen disposing or encumbering his shares in Hawkins or Shunfeng for the purpose of settling his debt owed to third party is a false alarm.  Ho Ngor Lun, also referred to in the testimony at the trial, is the said creditor, amongst those named in the 10/1/2003 Confirmation.  As counsel for Chen points out, the transcript of the trial recorded his evidence in court that there was indeed proposal in 2011 for pledge of shares in settlement of his debt owed to Ho.  However, all that he actually did was to tender the title deeds of his own residence to Ho as security.  Importantly, the debt owed to Ho was repaid in 2013, and Chen continued to explain which of the other debts referred to in the confirmation remained outstanding then.

56.  In any event, the shares of Shunfeng held by Hawkins are subject to a Mainland freezing order mentioned above.  The order is subsisting and will last until mid-April 2024.  This also explains why Chen, through controlling Hawkins, would not be in a position to cause the disposition or encumbrance of the shares of Shunfeng in the near future as suggested by the relevant defendants.

57.  Ironically, the Mainland freezing order actually came about as a result of the own dealings of Hawkins under the control of Superfine.  While judgment in the present case was pending after trial, Hawkins apparently voluntarily provided in October 2020 a guarantee, which consisted of security over the shares of Shunfeng, in respect of a judgment debt dated 29 November 2019 in another (unrelated) Mainland litigation (Civil Case No 5/537).  One month after the handing down of the Judgment, the freezing order in respect of Shunfeng was made.  Details of the dealings and arrangements behind, including those set out in the affirmation filed for the present purpose, fall short of the particulars requested by those acting for Chen.

58.  The appeal by the relevant defendants was lodged in April 2021, when the time for Superfine to comply with the Judgment and the Order was still running.  The progress of the case management by the parties to the appeal has taken up much time for various reasons.  The reality however was that the relevant defendants neither complied with the Order nor sought stay of execution.  They acted only after Chen sought to effect the transfer of Hawkins’ shares pursuant to the mechanism provided in the Order as Superfine defaulted.  The genuineness of the concern about the appeal being nugatory could not arise only then but not before.

Issue (4)

59.  Chen objects to the deprivation of the fruit of his success after trial in the circumstances of his case.

60.  In connection with this issue, legal expert evidence in respect of the relevant Mainland law is placed before this court. As counsel for Chen acknowledges, the state of the evidence renders it difficult to expect this court to resolve the dispute between the parties on the Mainland law.  That said, the expert engaged by the relevant defendants acknowledged that with the freezing order in place, which will last until 2024, Chen’s beneficial interest in Shunfeng through Hawkins has inevitably been affected.

61.  On the basis that this was brought about by the dealings of the relevant defendants and in the absence of knowledge on the part of Chen at the material time, which has not been adequately disclosed even for the present purpose, the concern on the part of Chen about the risk of further prejudice as a result of allowing Superfine to retain the shares in Hawkins, to which Chen is beneficially entitled, is understandable.

THE QUESTION OF UNDERTAKINGS

62.  As a condition for the stay of execution, if the court considers that to be necessary, the relevant defendants offer their undertaking to make payment of a sum of RMB63.57 million said to be representing the value of 80% Hawkins’ shares with interest up to February 2022 as security.  However, the offer was to pay that into a stakeholder account or an account of the Shenzhen notary public office on condition that that office shall release the sum pursuant to an order of the court in Hong Kong in the Mainland.

63.  As concluded above, the question of monetary compensation does not arise.  In any event, there are various unknowns or uncertainties about the undertaking.  To be effective, the stakeholder is expected to be subject to the jurisdiction of the court in Hong Kong, even if his bank account is proposed to be in the Mainland.   For the same reason, the holding of the money by the Shenzhen notary public office is not satisfactory, when Chen can only look to the relevant defendants which gives the undertaking for enforcement.  There is also the logistical perspective of the enforcement of a Hong Kong court order with a view to obtaining the payment by and from the Mainland notary public.

64.  By letter dated 8 February 2022, the relevant defendants made a recent offer of undertaking, that is to transfer the 80% Hawkins’ shares to the Registrar pending the appeal.  This is said to be pursuant to section 6 of the Court Suitors’ Funds Rules, Cap 4B.  That the provision may be invoked in circumstances such as preservation of securities is not doubted.  However, section 6(4) provides for the execution of transfer of the securities to the Registrar with authority from the Registrar in the prescribed form for their registration by the company concerned.  Unless it is ruled that the transfer of the 80% Hawkins’ shares by those acting for Chen is of no effect, the provision is not an option as a matter of fact.  As discussed, this is not the ruling of this court.

65.  For the present purpose, Chen also offers his undertaking not to dispose of or encumber the shares in Hawkins or cause Hawkins to dispose of or encumber the shares in Shunfeng pending the determination of the appeal.  This court is not impressed that such undertaking is necessary or meaningful in a material way in the circumstances surrounding the shares of Shunfeng mentioned above.  Nor does this court consider it necessary to extract an undertaking by Chen to transfer the 80% Hawkins’ shares back to Superfine in the event the appeal is a success.  This must be consequential upon the event of the appeal, and does not depend on the proposed undertaking as if this will be up to Chen.

POST-HEARING DEVELOPMENT

66.  This court reserved decision after the present hearing.  Two weeks later, those acting for the relevant defendants wrote to this court on 24 February 2022 about the following development:

(1)  They filed a further application on 23 February 2022 with the Court of Appeal for leave to amend their summons for leave to rely on new evidence on appeal; and

(2)  an affirmation in support dated the same date, exhibiting an affirmation of Zhang, a person and witness in the trial of the present action as well as director of Trengei, then yet to be notarised.

67.  Those acting for the relevant defendants request this court to restore the Stay of Execution Summons for further hearing on the basis of the above new development.  If necessary, they ask this court to give further directions for the parties in respect of the filing of further evidence for the purpose of the further hearing.  Not surprisingly, this meet with strenuous opposition by those acting for Chen.

68.  Essentially, the relevant defendants raised that the affirmation of Zhang and the documents exhibited thereto reveal crucial evidence said to suffice in damaging the entire case of Chen and thus his entitlement to the Judgment.  For reasons explained below, I need only point that they are basically saying that Chen somehow admitted to the Mainland authority that he committed forgery of nearly all the crucial documents in the present action and thereby obtained the Judgment by fraud.  Solicitors for the relevant defendant are adamant that such new development is so significant that the matter before this court should be restored for further argument.  As mentioned, they seek directions in respect of filing of further affidavit evidence by Chen, if he is so advised, for such purpose.

69.  The latest proposal by the relevant defendants is not acceded to.

70.  One could see that the attempt is not materially different in nature from what the relevant defendants have already been asking this court to do, namely to take into account for the purpose of assessing the merits of their pending appeal before the Court of Appeal new assertions and evidence for the purpose of the appeal, which they are yet to obtain leave from the Court of Appeal to do so.  As discussed, this court is being asked to proceed not only on the basis of effectively forming some kind of view about the prospect of their success in obtaining such leave from the Court of Appeal but also effectively to actually form such view in favour of the relevant defendants.  This court refuses to do that.

71.  That, it is argued, a relatively more relaxed approach to permitting new evidence on appeal may be adopted by the Court of Appeal because of the nature of the relevant defendants’ allegations, being fraud, should not change that, particularly against the consideration of the background prior to taking of the Stay of Execution Summons and the other factors in the basket.  Whether the relevant defendants’ case for the stay of execution may be viewed differently, if any new evidence is permitted on appeal by the Court of Appeal, is hypothetical as the matter now stands.  So is the question of entitlement of the relevant defendants to apply for stay then on the basis of material change in circumstances.

72.  Those acting for the relevant defendants wrote again to this court on 14 June 2022.  This time they sought to produce evidence of yet further development, namely that the notary public office before which Chen deposed to his affirmation dated 8 October 2021 for the purpose of resisting the present application recently revoked the notarisation.  What is said to be the formal written decision of the office was also produced.  Those acting for Chen responded by letter dated 16 June 2022, essentially to point out that such purported revocation is irrelevant.

73.  One should note that the purported revocation was effected pursuant to the relevant Mainland rules and on grounds set out in the formal written decision.  Essentially, the notarisation was revoked because the notary public office took the stance that the contents of the affirmation were false.

74.  The admissibility of the affirmation for the purpose of the present application is governed by O41, r12 of the RHC. Sub-rule (2) provides that an affidavit sworn before, amongst others, a notary public may be used in the court in all cases where the affidavit is admissible.  Sub-rule (3) provides that the fact that an affidavit purports to have been sworn before a notary public shall be prima facie evidence of the seal or signature, as the case may be, of such officer and his authority to append such signature to such affidavit.  This is about authentication of the affidavit before the court being the one deposed to before the notary public.  The notary public is never expected to warrant the truth of its content.  Nor is his or her view of its truth subsequent to the notarisation relevant to its admissibility in the court in cases in Hong Kong.

75.  Insofar as this is yet another part of the aftermath of the effort of the relevant defendants to demonstrate by new evidence that the Judgment was the result of an entirely fabricated case of Chen is concerned, the above discussion refers.

ORDER

76.  On the basis of the materials and submissions before this court, I make the following orders.

77.  Regarding the parties’ summonses for leave to adduce further affirmations respectively filed on 7 January 2022 and 24 January 2022, I make orders in terms of them respectively.  For the avoidance of doubt, costs of them are in the cause of the Stay of Execution Summons.

78.  The Stay of Execution Summons is dismissed.

79.  I make no order in respect of Chen’s summons filed on 27 January 2021 for extension of the time under §8 of the Order.

80.  I make a nisi order that Lead Success, Hawkins and Superfine shall pay Chen his costs of and occasioned by the Stay of Execution Summons, including any costs reserved, to be taxed, if not agreed, with certificate for two counsel.  In the absence of application in 14 days for variation, the nisi order shall become absolute without further order.