TOSHIBA HONG KONG LTD. v. FORMATIVE WAY CO. LTD. AND OTHERS

1997, No.A4472

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

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D E C I S I O N

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1. On 13th October 1997 Master Jones gave summary judgment against the 1st Defendant in these proceedings for HK$56,119,455.67, against the 2nd Defendant for HK$20 million, and against the 3rd Defendant for HK$11 million, together with interest and costs.

2. The Defendants issued a Notice of Appeal against such judgment dated 14th October 1997, and I understand that the hearing of that appeal is scheduled to come up before Waung J. on 16th December 1997, slightly more than a month from today.

3. The application with which I am presently concerned is an appeal against the Order of Master Cannon dated 28th October 1997, whereby the learned Master dismissed the Defendants' application for a stay of execution pending appeal. In fact the procedural history in this regard is a little complicated. The application for a stay of execution was first made before Mr Registrar Betts on 22nd October 1997; however, at that time no evidence was filed in support and the learned Registrar dismissed the application (the first stay application). Thereafter on 22nd October 1997, the Defendants took out another summons returnable before a Master (the second stay application), and on 28th October 1997 Master Cannon dismissed that application. I understand that it is common ground that Master Cannon was right in dismissing the second stay application in that, as appears to be accepted, the application should have been made to a judge in Chambers. So we have the rather unusual situation, and I say no more about it, that we have an appeal from an admittedly correct decision. However I do not think that is necessarily determinative of the matter at hand.

4. Mr Au Yeung, who appears for the Defendants, has submitted that there are indeed triable issues in the appeal, and that unless a stay is granted, the Defendants will be ruined. He has referred me to a passage in the case of Linotype-Hell Finance Ltd. v. Baker [1993] 1 WLR 321, and in particular to the observations of Staughton L.J., at p.323C. There the learned judge was quoted as saying that it was desirable that the nineteenth-century cases in this area should be put on one side, and the current practice should be adhered to. He then says in terms :-

"... It seems to me that, if a defendant can say that without a stay of execution he will be ruined and that he has an appeal which has some prospect of success, that is a legitimate ground for granting a stay of execution."

5. Be that as it may. The Defendants have taken the observations of Staughton L.J. very much to heart, in fact they have taken them quite literally because the sole evidence that I have on the prospect of their financial situation is contained, I think, in the 4th Affirmation of Choy Kin Sang filed on 6th November 1997. After reviewing the fact that Senior Counsel has informed the deponent that "the appeal has some prospect of success", the affidavit goes on to say, at paragraph 5 :-

"The execution of the Order of Master Jones in the interim will prove ruinous to the Defendants in that the judgment is monetary in nature, and the stated sums against the 1st, 2nd, and 3rd Defendants are respectively $56,119,455.67; $20,000,000.00 and $11,000,000.00. Neither the 1st, nor the 2nd, nor the 3rd Defendant has presently the cashflow nor assets in cash available to pay these very considerable sums of money."

I note in particular the guarded terms in which paragraph 5 is expressed. I am told nothing about the other assets that may or may not exist in the hands of the 1st, 2nd or 3rd Defendants, although I recall in the affidavits in the case it having been stated that certainly during 1995 the yearly turnover of Formative in electrical goods sold in China reached the HK$1 billion mark. Given monies of that dimension and given an operation of that apparent dimension, one could legitimately have expected, if indeed a "ruinous judgment" argument was to be run, to be furnished with some cogent evidence dealing with the full financial position of D1, D2 and D3. However, to the contrary, all of the court has is a very guarded statement which appears to be modelled on the general rubric of the Linotype-Hell Finance case. Nor has there been any offer of security.

6. At the end of the day, the question of a stay of execution is a matter for the unfettered discretion of the Court. The Court looks at the entire picture, both on the evidence relating directly to the stay and also to the broader picture, the manner in which the judgment has been obtained, and the factual background against which it has been given. I have to be careful about what I say because the matter is going to be considered before Waung J. in a month's time, and I would not wish to do or say anything which would reflect on the proper and untrammelled argument of that appeal. All I will say is this. I have read the affidavits that have been filed in this case. I have familiarised myself with all the evidence filed, and I have taken all the circumstances into consideration, including the well-known principles that should guide the Court upon the question of stay. It is tempting simply to say, in effect, "there is only another month to go, give them a stay", but that I think is to abdicate from the responsibility of making a decision in this application. Justice is even-handed. The Plaintiff has a judgment, and Ms Wong, who appears for the Plaintiff, says that they should not be deprived for a moment longer of the fruits of their judgment.

7. To sum up, looking at all the matters in the round, I regret that I feel unable to exercise my discretion and to grant a stay of execution. I think that is probably the end of the matter. It seems to me that costs should follow the event, but I will hear the parties. ...

8. Mr Au Yeung, with some realism, accepts that he has no submissions to make on costs. Accordingly, my order is that this application is dismissed with costs, to be taxed if not agreed.