PACIFIC ELECTRIC WIRE & CABLE CO LTD v. HARMUTTY LTD AND OTHERS

CACV 208/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 208 OF 2008

(ON APPEAL FROM HCA NO. 2763 OF 2004)

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D E C I S I O N

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1.  This is an application for stay pending appeal.  The history of the matter is that this is an action which is somewhat unusual.  There is what is alleged to have been a dissipation of the Plaintiff’s assets by three of its former directors, one of whom at least is under prosecution at the moment in Taiwan.  The Plaintiff itself is of no mean size.  There is evidence that it has some 300,000 shareholders.  What is alleged to have happened is that its assets were taken away, unbeknownst to the Plaintiff, and have ended up in a large number of companies in Hong Kong which own property which is of substantial value; approximately, according to some estimates, of HK$2 billion.  Hence, one can say that this is a very unusual case.

2.  There was an application in front of Saunders J, under Order 14, and that was heard over an extended period last year.  He gave judgment on 18 January, with some typographical corrections on 4 February of this year and he gave judgment against all the Defendants in respect of whom the application was made.  Following that, there was an application for receivers of the subsidiaries of the two companies which are involved in this application and that was heard ex parte on 18 January, with a return date on 25 January.  In June of this year, the judge heard an application for stay pending the appeal and that he refused on 4 July.  The final order on this matter was drawn up on 30 July and then applications for stay pending appeal have been lodged by a number of the Defendants, including the 18th and 19th Defendants which are companies which own a large number of subsidiary companies which are all asset-holding companies.

3.  Unfortunately, perhaps because the amount of money involved encourages those involved to inflate the case beyond its true merit, this case has the makings of one where there is a danger of there being a substantial amount of satellite litigation unless some clear control is kept over it.  One of those indications, for example, is that on 12 August there was a letter sent to the court by all the parties suggesting that this stay application should be put off to as long as the end of November.  That is simply not acceptable.  A stay application is a stay application and must be heard promptly or not at all.  This matter had been set down for hearing today and this court was quite capable of sitting all day if necessary to hear this application.  It was indicated to the other Defendants who are appealing that, should they wish to avail themselves of a hearing today, this court would be free to hear them, along with the 18th and 19th Defendants.  They declined to accept that.  So be it.  When their applications come to heard, they will have to bear the consequences of that and I say no more about that at this stage.

4.  As I have indicated, the judge refused the application for a stay.  This application is put upon two bases.  The first is that the appeal would be rendered nugatory should the 18th and 19th Defendants succeed in their application and on that basis it is said that the Defendants have an arguable case.  Assuming for the moment, because I will deal with it later, that there is an arguable case, the question is, would the appeal be rendered nugatory. 

5.  The argument in this court is slightly different from that below because the Plaintiff has had an opportunity of filing further evidence, which includes clarifying what was before and should have been before the judge below and demonstrating, in effect, that the Plaintiff is solvent and is perfectly capable of paying its debts.  It may have borrowed a lot of money but it is perfectly capable of financing that borrowing.  But what is said by Mr Smith, SC, on behalf of the 18th and 19th Defendants is, “Oh, well, now creditors might see, if there is no stay, that the Plaintiff has assets and they may seek to enter judgment against the Plaintiff and then the assets would disappear.”

6.  That, for a start, is simply a fanciful argument and there is no basis for it.  There is no indication that the creditors, who appear to be banks, are seeking to enforce any judgments and there is no reason why they should bring proceedings, as far as I can see.  This is simply a company that is borrowing money, has a substantial business and is able to finance its outgoings.  I do not see that any ground that this appeal would be rendered nugatory has been made out.

7.  The second ground is that the 18th and 19th Defendants say that they have strong grounds for appeal.  I do not see that at all.  The most that can be said about the grounds of appeal from what has been argued today is that the notice of appeal has not been struck out as unarguable, but that is about as far as it goes.  It is, in essence, the Plaintiff’s case that the 18th and 19th Defendants are owned by the Plaintiff and that all the assets which the 18th and 19th Defendants have - and there are no other shareholders involved - come as a direct result of moneys taken from the Plaintiff.  As far as I can see, it is a straightforward tracing claim and that is the end of it.  I do not see that there is any strong ground of appeal on the basis of the Limitation Ordinance at all.

8.  I have no doubt that this application should be refused.