CITIBANK N.A. v. DAYS PROPERTIES LTD

CACV 192/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 192 OF 2013

(ON APPEAL FROM HCMP NO. 477 OF 2012)

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REASONS FOR JUDGMENT

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Hon Lam VP (giving the Reasons for Judgment of the Court):

1.  This is an application for stay of execution which came before us on an urgent basis. The judgment was entered in favour of the Plaintiff pursuant to Order 88. The order of 10 September 2013 of Deputy High Court Judge Lok had two major components: (a) a money judgment in the sum of $60,061,660.24 to be paid within 28 days of the order; and (b) in default of payment pursuant to (a), the Defendant must deliver vacant possession of the mortgaged properties [“the Properties”] secured under a Legal Charge dated 19 March 2001.

2.  The Defendant defaulted in the payment of the monetary sum.  Thus, the Plaintiff became entitled to enforce the order for possession.

3.  The Defendant appealed against the judgment and served a Notice of Appeal on 23 September 2013.  The Defendant’s application for stay of execution was refused by the judge below on 22 October 2013.  Written reasons for the refusal were handed down on 6 November 2013.  Despite that, the Defendant did not deem it necessary renew its application for stay before this court.  It was only when the occupant of the Properties received Notices to Occupier to Quit from the High Court Bailiff that they sought to have an urgent hearing before us.  The obvious question is what happened between 22 October and 12 November?  There was no explanation in the evidence filed in support of the summons of 12 November 2013 as to why the application to this court was not made earlier when there was ample time to do so.  Solicitors for the Defendant only wrote to the Registry on 14 November asking for an urgent appointment to be given before 20 November and the letter only reached the court on 15 November, a Friday afternoon.

4.  We must express our view that this is highly unsatisfactory.  Litigants and those advising them are expected to proceed with due expedition in the making of an urgent application.  The Court of Appeal in this jurisdiction is extremely busy and the diaries of our judges are tightly scheduled.  Nowadays, apart from the time spent on hearing cases in court, judges have to spend many hours on reading the documents lodged in cases to be heard, preparing for hearings, dealing with paper applications and writing judgments.  It is high time that those involved in litigation need to appreciate that modern appellate practice places more emphasis on pre-hearing preparations on the part of the judges and this means we now spend more time on such preparations than hearing oral arguments in court.  In order that the Court of Appeal, with its limited establishment in terms of manpower, may accommodate for hearing urgent applications (the preparation for which also requires hours of advanced reading), litigants would be well-advised that it is in their interest to make such the application with as much lead time as practicable.  Inevitably, a judge who spends time on an urgent application (including preparation for the same, hearing the same and then giving judgment on the same) would have to cut the time he or she would have spent on other cases as originally scheduled.  Though the court will strive to accommodate requests for urgent appointment, given the tight schedule of our diaries, we need to scrutinize such requests cautiously to avoid unfairness to other court users who have legitimate interest in the fair and proper distribution of judicial resources.

5.  Further, an urgent application often means that less time is being given to the opposing party to prepare.  Consequently, on some occasions (we are happy to say that it did not occur in the present case) judges may not receive the level of assistance from those representing the other side as it should be.  This is particularly so when an applicant filed voluminous documents for the purpose of the application.  In the present case, solicitors for the Defendant lodged five bundles of documents plus one bundle of skeleton submissions and authorities for the 30 minutes’ hearing.  In view of the limited time available for preparation, we are grateful to Ms Sit, who appeared for the Plaintiff, for her helpful skeleton submissions which were placed before us in the afternoon before the hearing.   The court will be vigilant to guard against urgent application being conducted in a manner which would occasion injustice on the opposing party.

6.  In the past, there had been a practice of requiring a party who wished to make an urgent application to the Court of Appeal to prepare a certificate of urgency signed by counsel to justify the same.  In our view, it is necessary to revive such practice and the certificate should also account for why the application was not made earlier.  Short of cases of extreme urgency which render it impracticable to do so, the certificate should be lodged together with all hearing bundles and skeleton submissions prepared by counsel in support of the application to facilitate the proper estimation by the court as to the length of hearing as well as the preparation time required by the judge(s).  The documents will then be placed before a judge for consideration.  The court would also need to assess how much time should be given to the opposing party to prepare for the application.  Any misinformation in these respects may result in an adjournment of the matter to another date.  Late instructions from the client or dilatoriness in the preparation of an application mean that the urgency is self-induced and generally it would not be accepted as adequate ground for entertaining the application on an urgent basis.  If the justification is inadequate, the court will not give an urgent appointment and the matter would have to be listed in accordance with the usual diary position of the Court of Appeal in respect of interlocutory applications.  

7.  In the present case, we are of the view that the lapse of more than 20 days between the refusal of stay by the judge below and the issue of the summons of 12 November seeking a stay from this court is unreasonable.  Be that as it may, we have dealt with the application on its merit on this occasion.

8.  The principles governing an application for stay pending appeal is well settled. The leading case in Hong Kong is Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84.  It is not necessary for us to recite that judgment at length.  For present purpose, we would reiterate the following propositions:

(a)   The applicant must show an arguable ground of appeal (viz. one with reasonable prospect of success) before the discretion to grant stay is engaged, see Star Play para 9(6); Sy Chin Mong Stephen v Lo Shing Kin CACV 45 of 2013, 13 March 2013;

(b)   Even if arguable grounds exist, there must be other circumstances justifying the deprivation of the successful party the fruit of the judgment.  Sometimes, the applicant may do so by showing the existence of strong ground of appeal. Sometimes, the applicant may do so by showing that the appeal would be rendered nugatory if no stay is granted. In either case, the court must also have regard to the prejudice that could be suffered by the successful party if a stay is granted. In all cases where the discretion is engaged, ultimately it is a balancing process to be exercised with common sense; and

(c)   In assessing the strength of the appeal for the purpose of a stay application, it is impracticable and undesirable to go deeply into the merits.  A broad brush approach is called for.  Thus, counsel should not attempt to deploy full arguments on law and facts quoting in extenso all the relevant evidence and transcript as if the application for stay is a platform for a rehearsal of the appeal proper.  Generally, with the benefit of written skeleton submissions, the court is able to assess whether an appeal is reasonably arguable without lengthy oral submissions from counsel, see  Star Play para 9(5); MKKWH v RKSH CACV 197 of 2012, 27 February 2013.

9.  The facts of the present case were set out in the judgment of Deputy Judge Lok of 26 August 2013 and the basis of the application for stay was essentially the same as those put before the judge as stated in his Reasons for Decision of 6 November 2013.  We shall not repeat what has been adequately set out in these judgments.  Though Mr West, acting for the Defendant, had made an affidavit of 12 November 2013 to support the application before us, there is nothing new and primarily the affidavit only contains materials which were in substance arguments and submissions. 

10.  The main grounds of appeal can be categorized as follows:

(a)   Challenges to the judge’s conclusion that the Plaintiff was entitled to exercise its right to demand repayment by reason of what the judge called the “on demand” clause; and

(b)   Challenges to the judge’s refusal to grant specific discovery.

11.  The main plank of the first category of grounds appear to be the telephone conversations between Ms Hon and Ms Kwok of the Plaintiff and Mr Mahesh Dayaram on 30 September 2011 (wrongly dated 2012 in para 35 (b) of Mr West’s affidavit).  We have read the transcript of those telephone conversations exhibited as HSM-1 to the affidavit of Hon Stefanie Maria.  We do not see any reasonably arguable basis for suggesting that there was any implied undertaking to withhold the right to demand immediate repayment. Given the prevailing circumstances as alluded to at paras 6 to 21 and 62 and 63 of the judgment of 26 August 2013, it is incredible that such an implied undertaking would be given. In our view, it is not possible to read from those conversations any waiver of the right to demand immediate repayment as alleged at para 35(j) of Mr West’s affidavit.  Nor do we consider it arguable, as suggested by Mr Sheppard for the Defendant, that the conversations gave rise to an estoppel and/or forbearance on the part of the Plaintiff to demand repayment as it did on 14 October 2011. 

12.  Mr West said at para 35(b) of his affidavit that the judge ought to have concluded that “the case of the Defendant was that the Plaintiff could demand repayment of the loan pursuant, for example, to a demand being made upon reasonable and contractual renewal notice of 12 months, as contemplated by the Loan Tenor of the Guarantee by the Defendant to the Plaintiff dated 23 June 2011”.  This is at variance with the defence’s case as advanced at different stages: see paras 53 and 66 of the judgment of 26 August 2013.

13.  On the whole of the evidence, in the context of this stay application, we are quite satisfied that the judge was entitled to come to his conclusion at para 53 that Mr Dayaram’s evidence on the alleged assurance from Ms Yiu is wholly unbelievable and without merit.

14.  We also do not see any merit in the procedural challenge based on O88 r 5. The judge dealt with it sufficiently at para 39 of the judgment.

15.  As regards the application for specific discovery, the Defendant had failed to explain adequately why the application was made at so late a stage.  The trial date of the Order 88 proceedings was fixed in December 2012.  Request for specific discovery was only made on 28 February 2013 and it was promptly rejected on 7 March 2013.  Despite that, summons for specific discovery was not taken out until 10 May 2013 which was only 5 weeks before the trial.  The request was in respect of a wide range of documents spanning over 10 years.  It is difficult to see how those documents could have assisted in terms of fair and expeditious disposal of the matter.  The judge was plainly right in holding that the request is oppressive and out of proportion.  Given the scope of the discovery and the timing of the application, we would say that it smacks of a tactical move to delay the prompt and fair disposal of the Plaintiff’s claim.

16.  We have given due consideration to the proposed grounds of appeal set out at para 32 of the affidavit of Mr West.  We are not impressed by those grounds. We do not accept that the Plaintiff fixed the hearing date prematurely.  Further, despite the claim of the Defendant being prejudiced by lack of such specific discovery, Mr West did not explain how it is expected that the documents sought would advance the Defendant’s defence in the Order 88 proceedings.  Insofar as he purported to do so at para 32(j), that appears to be a reference back to the conversations of 30 September 2011 which, as we have held above, could not assist the Defendant.

17.  Neither did the Second Affirmation of Mr Mahesh Nanik Dayaram filed on 10 May 2013 in support of the summons for specific discovery shed much light on the materiality of the documents sought. Paragraph 31 of it refers back to his First Affirmation for the relevant events. In terms of the events which could be said to be assistance to the defence of the Order 88 proceedings, apart from past history (which could not have any bearing on the defence case) and concentrating on facilities available to the Defendant in 2011, the First Affirmation again focused on the telephone conversations with Ms Hon and Ms Kwok on 30 September 2011 and subsequent events.

18.  At the hearing, Mr Sheppard again referred to the conversation on 30 September 2011 as illustrative of his client’s defence.  He failed to persuade us that the earlier materials could be of any significance.

19.  We do not think there is any merit in the Defendant’s reliance on the refusal of discovery in prosecuting its instant appeal.

20.  The judge had explained in the judgment of 6 November 2013 why he granted leave to appeal against his decision to refuse discovery.  It is not for us to say in this judgment whether leave should have been granted in such circumstances though we have our doubts on it.

21.  We do not think the appeal has any reasonable prospect of success.  On this ground alone, we should not grant any stay.

22.  Further, even assuming the Defendant could somehow make out an arguable ground of appeal, we are of the view that one cannot say that the appeal would be rendered nugatory if a stay is not granted.  The execution of the judgment would give possession of the Properties to the Plaintiff.  But there is no order for sale in place. Whilst there might be inconvenience to the occupants, in our judgment that sort of inconvenience is not the same as the irreversibility of a sale of the properties.  Moreover, as submitted by Ms Sit, such inconvenience is self-inflicted because it was always within the power of the Defendant to pay up the money judgment (whether by re-financing or otherwise) and the Defendant only chose not to do so.

23.  On the whole, we are not satisfied that there is sufficient ground to tilt the balance to warrant the deprivation of the fruit of the judgment from the Plaintiff.

24.  For these reasons, we dismissed the application for stay with costs, such costs is to be taxed on indemnity basis if not agreed.