SUPER KEEN INVESTMENTS LTD. v. GLOBAL TIME INVESTMENTS LTD.

CACV 285/1998 and CACV 346/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEALS NOS. 285 AND 346 OF 1998

(ON APPEAL FROM HCCT NO. 71 OF 1997)

______________

_______________

J U D G M E N T

_______________

Keith JA (giving the first judgment at the invitation of Mayo V-P):

1. This history of this litigation appears from the judgment handed down by the Court of Appeal on 14 January. It is common ground between the parties that the Third Party and the Defendant are entitled to leave to appeal to the Court of Final Appeal as of right. Apart from the security which has to be given, the issue which divides the Third Party and the Defendant is whether there should be a stay on the execution of the judgment given against the Third Party.

2. The Third Party's only asset is the building to which the action related. It is common ground that its current value is far less than the $256m. which the Third Party agreed to pay for it in December 1993. Its current value is in dispute, but the valuations range from a low of $73.5m. to a high of $118m. Even on the highest valuation, the value of the building is less than the Third Party's judgment debt because once interest had been taken into account, the debt had, by February, increased to almost $170m. Since the Third Party will have to sell the building to satisfy just part of the judgment debt, the Defendant wants the building to be sold now. If the building is not sold now but is sold only when the appeal to the Court of Final Appeal has been disposed of, the value of the building may have dropped even further. Thus, if the appeal is dismissed, the Defendant could recover even less than it could recover if the building is sold now. For that reason, the Defendant applied on Wednesday to Burrell J for an order that the building be sold now, and that a receiver be appointed to manage the building and receive the rents in the meantime. Burrell J adjourned the summons pending the hearing of today's application by the Third Party for a stay of execution on the judgment.

3. A judgment creditor should normally be entitled to the fruits of his judgment notwithstanding any pending appeal from that judgment. Indeed, a stay pending appeal to a court of final adjudication will not be granted save in very exceptional circumstances: see The Supreme Court Practice 1999, Vol. 1, para. 59/13/13. Nevertheless, it is, I think, legitimate to compare the injustice which the Defendant would suffer if a stay of execution is granted but the appeal is eventually dismissed with the injustice which the Third Party would suffer if a stay of execution is not granted but the appeal eventually succeeds. Plainly the Defendant would suffer a significant injustice if the value of the property drops even further, and the longer it has to wait to enforce the judgment, the higher will be the debt then because of the accrual of interest. But for its part, the Third Party would have cause for complaint if there was a forced sale now but the value of the building was to increase. If it won the appeal, it could say that it would have been deprived of making the commercial decision of selling the building then or holding onto the building for the time being in the hope that it would increase in value further.

4. In the balancing exercise which has to be conducted, I might have been persuaded that a stay of execution would have been appropriate, but only if the Defendant could properly have been protected pending the hearing of the appeal from the possible further decrease in the value of the building and from the further accrual of interest. In my opinion, that might have been achieved in two ways. First, a receiver could have been appointed to manage the building and collect the rents pending the appeal, the net income being paid either into court or into an account acceptable to the parties. If I had thought that this was an appropriate case for a stay of execution, I would have insisted on that being a condition. Secondly, the Third Party could have been required to pay an appropriate sum into court. I appreciate that it has no assets apart from the building itself, but these proceedings have been lengthy and costly, and they must have been financed by someone - maybe its shareholders, maybe its bankers. If there were to be a stay of execution which could result in the Defendant being significantly worse off, those who are financing the appeal and backing the Third Party's application for a stay of execution and who are therefore creating the risk which the Defendant has should at the very least be required to take such steps as to reduce that risk. If I had thought that it was appropriate for there to be a stay of execution, therefore, I would have made it a condition of such a stay that the Third Party pays a sufficient sum into court. However, that is not an option because Mr Nelson Miu for the Third Party has told us that there is no prospect of any money being paid into court to protect the Defendant's interests. Since, therefore, the imposition of such a condition is one which the Third Party says it would not satisfy, the only basis upon which I might have been prepared to grant a stay of execution disappears.

5. For that reason, I would dismiss the application that there be a stay of execution pending the appeal. It is now for Burrell J to decide whether to order the sale of the property. If he orders the sale of the property, he will also have to decide what order should be made about the proceeds of that sale, bearing in mind that at present the Defendant is content for the proceeds of sale to be paid into court but that the Plaintiff may not be.

Ribeiro JA:

6. I agree that the application for a stay should be dismissed.

Mayo V-P:

7. I also agree.