TYG CAPITAL FUND v. HILDA HOR YEE CHAN AND OTHERS

HCA 1585/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1585 OF 2014

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R U L I N G

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1.  This follows from the oral delivery of decision this morning in which I have discharged the Shareholders’ Restraint and refused to re‑grant the same. Mr Ling has immediately asked for leave to appeal against the decision. Since for the purpose of the delivery of the oral decision I have dispensed with the attendance of counsel, arrangements have been made for counsel to attend before me this afternoon to deal with applications for (1) leave to appeal against my decision; (2) stay of execution pending appeal; and (3) if I refuse to grant leave to appeal, interim stay of execution pending application to the Court of Appeal for leave to appeal.

2.  Mr Ling has a draft summons with draft grounds of appeal in anticipation of an adverse ruling this morning and, by this afternoon, he has touched up on his draft grounds of appeal. 

3.  It is trite that leave to appeal against interlocutory decisions under section 14AA of the High Court Ordinance Cap 4 will not be granted unless the court is satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.  Such leave to appeal is not lightly granted.  The test for reasonable prospect of success involves the notion that the prospects of succeeding must be reasonable and therefore more than fanciful without having to be probable.  As the leave requirement was introduced largely to address satellite litigation, so for the courts to be satisfied that the appeal does have reasonable prospects of success, merely showing that the appeal is arguable and not fanciful will not be sufficient.  It will be pertinent to bear in mind that if there is a reasonable prospect of success on appeal, the court still retains a discretion whether to grant leave to appeal, although the fact that there is, ex hypothesi, a reasonable prospect of success would heavily influence the court’s exercise of discretion.

4.  Turning to the grounds of appeal, Mr Ling says, as a primary contention, that I have erred in law in holding that the Shareholders’ Restraint is not sustained by a reasonable or substantive cause of action in Hong Kong and/or that it is not ancillary to the Proprietary and/or Mareva Injunctions under the Ex Parte Order. 

5.  In this respect, Mr Ling says that it is inconsistent with my earlier decision to continue the Proprietary and Mareva Injunctions. He says that lifting the Shareholders’ Restraint has the effect of nullifying the protection afforded against Hilda and Daren Chan seizing control of the Fund and discontinuing the present action, and that the undertakings given by Hilda and Daren Chan are not sufficient to address such concerns.  Mr Ling says these grounds have reasonable prospect of success even though it can be said that, on one view, the wording of the Proprietary and Mareva Injunctions are removed from the shareholders’ voting rights, the court must consider the unusual circumstances of the case and there is juridical basis to grant ancillary orders to ensure the effectiveness of the primary Injunctions. 

6.  Tacked on to this argument is the further ground that I have erred in holding that there is material non-disclosure of an obvious defence that can reasonably be expected to be raised and that I have also erred in failing to exercise my discretion to re-grant the Shareholders’ Restraint. It is also said that in the exercise of my discretion, I have wrongly taken into account irrelevant matters, for example, that the Fund could or should have applied to the Cayman Islands court for the same relief and that I have erred in considering the balance of convenience by failing to recognise the dire consequences to the Fund and a lack of prejudice to Hilda and Daren Chan upon lifting of the Shareholders’ Restraint.

7.  Insofar as Mr Ling complains of a wrong exercise of discretion and failure to properly consider the balance of convenience, it is noted that, on established principles, the appellate court may not exercise an independent discretion of its own; it ought to defer to the judge’s exercise of his discretion unless it is based on a misunderstanding of the law or of the evidence, or the exercise of discretion is so aberrant that no judge, mindful of his duty to act judicially, could have reached it.

8.  Mr Wong, SC, and Miss Ho who adopts Mr Wong SC’s submissions, dispute Mr Ling’s submissions. 

9.  Having carefully considered Mr Ling’s submission, I am not persuaded that the draft grounds of appeal have reached the threshold test for allowing leave to appeal.  The grounds put forward by Mr Ling as substantive points of law are matters raised at the hearing on Friday and have been addressed in my oral decision.  Mr Ling fairly accepts that the four squares of the Proprietary and Mareva Injunctions that deal with the personal assets of Hilda and Daren Chan and the previous payments from the Fund to TYG HK do not admit of the subject matter of the Shareholders’ Restraint, but he says that the Shareholders’ Restraint is ancillary in the sense that it renders the injunctions effective.  It is feared that the Board of the Fund will be swamped by unspecified numbers of independent directors who may simply discontinue the action.

10.  Mr Wong, SC, disputes this, and in my decision, I have also given reasons for my conclusion otherwise, and I have pointed to the objective matters other than the Undertakings (which I have also taken into account and which have been offered by Hilda and Daren Chan that suggest otherwise).  I am not persuaded there is reasonable prospects of success.

11.  In relation to the exercise of discretion, including the balance of convenience, it must be borne in mind that this is an application for discharge for material non-disclosure.  Having come to the view that there is material non-disclosure (and on my view there is no reasonable prospects of success on this ground) the practice of the court is to discharge, and I am not persuaded that there are reasonable prospects otherwise.  For the reasons in my ruling, I also do not agree that there are reasonable prospects in relation to the exercise of discretion on re-grant. 

12.  It follows that I dismiss the application for leave to appeal.

13.  Mr Ling indicates that the Fund will seek leave from the Court of Appeal and asks for interim stay pending such application.  The applicable principles for stay of execution of a decision pending appeal have been set out by Ma J, as he then was, in Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 at paragraphs 6 to 10.  It is for the defendant to show good reasons for the stay and the two relevant factors are the merits of the appeal and whether, without the stay, the appeal would be rendered nugatory. 

14.  However, it is also pointed out in Star Play Development Ltd that it is important not to forget the position of the successful party; it is always relevant to consider the prejudice that will be caused to the successful party, the respondent in an appeal, in the event that a stay is granted and the necessity to impose conditions so as to minimise the prejudice caused to him.  A fortiori, the court must consider any contention that the appeal would be rendered nugatory to him, in the event an appeal is dismissed should a stay of execution be imposed. 

15.  Bearing in mind that there will be a hearing at the Grand Court on 5 September 2014, and that Hilda and Daren Chan have been successful before me, and taking into account the Fund’s stated intention to appeal, I grant an interim stay of execution of my order until this Friday, to be precise, until 4 pm on 29 August 2014.  It is then for the Fund, if they are able, to arrange urgent application to the Court of Appeal for leave to appeal.