XCHRX WORLD TRADE CENTRE GROUP LIMITED AND ANOTHER v. RESOURCEFUL RIVER LIMITED AND ANOTHER

IN THE COURT OF APPEAL

1993, No. 70

(Civil)

Headnote

Ord 59 rl3(1) RSC - Stay of execution pending appeal - Relevance of prospect of financial ruin if no stay granted - Application for stay refused.

IN THE COURT OF APPEAL

1993, No. 70

(Civil)

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D E C I S I O N

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Litton J.A.:

1. What I have before me is a summons taken out under Order 59 rule 13(1) of the Rules of the Supreme Court by the second defendant for an order that execution and all further proceedings on a judgment entered on 20 February 1993 against it be stayed pending the hearing of it's appeal to this court. The appeal is against the judgment of Mortimer J. given on the 8 April 1993. The judgment which is to be stayed, dated 20 February 1993, requires the second defendant to pay to Messrs Baker and McKenzie, the second plaintiff, a sum of HK$50 million together with interest thereon at the rate of 11.5% per annum from 5 November 1992 until payment, and costs of the action.

2. The judgment for $50 million and interest arises from a cheque dated 9 October 1992 which was delivered to Messrs Baker and McKenzie pursuant to an agreement dated 10 October 1992 concerning the sale and purchase of the entire share capital of a company called Bond Corporation (World Trade Centre) Ltd. for a total of HK$2.5 billion. Under that agreement a deposit of HK$50 million was required to be paid to Messrs Baker and McKenzie who were then to hold the sum as stakeholders.

3. On this application counsel for the second defendant makes two points. (1) That the second defendant has an arguable case of success on appeal and (2) if the stay were not granted that would result in the financial ruin of the second defendant. An application for stay upon identical grounds had been made to Mortimer J. He refused the application and gave reasons for his decision on 30 April 1993.

4. The jurisdiction to order a stay under Order 59 r13(1) is a flexible one. It is important to appreciate its terms. It says:

"(1) Except so far as the court below or the Court of Appeal or a single judge may otherwise direct -

(a) an appeal shall not operate as a stay of execution or of proceedings under the decision of the court below;"

Plainly the intention is that a party should not be deprived of the fruits of a judgment in his favour except on good grounds being shown. Obviously if an applicant were able to demonstrate that he has very strong grounds of appeal, that something has grievously gone wrong with the process of law in the court below, then this court would be inclined to make such order as to ensure that the appeal would not be rendered nugatory in the meanwhile. In those circumstances perhaps the court may not examine very closely the financial situation of the appellant. On the other hand if the grounds of appeal appear weak then the court would look more closely into the alleged impecuniosity and prospective financial ruin.

5. In the court below Mortimer J. was invited to conclude on the basis of two bland paragraphs in an affirmation of Mr. Yang You Li that if no stay were granted this would result in the financial ruin of the second defendant.

6. Paragraph 6 of the Affirmation is in rather equivocal terms. It says:

"If the stay is not granted to the 2nd Defendant, it will not be able to pay the said judgment sum without the need of incurring a debt in the sum of at least HK$50 million and/or the same will result in the closing down of the 2nd Defendant."

7. The judge was not greatly impressed by the evidential weight of this assertion, neither am I. A limited company is governed in its operations by the Companies Ordinance. The Ordinance requires directors of each company to lay before its shareholders the audited financial statements annually. One would assume that the 2nd defendant in its operations complies with the law. In these circumstances it is extraordinary that no audited accounts have not been put before the court. This was an omission pointed out in the judgment of Mortimer J. No further material has been put before me.

8. What I know about this company is no more than this. One, it has a paid-up share capital of $100,000 and two, that it drew a cheque dated 9 October 1992 on its account with The Yien Yieh Commercial Bank Ltd. ordering that bank to pay the 2nd plaintiff $50 million, thereby representing that when the cheque was presented on due date it would be met. What has happened between that date and now to effect such change of fortune that it would be ruined by having to pay $50 million has not been fully explained. In these circumstances, like the judge, I am by no means satisfied that if no stay were granted that would result in the financial ruin of the appellant.

9. As regards whether the 2nd defendant has an arguable ground of appeal, perhaps the less said the better. The point seems to revolve around the consideration moving from Messrs Baker and McKenzie, as the payee of the cheque, to the 2nd defendant. Under the agreement of 10 October 1992 Messrs Baker and McKenzie were stakeholders; by so agreeing to act they undertook obligations to both the vendor and the purchaser. On the very slim arguments addressed on the point - I did not encourage detailed arguments from Mr. Chung - I find it at present difficult to see how it could be argued that no consideration moved from Baker and McKenzie. I say no more about the point beyond observing that, in my judgment, the prospects of a successful appeal do not appear to me at present to be strong. For these reasons the summons for stay is dismissed with costs to the 2nd plaintiff.