LAERDAL MEDICAL LTD v. HONG KONG HAOCHENG INTERNATIONAL TRADE LTD

HCA 2193/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2193 OF 2016

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JUDGMENT

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Introduction

1.  This is the application by the defendant company (“D”) for stay of execution of a summary judgment granted by Master Chow[1] which was upheld on appeal by Deputy High Court Judge Saunders (“the Judge”).[2]  D is appealing against the judgement of the Judge and no hearing date has been fixed for that appeal.[3]  P has applied for security for costs of€ appeal and I am told that application is being dealt with by the Court of Appeal on papers and that all written submissions have been filed for that purpose.

2.  Briefly stated, the case is about a common email fraud in which the plaintiff company (“P”), which is a foreign company based in the United Kingdom with a Norwegian parent company, was induced to transfer €496,000 into the bank account of D in Hong Kong.  D is a company registered in Hong Kong and its sole shareholder and director is a Mainland resident.  There is no dispute that P and D had no business dealing with each other.  P’s claim is based mainly on “unjust enrichment” and it was also on that basis that the summary judgment was granted.  

3.  D’s defence was that it was a genuine trader in shoes based on the Mainland, that the money transferred to its bank account in Hong Kong was the price for the goods that it had supplied to a third party and that it had no knowledge of the fraud perpetrated on P and had nothing to do with the fraud. In summary, D’s case in reply to P’s claim was that it was a bona fide purchaser for value without notice, that it had not been “unjustly enriched” because it had provided value to the third party and that the fraud exception applied which took the case out of the ambit of the types of cases capable of summary disposal.  

4.  As regards the €496,000 transferred to D’s bank account, only part of the money, namely about US$212,000, still remains in that account. Nevertheless, the Judge orders that D do pay to P the full sum of €496,000 with interest and costs, and directs inter alia accounts, inquiries and remedies for tracing and recovering the Judgment Sum and the profits arising therefrom, with costs. 

5.  In its appeal to the Court of Appeal, D repeats its defence and complains that the Judge errs in finding that there are no arguable issues and in upholding the summary judgment. 

Consideration

6.  Order 59, rule 13(1) of the Rules of the High Court 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;

(b) no intermediate act or proceeding shall be invalidated by an appeal.”

7.  The relevant principles for the exercise of the court’s discretion are summarized in the well-known judgment of Ma J (as he then was) in Star Play Development Ltd v Bess Fashion Management Co Ltd[4] which I will not repeat.

8.  Having considered counsel’s submissions, both written and oral, as regards D’s argument on the maxim of nemo dat quod non habet, Mr Tang for D has been unable to provide the court with any case authorities that it is applicable to a supplier of goods, as D was, rather than a purchaser and I am unable to be satisfied that the argument on that ground is a strong one.  I agree with Mr Koo, counsel for P, that the “fraud exception” is not applicable as the summary judgment is based on the doctrine of “unjust enrichment” rather than “fraud”.  As to D’s ground of appeal that it had not been “unjustly enriched”, the point though interesting and arguable, is not in my humble view capable of affording D a strong ground which is sufficient to constitute a good reason for a stay. 

9.  Apart from the prospect of success of the proposed appeal, I also have regard to the circumstances of the present case.  The real dispute is about the money still remaining in D’s bank account.  Apart from that money, D does not have other assets in Hong Kong to satisfy the Judgment.  I am told that D’s bank account has in effect been “frozen” by the Police by means of a “letter of no consent” which is purely an administrative measure.The reality is that if that letter is not withdrawn, then even if a stay of execution was ordered, D would be unlikely to be able to move any money out of that bank account.  On the other hand, if the Police was minded to withdraw the “letter of no intent”, there would be nothing to prevent P from taking out a post-judgment Mareva injunction in order to preserve the assets.  Besides, in my assessment there is not a risk that D’s appeal would be rendered nugatory if no stay was ordered.  This is because P’s solicitors have agreed to stake-hold all money derived from the execution of the Judgment against D pending the disposal of the appeal.  Moreover, a business associate of P in Hong Kong has also offered to give an undertaking to court that it will repay D in the event of a successful appeal.  There is no reason for me to doubt the sufficiency and adequacy of the aforesaid undertakings.  On the other hand, D does not have substantial ties with Hong Kong and if it was allowed to remove any money out of its bank account, the likelihood of P being able to execute its Judgment in case D’s appeal failed would be remote.

10.  In all the circumstances, given the undertakings from P, I see no good reasons why P should not have the fruits of its Judgment now.  Therefore, I refuse D’s application for stay of execution. 

11.  I will hear counsel on costs.