HUMPHREYS ESTATE (OUEEN'S GARDENS) LTD v. ATTORNEY GENERAL AND ANOTHER

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J U D G M E N T

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Fuad, J.A.:

1. This is an application by the unsuccessful Defendants in an action brought by Humphreys Estate (Queen's Cardens) Limited for a stay of execution pending appeal. The Defendants are the Attorney General and the Colonial Treasurer Incorporated, in practical terms, the Government.

2. On 10 May this year, Jackson-Lipkin, J. gave judgment against the Defendants and part of his order was that the 1st Defendant should pay to the Plaintiff the sum of $103,865,608 with interest at the prime rate plus 1% and there was also an order for costs in favour of the Plaintiff. The Defendants applied to the learned judge, as they must, for a stay pending appeal but this was refused.

3. The application is based on an affidavit which informs us that the Plaintiff company is the registered owner of three properties and holds shares in a fourth property which is the subject matter of the action. The material before us indicates that all these proporties (except the property in which the company has shares) are subject to incumbrances. The first is an Agreement for a mortgage dated 29 March 1983 in the sum of US$75 million. The second is the second mortgage and floating charge dated 29 July and the third, which perhaps is the most important, is a Deed of Trust dated 6 September 1983 securing the sum of $10,060,837,200. The latest annual return of the company had been produced but no balance sheet.

4. It had been submitted on behalf of the Defendants by Mr. Fleming that on this material, the Court should exercise its discretion to grant a stay on the ground that there is a real probability that the Defendants would not get back the sum of money which has to be paid under the judgment if the appeal succeeds.

5. An Applicant for a stay pending appeal has a difficult task because it is well accepted that the Court is reluctant to deprive a successful litigant of the fruits of the litigation and to lock up funds to which the Plaintiff is, prima facie, entitled, pending an appeal.

6. Mr. Fleming has suggested that a special consideration to be borne in mind is that the sum ordered to be paid over is public money. I wish to make it clear that I, for my part, can find no valid distinction that can be drawn between the Court's duty to protect public money from its duty to protect private money.

7. The Applicants for the stay had a difficult task in this case to find out the means of the company but I think that the evidence before us does show, prima facie, that there is a real risk that the Defendants, if they are successful in their appeal, might not be able to recover their money. We are not concerned about the order for costs because costs will be ordered to be paid on the usual undertaking by the solicitors for the Plaintiff that they would be repaid in the event of a successful appeal.

8. Mr. Ching who appeared in opposition to this application did not seek for an adjournment to file evidence in opposition to the material that was placed before us by the Applicants. It seems to me that a very short affidavit showing the present financial state of the company would have been sufficient (had it removed anxieties about the sum involved) to render the application quite hopeless but in the absence of any evidence of the contrary, I am of the opinion that sufficient grounds have been made out for the grant of a stay and, therefore, subject to such terms as may be imposed if my Lords agree with my decision, I would grant the application in respect of the principal sum and interest which is now due to be paid under the judgment.

Cons, J.A.:

9. We understand that immediately after the order was made on 10 May this year application was made to the judge below to stay the effect of the whole of the order. That application was refused by the judge save as to the order for possession of the 83 flats in question. Since then the Crown has made enquiries as to the financial standing of the Plaintiff. We are not told why the enquiries were not made before the previous application was made but nevertheless, on what has been discovered, the application is renewed before this Court. The criterion to be employed in such circumstances is well established. As a general rule the only ground for a stay is an affidavit showing that if the damages and costs were paid, there is no reasonable probability of getting them back if the appeal succeeds.

10. The only assets of the Plaintiff appear to be three properties in Old Peak Road, setting aside naturally, for the purpose of this application, the 83 flats in question. Mr. Fleming, who appears for the Crown, says he has been unable to locate a balance sheet of the Plaintiff and certainly none has been put before us. We have however seen the Annual Return of the Plaintiff for 1984. This shows an indebtedness of US$75 million in the form of a mortgage and floating charge, and a further HK$10,000 million odd subject to a trust deed. Our attention has not been specifically drawn to the document securing the US$75 million but an affidavit was put in this morning by the company secretary of the Hong Kong Land Company Limited to which is exhibited the copy of a public notice appearing in the Financial Times of 3 June which itself indicated that the Hong Kong Land International Limited intended to redeem certain debentures on 1 August of this year. Our attention has been drawn to the trust deed, which secures obligations up to the sum mentioned which may be or have been undertaken by the Hong Kong Land Company. Crown counsel thinks that at the moment there is not a great deal of money outstanding subject to that security but it extends, as he observes, to obligations which may be incurred in the future, so that to that extent the financial viability of the Plaintiff depends upon the conduct of the Hong Kong Land Company Limited. Mr. Ching has observed that there is no evidence that the Land Company is likely to put more money at the risk of that security or that it is likely to default on money which it does so put. On the other hand we have no evidence as to the financial position of that company itself and an implied offer for an adjournment to adduce evidence was declined this morning.

11. It seems to me then, that on such evidence as has actually been put before us, there is a reasonable probability that the money, if paid, could not be recovered in the future, if the appeal by the Crown were ultimately successful. For these reasons, I agree with the order proposed by my Lord.

Kempster, J.A.:

12. This Court derives its discretion to grant the stay presently sought from the terms of 0.59, r.13 of the R.S.C. The exercise of that discretion falls to be based on such material as is put before it by the parties. Here, as has been stated by my Lords, the only material evidence has been adduced by the Appellants and standing uncontradicted it suggests that, if now paid over, the large sum involved might well be irrecoverable in the event of the appeal succeeding. My Lords have explained the substance of that evidence.

13. It is accepted that a successful litigant should not readily be deprived, even temporarily, of the fruits of his successful litigation. As against that an appellant should not be deprived of the fruits of his successful appeal when that appeal is bona fide and no suggestion is made to the contrary here. To quote from the judgment of Cotton L.J. in Wilson v. Church (No.2)⁽¹⁾.

"When a party is appealing, exercising his undoubted right of appeal, this Court ought to see that the appeal, if successful, is not nugatory."

I, too, would order a stay of execution of the principal sum and interest awarded by the judge below having it in mind that the appeal is likely to come on in September or October. The costs will be paid by the Defendants' solicitors to the Plaintiff's solicitors upon their usual undertaking to repay the same should the Defendants succeed on appeal.

⁽¹⁾ [1879] 12 Ch. D. 454 at p.458