TANG KIM KWAN PATRICK v. LEE CHI TING KAREN

CACV 163/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 163 OF 2012

(ON APPEAL FROM HCA NO. 920 OF 2009)

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BETWEEN

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REASONS FOR DECISION

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1.  This is an application for stay of execution in respect of a judgment of Deputy High Court Judge Houghton SC entered on 24 August 2012. That sealed judgment was entered pursuant to an earlier judgment handed down on 26 June 2012 in HCA 920 of 2009.

2.  As I understand from counsel, the application concerns the following paragraphs in the sealed judgment.

“Metro Harbour View Property

1. There be an Enquiry as to the amount of restitutionary compensation the Defendant ought to pay to the 1^st Plaintiff for the Defendant’s breach of trust by wrongfully selling the Plaintiff’s property known as Flat D, 21^st Floor, Block 1, Metro Harbour View, No.8 Fuk Lee Street, Kowloon on or about 14^th November 2005;

2. The Defendant do pay the 1^st Plaintiff the sum found due in the said Enquiry with interest;

Royal Peninsula Property

3. A declaration that the Defendant holds her legal title in the Property known as Flat M, 35^th floor, Block 2, Royal Peninsula, No. 8 Hung Lai Road, Kowloon (“Royal Peninsula Property”) on trust for the 1^st Plaintiff;

4. The Defendant do assign or vest her legal title in the Royal Peninsula Property to the 1^st Plaintiff; and the Defendant do within the next 30 days execute all necessary instruments to be prepared by the 1^st Plaintiff for that purpose;”

3.  The other paragraphs in the sealed judgment provide for the dismissal of the Plaintiffs’ other claims, to which there is no cross-appeal.  There is also a paragraph with regard to costs.  Having regard to the submissions of counsel and the materials before the court, there is no basis for granting any stay with regard to that part of the sealed judgment.  Mr Yau did not seriously argue otherwise.  I shall therefore concentrate on the part of the judgment set out at para 2 above.

4.  Counsel accepted that the principles governing the exercise of discretion in respect of stay of execution  are set out in the judgment of Ma J (as he then was) in Star Play Development Ld v Bess Fashion Management Co Ltd [2007] 5 HKC 84, in particular paras 6 to 10.  There is no need for me to recite them in this judgment.

5.  In respect of the Metro Harbour View Property, it had been sold by the Defendant before the litigation.  Paragraphs 1 and 2 of the sealed judgment directed an inquiry to be held with regard to restitutionary compensation that the Defendant ought to pay the 1^st Plaintiff. Though there is also a judgment to the effect that the Defendant shall pay the 1^st Plaintiff the sum found due, that payment obligation cannot be immediately enforceable until the inquiry has been held.  There has not been any directions given by the court for the holding of the inquiry and it might take some time before the inquiry can be actually heard.  Subject to the state of the court diaries, I see no reason why the appeal may not be heard before the conclusion of the inquiry.

6.  In those circumstances, even assuming there is an arguable appeal in respect of the judge’s finding on the beneficial ownership of this property (and having considered the matter in light of the submissions before me, I am prepared to take a provisional view that the appeal is arguable even though it may involve a challenge to finding of facts of the judge), I do not think the Defendant has shown that the appeal would be nugatory if there is no stay of execution in respect of paras 1 and 2 of the sealed judgment. This is particularly so when counsel for both parties agreed at the hearing before me that the Defendant is at liberty to raise whatever arguments she deems fit in respect of the proper basis for calculating the equitable compensation at the inquiry.  There is nothing in para 1 of the sealed judgment to prevent the Defendant from arguing at the inquiry that in the circumstances of the present case the proper reference date for calculating the compensation should be the date of actual sale, or the date of the writ, as opposed to the date of judgment.

7.  As regards the discrepancy between para 71 in the June judgment and the final order made in paras 1 and 2 of the sealed judgment of August, the court has jurisdiction to re-open the issue of remedies as long as the final order has not been perfected: see Charlesworth v Relay Roads [2000] 1 WLR 230; Stewart v Engel [2000] 1 WLR 2268; Hertfordshire Investments Ltd v Bulb [2000] 1 WLR 2318. Here, the judge had heard submissions from the parties as a result of the disagreement on the draft judgment.  After hearing submissions, the judge ruled in favour of the Plaintiffs on paras 1 and 2 of the draft.

8.  Mr Yau had not placed the transcript of the hearing of 24 August before me and, not being the counsel who conducted that hearing and with the change of solicitors on the part of the Defendant, counsel could not offer much assistance in terms of the reasons of the judge in coming to that conclusion. Despite the court raising concern as to lack of information in that respect, Mr Yau decided to continue with the application for stay instead of seeking an adjournment in order to facilitate the transcript to be obtained.

9.  In a sense paragraph 71 in the June judgment is ambivalent because it provided for both account and inquiry.  The two should be alternative remedies.  A taking of account should proceed on the basis of affirming the sale and the Defendant should account back to the 1^st Plaintiff the sale proceeds and the profit she derived from such sale proceeds, if any. On the other hand, an inquiry should be conducted on the basis that the sale was wrongful and the Defendant should compensate the 1^st Plaintiff as to the loss he suffered as a result of that sale.  The 1^st Plaintiff had the option of electing between these remedies.  It may be that the parties have not drawn this to the attention of the court at the trial and para 71 may have unduly limited the 1^st Plaintiff to an account of the sale proceeds. However, as explained, the matter was re-opened and after the hearing on 24 August 2012, the judge ruled in favour of the 1^st Plaintiff. Though there is a discrepancy, I do not see that as a strong ground of appeal.  It does not, by itself, give rise to a good reason for stay of paras 1 and 2 of the August sealed judgment.   

10.  I am also not persuaded that there are other good reasons to order a stay of those parts of the sealed judgment. Some costs may have to be incurred in the inquiry before the hearing of the appeal.  However, there is no suggestion that the 1^st Plaintiff is not in a position to pay for such costs if the appeal is successful.

11.  Turning to the appeal in respect of the Royal Peninsula Property, as shown in the grounds set out in the Supplementary Notice of Appeal lodged on 14 November 2012 the appeal focuses on the discrepancy between the judge’s judgment in June and the sealed judgment. In his June judgment, the judge said at para 72,

“72. The 1^st Plaintiff is also entitled to a declaration that the Defendant holds her legal title in Royal Peninsula Property on trust for the 1^st Plaintiff, from which it follows that there is also an entitlement to an order directing the Defendant to assign or vest her legal title in Royal Peninsula Property to or in the 1^st Plaintiff, and, so far as necessary, to an order directing the Defendant to execute all necessary instruments for that purpose. Any such order must however recognise the Defendant’s entitlement to a share in any profits arising on sale this property.”

12.  In contrast, there is no provision in the sealed judgment for the Defendant’s entitlement to a share in the profit upon a sale of the property. This comes about at the instigation of the Defendant in the following manner.

13.  In a draft of the formal judgment sent by the Plaintiffs’ solicitors to the Defendant’s former solicitor for comment under the cover of a letter dated 12 July 2012, there were the following additional paragraphs with regard to the Royal Peninsula Property,

“5. There be an Enquiry

(a) as to the amount of profit a notional sale of the Royal Peninsula Property would have earned had it been sold in the open market for a fair market value on 31^st March 2009; and

(b) as to the amount of all the net income earned by renting out the Royal Peninsula Property up to the date of the Enquiry;

6. An order that the 1^st Plaintiff do pay the Defendant an amount being half of the profit found in the Enquiry ordered in paragraph 5(a) above but deducting thereform all the net income found in the Enquiry ordered in paragraph 5(b) above;”

14.  The Defendant’s former solicitor did not reply to that letter until sometime after the lodging of original Notice of Appeal in this appeal. A holding reply was given on 26 July.  A substantive reply was given on 6 August 2012. For present purposes, it is pertinent to set out the substantive reply,

“We enclose herewith the draft judgement dated 26 June 2012 drafted by Messrs. W.K. To & Co. (“WKTO”) with our proposed amendment thereon in red (as advised by counsel) for your reference.

In this connection and upon scrutiny of the Judgment handed down by the learned Judge on 26^th June 2012, we having obtained counsel opinion would comment that there was not made in the said Judgment such orders as proposed in paragraphs 1,2,5,6 and 9 of the draft judgment as proposed by WKTO.  Parties should confine to only those stated in the said Judgment when drafting the judgment for sealing.”

15.  In the proposed amendment of the draft attached to that reply of 6 August, the paragraphs dealing with inquiry and the sharing of profit in respect of the Royal Peninsula Property (viz. paras 5 and 6 in the Plaintiffs’ draft) had been deleted.

16.  As mentioned, the judge held a hearing on 24 August 2012 to deal with the disagreement between the parties on the draft.

17.  The stance as to the deletion of paras 5 and 6 was repeated in the skeleton submissions of the Defendant of 22 August 2012 placed before the judge for the hearing on 24 August 2012. I quote from paras 19 to 22 of that skeleton submissions,

“19. Paras. 5 and 6 are wholly novel unilateral inventions by Ps.

20. Not only are the matters therein raised not part of the Judgement, they have not even ever been raised on the pleadings by any party.

21. In addition to being novel and unilateral:-

(i) Para.5(a) is also problematic as the suggested relief of ordering an enquiry “as to the amount of profit of a notional sale” may not even be available as a matter of law. Ps have not produced any authority to suggest that it is;

(ii) Para. 5(b) is in direct conflict with what is stated in Para. 69 of the Judgment;

(iii)Para. 6 is premised upon the order of enquiry set forth in Para. 5(a) and is bad for the same reason as Para. 5(a). Further, it is also bad as attributing to D “half of the profit”. That attribution is neither justified by the Judgment nor P1’s own pleadings:-

a. In the Judgment, the Judge stated the evidence seemed to him to be :

“clear that the property was “intended to be one which would be bought and sold at a profit, with the profit shared between the 1^st Plaintiff, the Defendant and Tim”

[Para. 58]

b.  In the Amended Reply at Para. 22(c) [TBA/43], P1 had pleaded:

“(c) In acquiring the Royal Peninsula Property in the name of the Defendant, the Plaintiff orally told the Defendant that he would give the profit earned from the resale of the Royal Peninsula Property to her as gift if the same could be successfully resold at a quick time”

22. What P1 is in effect seeking by Paras. 4, 5 and 6 of Ps’ Draft is to : re-plead and re-argue his case, and also assume the role of the Judge and re-write the Judgment in part and in another part to overrule the Judgement.”

18.  To be fair to the former counsel for the Defendant, in the attachment to her skeleton submissions, she sought the following paragraph in place of para 4 of the draft prepared by the Plaintiffs’ solicitors,

“The Defendant do assign or vest her legal title in the Royal Peninsula Property to or in the 1^st Plaintiff and execute all necessary instruments for that purpose, subject to a recognition of the Defendant’s entitlement to a share in any profits arising on the sale of the property.”

19.  Based on the existing materials before me, in the absence of the transcript of the hearing on 24 August 2012, it would appear that the disagreements between the parties on the terms of the formal order in this respect were,

(a)  Whether there should be a limit on the sharing of profit by the Defendant by reference to a notional sale on 31 March 2009;

(b)  Whether there should be any deduction of net income received by the Defendant in respect of this property from her share of profit.

20.  Whilst there was a reference to para 58 of the judgment at para 21(iii) of the skeleton submissions of Defendant’s former counsel placed before the judge for the hearing of 24 August, she did not seek any order for the sharing of profit with Tim in her draft attached to her skeleton.    

21.  Mr Chan indicated that the 1^st Plaintiff would file a respondent’s notice challenging the judge’s finding that the Defendant is entitled to a share of profit.  The 1^st Plaintiff would seek to argue, as he had before the judge at the trial, that the original intention as to the sharing of profit had been superseded by subsequent developments. 

22.  As I said, I do not know the basis on which the judge came to his decision on the final form of the sealed judgment as the transcript was not produced.

23.  It should be noted that in the original Notice of Appeal, the grounds for challenging the judgment in respect of the Royal Peninsula Property were quite different from those set out in the Supplementary Notice of Appeal. By reason of Order 59 Rule 7(1)(b), upon the service of the Supplementary Notice of Appeal, the original Notice of Appeal is amended and insofar as they are not repeated in the Supplementary Notice, the grounds in the original Notice are taken as abandoned.   

24.  The Defendant changed her legal team after the hearing of 24 August 2012.  But her new legal advisers should be aware of the history leading to the settlement of the sealed judgment in its final form as the Affirmation of 1^st Plaintiff of 9 November 2012 referred to it. 

25.  Notwithstanding that, the Supplementary Notice of Appeal was filed on 14 November 2012, substituting the grounds of appeal in respect of the Royal Peninsula Property.  The current grounds of appeal (as set out in the Supplementary Notice) regarding this property are as follows,

“9. The Deputy Judge erred in departing from the June Decision omitting to provide for the sharing of the profits between the parties on the sale of the Property.

10. Had there not been such a departure, the Deputy Judge should have held that the profit of sale should be shared among the 1^st Plaintiff, the Defendant and her younger brother equally, in common with what they had done in respect of the profits from a previous property transaction: paragraph 33 of the Decision.

11. alternatively to paragraph 10 above, but as a fall back, the profits should have been shared equally between the 1^st Plaintiff and the Defendant.”

26.  In her 2^nd Affirmation filed on 14 November 2012, the Defendant pinpointed the prejudice that may be caused to her if a stay is not granted on this part of the judgment as follows,

“9. The prejudice occasioned to me, if the stay is refused, is that I will have to chase Mr Tang for my share of profits to which I am entitled on the conclusion reached in the June Decision. (One can also see that, in the judgment which was drafted by Mr Tang’s lawyers for approval by the Court this July, they also inserted direction for sharing of profits: see TKKP-1) Although I trust that Mr Tang will have the financial means to pay me and my brother our shares, I am afraid to say that Mr Tang will not easily agree on the amount Tim and I can take without further litigation. Monies are no object to him. He will not be as keen as I am in finding out how much the share of profits should be, particularly if the property is conveyed to him.”

27.  If the basis of the sharing of profit were her real concern all along, instead of a wholesale objection to paras 5 and 6 of the draft prepared by solicitors for the Plaintiffs, she should have invited the judge to modify them.

28.  I do not know why the judge rejected the Defendant’s proposed revision to para 4 at the same time when he deleted paras 5 and 6 of the Plaintiffs’ draft.  For my part, I find the revised para 4 suggested by  former counsel for the Defendant to be unsatisfactory as it did not specify the extent of the Defendant’s entitlement in terms of her share of profit and what should be done to give effect to such interest.  It would only be an invitation to future litigation.

29.  Be that as it may, I am prepared to accept that the Defendant has an arguable appeal insofar as there is an omission in the August sealed judgment to deal with her entitlement to a share of the profit.  I do not express any view with regard to the younger brother entitlement.  He was not a party to the action and there had never been any relief claimed in respect of his share of profit. There was no averment in the pleadings as to his interest in a share of profit.

30.  But an arguable appeal is not enough to give rise to a good reason for granting a stay of paras 3 and 4. Even putting the Defendant’s appeal at its highest, as it is now accepted on behalf of the Defendant that her interest is confined to a share in the profit, there is no reason why the title of the property should not be assigned back to the 1^st Plaintiff. She can still argue about her entitlement to a share in the profit in the appeal and, if she were successful in the appeal, the 1^st Plaintiff would be obliged to pay such share of profit to her after the sale of the property. Given the wealth of the 1^st Plaintiff, there is nothing to suggest that he would not be able to pay. It is clear to me that the Defendant is not entitled to rely on her interest in a share of the profit to delay the transfer of the property back to the 1^st Plaintiff. Yet this seems to be what she is trying to achieve by seeking a stay of paras 3 and 4.    

31.  The implementation of paras 3 and 4 would not render the appeal nugatory. Neither do I see any other good reasons to justify a stay of those paragraphs.

32.  For these reasons, the application for stay was dismissed with costs at the hearing on 20 November 2012.