LAM ROGERIO SOU FUNG v. TAN SOON GIN GEORGE

HCA2576 & 2545/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2576 OF 2005

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BETWEEN

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REASONS FOR DECISION

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1.  At the hearing on 26 July 2011, I dismissed the application by the defendant in counterclaim in HCA2576/2005 for stay pending appeal and ordered that the sums now standing in court under HCA2545/2005 be paid out to the defendant in the Issue or his solicitors. I also refused to grant an interim stay in HCA 2576/2005 pending a renewed application for stay of execution to the Court of Appeal. My reasons appear below.

The applications

2.  The two applications that came before the Court were: (i) An application by Mr Tan Soon Gin George (“Tan”), the defendant in the Counterclaim in HCA2576/2005, to stay the execution of the Judgment in that action dated 5 May 2011 (“the Judgment”) pending his appeal to the Court of Appeal; and (ii) An application by Mr Lam Rogerio Sou Fong (“Lam”), the defendant in the Issue in HCA2545/2005, for an order that the two sums paid into court by Sotheby’s Hong Kong Limited pursuant to the order dated 26 May 2006 be paid out to him.    

The Judgment

3.  By the Judgment, Tan was ordered to pay Lam (i) damages for conversion in the respective sums of HK$103 million, HK$2.8 million and HK$5 million; (ii) nominal damages for wrongful detention in the sum of $100; and (iii) an order for delivery up of the Deep Dish and the Quail Dishes held in the custody of Christie’s Hong Kong Limited. Tan had lodged an appeal against the Judgment, which is scheduled to be heard on 10 and 11 January 2012.

4.  Counsel agreed that the determination on paragraph 2 of the Summons in HCA2545/2005 stood or fell with the outcome of the application for stay.

Applicable principles

5.  Counsel were in agreement on the applicable principles as summarised in the submissions of Mr Strachan, who appeared together with Mr Wong for Lam. To recap, they are that:

(1)   An appeal per se does not operate as a stay of execution of the order appealed against. The Court does not make a practice of depriving a successful litigant of the fruits of his litigation and locking up funds to which prima facie he is entitled to.

(2)   A stay of execution will only be granted if good reasons are shown.

(3)   The existence of an arguable appeal (that is one with a reasonable prospect of success) is a minimum requirement for the court to consider granting a stay. Hence, a stay will not be considered if an appellant cannot demonstrate that the appeal has arguable grounds.

(4)   If it is an arguable appeal, the appellant must still provide additional reasons as to why a stay should be granted. One such additional ground is that, without a stay, there is a risk of the appeal being rendered nugatory. In the case of a monetary judgment, this may be so where there is an appreciable risk that the respondent to the appeal would not be able to repay in the event of a successful appeal.

(5)   If the appellant is able to demonstrate he has very strong grounds of appeal, then the court will be inclined to grant stay of execution and may not be inclined to examine other matters very closely, such as the financial situation of the appellant or of the respondent.

(6)   Ultimately, however, the court should always have regard to the position of the respondent and it is always relevant to consider the prejudice that would be caused to him in the event of a stay of execution.

See Order 59 rule 13 of Rules of the High Court, cap.4A; Star Play Development Ltd v. Bess Fashion Management Co Ltd [2007] 5 HKC 84, paras.6-10; Wendon Engineering Services Co Ltd v. Lee Shing Yue Construction Co Ltd (unreported) HCCT 90/1999, 17 July 2002 at paras.5-8; World Trade Centre Group Ltd & Anor v. Resourceful River Ltd & Anor (unreported) CACV 70/1993 at para.4; and World Food Fair Ltd & Anor v. Hong Kong Island Development Ltd (unreported) CACV 398/2003 at para.5.    

The merits of the appeal

6.  Tan’s application for stay of execution rested on two broad bases. The first is that there exist strong grounds of appeal, which is in itself and without more, a good reason justifying the stay. The second is that there is a risk of the appeal rendered nugatory in that Lam is impecunious and that Tan would encounter considerable difficulties in recouping the judgment sum in the event of a successful appeal.

7.  In respect of the merits of the appeal, it is trite that in an application for stay of execution, the court ought not to embark upon a detailed analysis of the arguments involved.  The court needs only form a tentative view of the prospects of success of the appeal.

8.  In summary, the grounds raised in the Notice of Appeal are these: First, it is said that the court erred in coming to a conclusion first and then to justify the conclusion; and that the proper approach should have been to make findings of fact as to what happened from the time the Disputed Antiques were in the defendant’s possession up to 2005, and then to stand back and assess whether a sale or loan was inherently more probable (Ground 1).  Second, it is said that the court erred in failing to find that Lam was present at the reception for the Mayor of Oakland, and that had the court made this finding, the court would and should have concluded that Lam’s case that the Disputed Antiques were lent to Tan was improbable (Ground 2 -4).  Third, it is said that the court erred in not giving any or sufficient weight to certain features in the Lam’s or Tan’s evidence (Ground 5 – 8). Fourth, it is said that the court erred in forming an adverse view on certain parts of Tan’s evidence (Ground 9 & 10). Fifth, it is said that the court should not have attached weight to the temporary receipt signed by Mr James Lally (Ground 11).

9.  The thrust of Tan’s appeal is directed at my assessment of the credibility and reliability of his and Lam’s evidence, my findings that Tan’s evidence is inherently improbable and incapable of belief and my conclusion that, looking at the entirety of Lam’s and Tan’s evidence against the undisputed background and facts, the account of events given by Lam (namely he had lent the Disputed Antiques to Tan) is to be preferred to the account given by Tan (namely he purchased the Disputed Antiques from Lam and another private collector). 

10.  In particular, Mr Burns SC submitted that I had misdirected myself as to the effect of the oral evidence and that the evidence does not justify my acceptance of Lam’s case and the rejection of Tan’s case on the central issue of whether Tan borrowed the Disputed Antiques from Lam or whether he acquired them from Lam and a private collector.  Reliance was placed on the judgment of the Privy Council in Universal Dockyard Ltd v. Trinity General Insurance Co Ltd [1989] 2 HKLR 160, at 167B-168B.

11.  For the purpose of demonstrating that there grounds of appeal have a high prospect of success, Mr Burns SC has attached to his submissions a Critique of the reasons for finding in favour of Lam.  Mr Strachan responded to the Critique by way of an annexure to his submissions (I.e. Annexure I). 

12.  I do not intend to go into the points canvassed in both documents as this is not the occasion to do so, this being not the hearing of the appeal. I would only observe that, as Mr Strachan submitted, a number of the points in the Critique are not part of the grounds in the Notice of Appeal.  I also note that neither the Notice of Appeal nor the Critique raises any substantive point of law.  The focus of the challenge is on the assessment of the evidence and the findings of fact drawn from the evidence.  I note too that the arguments relating to the Mayor of Oakland’s reception had already been canvassed by Tan’s trial counsel and dealt with in the Judgment.  Further, it is doubtful whether Tan’s appeal involves a complaint of misdirection as to the effect of the evidence of the kind identified in Universal Dockyard Ltd v. Trinity General Insurance Co Ltd.

13.  Additionally, in Ting Kwok Keung v. Tam Dick Yuan & Ors (2002) 5 HKCFAR 336, paras.34 & 35, a distinction was drawn between appeals against findings of primary facts involving assessment of the relative credibility of witnesses and appeals against findings of facts made by a process of inference.  In the speech of Lord Reid in Benmax v. Austin Moto Co Ltd [1955] AC 370 at 375 quoted by Bokhary PJ, the point was made that it is only in rare cases that an appeal court could be satisfied that the trial judge has reached a wrong decision about the credibility of a witness.  In the present case, the credibility of Lam and Tan and the reliability of their evidence is pivotal to the determination of the core issue as to whether the Disputed Antiques were lent by Lam to Tan or whether they were purchased by Tan from Lam and a private collector.   

14.  Having regard to the principles stated in Ting Kwok Keung v. Tam Dick Yuan & Ors, at paras.32-46, I do not feel able to accept that there are strong grounds in Tan’s appeal.  I have doubts, too, whether the grounds of appeal can be said to enjoy a reasonable prospect of success.  I am, however, prepared to assume for the purpose of the application for stay pending appeal that Tan’s appeal is arguable.  On this basis, Tan has to go further to establish that the appeal would be rendered nugatory.

Appreciable risk of the appeal being rendered nugatory

15.  The case that Tan seeks to advance is twofold. Firstly, it is said that there is a risk of Lam selling the Stemcup and the Double Gourd. This is hardly a good reason having regard to the fact that nowhere in his affidavits had Tan indicated an intention or interest in keeping the two items and that he had as early as 2005 put them up for auction. 

16.  Secondly, it is said that there is a risk that Tan would have difficulties in recovering from Lam the judgment sum in the event of a successful appeal. Mr Burns SC argued that the risk arose because there are reasonable grounds for believing that Lam is impecunious and that he is a man of low or no commercial morality and has a personal animosity against Tan.     

17.  On this aspect of the application, Tan and Lam had each made two affidavits. Mr Paul Ernest Firmin, Tan’s solicitors, had also made an affidavit exhibiting an investigation report compiled by Mega Management Limited (“Mega’s Report”).

18.  The burden is on Tan to make good his case that there is an appreciable risk that, without a stay, the appeal would be rendered nugatory.  He has to show that Lam is impecunious and make good the risks he alluded to. 

19.  Several matters were put forward by Tan to support his assertions that Lam is impecunious and there is a likelihood that the judgment sum would have been disposed by Lam and could not be recovered in the event of a successful appeal. Tan referred to the fact that Lam has retired and is not known to have any landed properties or assets. Lam accepts he has retired and does not own any landed properties. He however says he has other assets consisting of a collection of valuable antiques, a matter to which I will return later. 

20.  Mr Burns SC also said that the evidence at the trial showed that Lam’s family companies were dissolved and his personal and family wealth had dissipated as a result of the Gammon House and CUL shares transactions. Lam’s evidence at the trial was that the loss of his personal and family wealth was very much the result the making of Tan.  What is tolerably clear is that these losses were tied to the collapse of Tan’s Carrian Group.

21.  Tan had produced the results of a search on litigations that involve Lam, which went as far back as 1982.  It is Lam’s evidence (which is not really challenged) that all the litigations had been disposed of, save the present two actions against Tan and the proceedings between him and his former solicitors.   

22.  To refute Lam’s assertion in his 5^th affidavit that he has a valuable collection of Ming and Qing porcelain and that this is well known to the collection circle, Tan produced (some two months after the filing of Lam’s affidavit and less than a week before the hearing) the Mega’s Report. The report concluded that Lam is not well known in Chinese ceramics collection circle and is not known to have any collection of antiques and that whatever pieces he once had; they had either been long donated to museums or otherwise disposed of.  Mr Burns SC submitted that this report cast doubt on Lam’s assertion. 

23.  In my view, very little weight can be given to this report.  Firstly, it gave no indication (not even to the court) as to the source of the information or comments about Lam that were contained therein.  Secondly, the report made a number of obscure points and spoke of matters that had no apparent relevance, but were highly prejudicial. For example, paragraph 5 made an abrupt reference to Dr Peter Lam, saying “he has elevated himself to a certain status within the industry” and that “nobody is willing to ‘take him on’ or dispute what he might have to say”.  Dr Lam was Lam’s witness at the trial, whose evidence I had accepted, including his evidence that Lam is a much respected collector of Chinese ceramics.  Then in paragraph 3, it was suggested that there were many fakes in the antique market. In paragraph 6, it began by suggesting Chinese porcelain collectors would not wish by make adverse statements about other collectors, current or otherwise. It then went on to mention the late Mr Tsui Tsin-tong, saying he had appeared as a co-defendant with Lam in several litigations.  Then in the last sentence of the report, the investigators said they did not believe the pieces presented by Lam had the provenance and value claimed and suggested they were simply modern reproductions.  It is simply unclear what is the purpose, let alone the relevance, of these paragraphs in the report.  Even Mr Burns SC was not in a position to explain.

24.  Two days after receiving Mega’s Report, Lam made his 6^th affidavit in which he gave an account of some of the Ming and Qing porcelain items in his collection.  He estimated their value to be in excess of HK$400 million, based upon recent sales of comparable items. He said he also had a collection of Ming furniture and modern paintings, which valued over 100 million.  Mr Burns SC criticized Lam for exhibiting pictures of the porcelain items that were taken from catalogues and for not providing details of where the items were kept, how and from where they were acquired and also their provenance.  In respect of the rare Wing bowl that Lam said he purchased in 1977 from a Sotheby’s auction, Lam was criticized for not providing documentary proof of the purchase and payment. 

25.  In my view, these submissions have overlooked the fact that this is Tan’s application and the burden of proving impecuniosity falls on him.  Lam has no positive duty to prove his wealth and financial means.  Tan’s case is that there are reasonable grounds to believe Lam is impecunious.  Lam has gone on oath to say he is not impecunious and has gone further to indicate the nature and value of part of his collection.  There is no proper basis on which this court can conclude that Lam’s affidavit evidence ought not to be believed.  It is also relevant to note that Lam only had a short time to respond to the Mega’s Report.  Even if he should have provided the details suggested by counsel, the omission to do so should not without more lead to the conclusion that he was merely making bold assertion. I also do not accept the submission that even if Lam did have these antique items in his possession, it is no proof that he owns them.  There is no factual foundation for the court to take such a view.

26.  It is also submitted on behalf of Tan that Lam is a man of low commercial morality since he had a criminal conviction and as he has a personal animosity towards Tan, there would be difficulties in recouping the judgment sum from Lam in the event of a successful appeal.  I do not accept the submission.  Mr Strachan submitted, and I agree, that these are unfair attacks.          

27.  Mr Burns SC further made the point that it is not unfair to grant the stay sought in view of the delay by Lam in bringing his claim and since the appeal will be heard in less than six months’ time.  It was further pointed out that without a stay, sums of over HK$100 million would be paid to Lam.  In my view, the answer to these points is that Lam, being the successful party, ought not to be deprived of the fruits of the litigation.

28.  For the above reasons, I am of the view that Tan has failed to show good reasons for staying the Judgment pending his appeal.  The application for a stay was accordingly dismissed. 

Application for interim stay

29.  Mr Burns SC applied orally for an interim stay pending the making of a renewed application to the Court of Appeal.  It was submitted that the status quo should be maintained before the renewed application is heard.  I am not satisfied there are good reasons to grant an interim stay.  On the basis of the materials before the court, I am not persuaded that Tan has a reasonable prospect of success on his renewed application.  I see no justifications for depriving Lam of the fruits of his litigation.  There is additionally no urgent need for an interim stay. I refused to grant an interim stay of the Judgment.

Application for payment out in HCA2545/2005

30.  It follows from the dismissal of the application for stay of execution that Lam’s application for payment out as per paragraph 2 of the summons in HCA2545/2005 should be acceded to.  I therefore made an order that the two sums paid into court by Sotheby’s Hong Kong Limited pursuant to the Order dated 26 May 2006 together with the interest accrued shall be paid out to Lam or his solicitors.

31.  I further ordered that Tan pays the costs of Sotheby’s and Lam on the interpleader summons.  The amount of Sotheby’s costs had been assessed by Master to be HK$379,404 and was deducted from the sale proceeds paid into court by Sotheby’s.  Accordingly, Tan should forthwith pay to Lam the said sum of HK$379.404.         

Costs

32.  There is no disagreement that the usual rule of costs follow event should apply.  The costs of the two summonses should be paid by Tan to Lam together with a certificate for two counsel; the amount of costs shall be determined by way of gross sum assessment.  To this end, Lam shall provide the statement of costs within 7 days from the date of the hearing. Tan shall provide his objections within 14 days thereafter. Lam shall provide his reply (if any) within 7 days thereafter.