LEE SHU HANG AND ANOTHER v. KAN LAP KEE (also known as “TERRY KAN”)

HCMP 2320/2020

[2025] HKCFI 1393

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2320 OF 2020

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DECISION

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1.  On 16 October 2024, this court handed down the decision dismissing the application by the defendant (“Kan”) with costs (“the Stay Decision”). Kan now applies for leave to appeal against the Stay Decision. Pursuant to earlier direction, the present application is now disposed of on paper, after no submission in reply has been received.

Background

2.  The dispute between the parties was set out in the judgment of this court dated 8 March 2022 (“the Judgment”) and the Stay Decision. Unless otherwise specified, this court adopts the same definitions and abbreviations as before.

3.  The application by Kan in the first instance was for stay of execution of the costs orders made by this court pursuant to the Judgment finding civil contempt on the part of Kan and the sentencing upon proof of contempt respectively (“the Stay Application”). The Stay Application was taken out after such costs have already been taxed and the Allocatur issued.

4.  By the time of the hearing of the Stay Application, it became clear that Kan could only be seeking to invoke the court’s inherent jurisdiction, and the major contention was that the enforcement of payment of the plaintiffs’ taxed costs should hold because the balance of his professional fees as liquidator in HCCW 236/2011 payable by the plaintiffs would exceed such costs payable by him.

5.  As part of the circumstances of this case, which this court had to take into account, the scene behind how the Stay Application came about since the costs orders have been made was set out in the Stay Decision before this court proceeded to discuss the grounds and arguments. Eventually, this court refused to stay. Hence the Stay Decision.

Principles

6.  Section 14AA(4) of the High Court Ordinance, Cap 4 provides that leave to appeal shall not be granted unless the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.

7.  When it comes to challenge against the exercise of discretion of the court, the applicant must demonstrate that such decision of the court was plainly wrong. This would either be an error in law or failure to take into account relevant considerations (or taking into account irrelevant considerations) and thus leading to a conclusion which no reasonable tribunal would have drawn. Otherwise, the appellate court would refrain from interfering: see for instance Wong Kar Gee Mimi v Severn Villa Limited & Ors [2012] 1 HKLRD 887 at §31; Xu Hongbiao v Oasis Investment Group Limited & Ors [2024] HKCA 854 at §43.

8.  In this context, the intended appeal is expected to address error in the first instance, and not to regurgitate arguments in the hope for a possibly different view of the appellate court: see K&L Gates v Melco Crown Gaming (Macau) Limited [2019] HKCFI 200 at §7(iii) (on appeal: [2019] HKCA 350).

9.  I see no real dispute as to such principles.

Grounds of the intended appeal

10.  Draft notice of appeal is annexed to Kan’s summons for the present purpose. The following grounds are advanced, pointing out the following errors of this court:

(1)  error in assessing the evidence in respect of the potential of his entitlement by his pending cross claim exceeding such costs that the plaintiffs are entitled to;

(2)  error in applying the law by setting an unduly high threshold for granting a stay of execution;

(3)  error in failing to take into account other special circumstances and balance of prejudice which should favour stay.

Ground (2): the law

11.  I address the second ground first.

12.  The starting point that a judgment creditor should be able to take all legitimate measures to enforce the judgment instead of being deprived of its fruits was laid down by the appellate court: see for instance Credit Lyonnais v SK Global Hong Kong Ltd [2003] 4 HKC 104 at §§4; 25. Discretion in favour of stay of execution of judgment should be exercised in special, if not exceptional, circumstances. The same applies to costs orders. This court sees no reasonable prospect of arguing against that as the applicable test.

13.  That this court was not satisfied that Kan has discharged his burden of demonstrating the requisite special circumstances, which would have justified the stay, was a conclusion reached upon the consideration of the circumstances of the case. Amongst them was any abuse or manifest injustice arising from the plaintiffs’ exercise of their right of execution. It was in such context that this court considered specifically the amount of the plaintiff’s taxed costs being enforced and the timing of Kan’s conceiving the Stay Application.

14.  Kan’s disagreement with this court’s assessment of the circumstances, including those mentioned in the preceding paragraph, will be discussed under intended appeal ground (1) below. However, it is out of context for Kan to argue that this court somehow advocated abuse or manifest injustice as the threshold of the applicable test, which is therefore said to be unduly high and hence an error in law. Clearly, avoidance of injustice is the key consideration in granting stay: see Credit Lyonnais (above).

Ground (1): assessment of the circumstances

15.  In principle, mere existence of a cross action by the debtor against the judgment creditor will not ordinarily suffice for justifying a stay. It requires more. This is particularly true in the case of costs orders, which are recompense for the receiving party for the money expended in litigation with the party adjudged to be liable to pay such costs. This is a particularly relevant consideration as a matter of principle.

16.  Principled consideration aside, the circumstances projected by Kan was that first, he is potentially entitled to the balance of his professional fees as liquidator payable by the plaintiffs, as may be determined under the adjourned Misfeasance Summons/Reassessment Application, exceeding the taxed costs payable to them; and second, if the plaintiffs were allowed to enforce the costs orders, they would not be good for recovery of such projected net balance in his favour. It was in such context that the circumstances of the case should be, and were, assessed.

17.  Kan argues that this court failed to take into account that part of his fees and expenses in respect of which the plaintiffs complain under the Misfeasance Summons/Reassessment Application has been adjudicated against them. As far as he still relies on the observations of Hon G Lam J (as he then was) in making the 23/1/2020 Order, he is apparently yet to properly understand His Lordship’s discussion in his decision then for the purpose of the matter before him[1].

18.  As his counsel acknowledged in the Stay Application[2], it was Kan who indicated his readiness to accept interim payment of 50% of the liquidator’s fees then taxed ex parte, which Hon G Lam J decided to adopt after considering the circumstances of the case for the specific purpose of a conditional stay of the winding up as explained in his decision. In this connection, the determination pursuant to the 23/1/2020 Order so made expressly entails determination/re-determination, adjudication/re-adjudication and assessment/reassessment, which would effectively ascertain afresh the liquidator’s fees to which Kan ought to be entitled, albeit partly paid for the purpose of the conditional stay of the winding up Pak Tat. Hence the outcome of the pending Misfeasance Summons/Reassessment Application, and thus the likelihood of an ultimate net and substantial balance in favour of Kan, being fluid.

19.  Kan argues that this court failed to take into account his entitlement to further liquidator’s fees and expenses since April 2017 until his discharge[3]. However, this court’s analysis must applies to all the fees and expenses which Kan may be found to be entitled to under the pending Misfeasance Summons/Reassessment Application.

20.  The set-off envisaged by the cross-undertakings of the parties consists of that by Kan to repay any excess already received upon such an exercise according to the findings under the Misfeasance Summons/Reassessment Application. As far as it is said that the exercise may end up with a net balance in favour of Kan, one may not in principle argue against that as a matter of possibility. That said, one equally may not pitch such possibility at this stage in more concrete terms. The question then is whether or not that state of affairs known before this court sufficed for the purpose of the Stay Application.

21.  One must balance what the parties, particularly Kan, managed to project before this court as the outcome of the determination of the dispute and resultant entitlements in pending proceedings and the known amount of the taxed costs to which the plaintiffs have been adjudged to be entitled. This is also relevant to the consideration of the contention in respect of the likelihood of the plaintiffs being unable to pay back in the event of a net balance against them. All are relevant to the court’s exercise of discretion whether to stall the plaintiffs’ enforcement of the costs orders in question.

22.  Applying the test mentioned above, this court was not satisfied that Kan has discharged his burden in causing this court to so exercise the discretion in his favour in all those circumstances. Whilst Kan disagrees with this court’s conclusion, his argument that this court has failed to take into account some of those circumstances, in my view, does not possess a reasonable prospect of convincing the appellate court to interfere.

23.  One must note that this court in fact did not rule out considering stay on the basis of a possibility of a net balance of entitlement in favour of Kan eventually after the determination of the Misfeasance Summons/Reassessment Application. However, this court, as it was entitled to, factored in the consideration the appropriateness of stay only on terms. Such condition, if in the form of some payment into court, would also have addressed any concern about the plaintiffs’ worthiness in making possible repayment eventually. As noted in the Stay Decision, Kan was not forthcoming in this respect at all, despite opportunity to do so. He remains silent on this point for the present purpose.

24.  In other words, Kan is not challenging the appropriateness of the consideration of conditional stay in principle, but is standing firm that the Stay Application ought to have been granted and without any condition attached. Such stance is hardly convincing in the absence of concrete projection that it is most likely that the Misfeasance Summons/Reassessment Application would yield not only a net but also a substantial net balance in his favour in the circumstances which are heavily disputed and to be resolved at this stage. This court fails to see how accepting such stance of Kan would have been appropriate exercise of discretion in the circumstances before it.

Ground (3): other special circumstances and prejudice

25.  Kan argues that this court failed in taking into proper account of the issue of delay. It is difficult to see how so. Exactly because this court was acutely aware of the relevance of the scene behind how and when the Stay Application came to be conceived, the same was set out at the beginning of the Stay Decision. This court set out the fact of the time taken and the development since the costs orders until the Stay Application as the background.

26.  Kan essentially repeats his arguments and authorities on the issue of the alleged potential difficulty in recovering from the plaintiffs in the event of a net balance in favour of Kan upon conclusion of the Misfeasance Summons/Reassessment Application. However, the issue of recovery from the plaintiffs could not be considered without establishing the likelihood of that event. The assessment in respect of the likelihood of that event in the Stay Decision and, now for the present purpose, above refers. Decided cases in this respect vary according to their own facts. Re Lehman Brown Ltd (No 2) referred to by Kan and cited in the Stay Decision was one of those. So are Asparouh Ianev Dimitrov v Dominic Tak Ming Lau [2018] HKCA 356, Dar Al Arkan Real Estate v Al Refai [2016] 6 Costs LO 865 and Pacific Foundation Finance Limited v Fairyoung Holdings Limited HCA4029/1998 (4 November 1998) cited by Kan for the present purpose.

27.  Kan also complains about the plaintiffs’ issuance of statutory demand upon the handing down of the Stay Decision. Putting aside whether the decision of the plaintiffs to exercise such right in the circumstances deserves criticism as a matter for the Companies Court, such conduct subsequent to the Stay Decision does not sustains as a matter in support of satisfying the test under section 14AA.

Conclusion and order

28.  Therefore this court is not satisfied that the intended appeal on the grounds proposed has reasonable prospect of success. Nor is there suggestion that there is reason in the interests of justice that the appeal ought to be heard.

29.  The present application is dismissed with, on nisi basis, costs to the plaintiffs with certificate for counsel. Unless application to vary is made within 14 days from the date hereof, the nisi costs order will become absolute without further order. Upon that, the plaintiffs shall lodge and serve their statement of costs within 7 days, and Kan may lodge and serve his written comment within 7 days thereafter. Costs of the application payable by Kan will be summarily assessed on paper only.