XCHRX KAILAY ENGINEERING CO. (HK) LTD. v. YAU LEE CONSTRUCTION CO. LTD.

HCCT 74/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION LIST NO. 74 OF 1999

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REASONS FOR DECISION

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On 16th August 1999, I gave partial summary judgment for the Plaintiff in the sum of HK$1,756,004.95 on an Order 14 summons. The parties came back before me on 3rd September 1999 on the Defendant's summons for stay of execution pending appeal against my judgment.

2. In support of its application for stay of execution, the Defendant filed two affidavits, one being the Second Affirmation of Chui Man Lung affirmed on 30th August 1999, exhibiting a credit report by Dun and Bardstreet ("The Credit Report") and deposing to the results of some follow-up enquiries and another being the Third Affirmation also by Chui Man Lung purporting to provide "new evidence". The Plaintiff filed an affidavit by Christopher Hiscoke purporting to answer some of the matters raised in the Second Affirmation of Chui Man Lung.

3. I have, of course, read the Third Affirmation by Chui Man Lung. In gist that Affirmation attempted to explain, e.g., (1) why the officer of the Defendant company handling this action could not obtain some information in time to place before the court for the Order 14 summons and (2) why construction performance bond was discharged and retention money released. Mr. McCoy, S.C. told me that the Defendant will seek to place the "new evidence" before the Court of Appeal. In my view, without going into the details, the "new evidence" is only an excuse to have a second bite at the cherry. However, this is not the reason I rejected such evidence.

4. Mr. Harris for the Plaintiff drew my attention to the case of Atkins v. The Great Western Railway Company [1886] L.T.L.R. 400. There, it is reported that: -

"The MASTER of the ROLLS said that he would not undertake to say that the Court of Appeal would never listen to what happened at the trial in order to see whether they would grant a stay of execution, but, as a general rule, the only ground for such a stay was an affidavit showing that if the damages and costs were paid there was no reasonable probability of getting them back even if the appeal succeeded. He would not say that the Court would not interfere for some other reason, but that there were strong grounds for an appeal was no reason, for no one ought to appeal without strong grounds for doing so. In "Barker v. Lavery" (14 Q.B.D., 769) the Court enunciated that rule when Lord Selborne, then Lord Chancellor, was present, and he was precisely of the same opinion. The application should be refused.

The LORDS JUSTICES concurred." (Emphasis added)

If I understood this authority correctly, whereas materials tending to show that the pending appeal is unmeritorious may be relevant to consideration for stay of execution pending appeal, materials suggesting that the pending appeal is likely to succeed are irrelevant. As the reported judgment of the Master of the Rolls indicates, one should paradoxically assume that the appeal may well succeed and consider whether there was no reasonable probability of recovering the judgment sum to be paid before the appeal is decided.

5. The correct approach, Mr. Harris contended, is encapsulated in the While Book para. 59/13/2 at page 1077: -

"Where the appeal is against an award of damages, the long established practice is that a stay will normally be granted only where the appellant satisfies the court that, if the damages are paid, then there will be no reasonable prospect of his recovering them in the event of the appeal succeeding (Atkins v. Great Western Railway Co. [1886] 2 T.L.R. 400, following Barker v. Lavery [1885] 14 Q.B.D. 769, CA; this rule applies equally to Admiralty cases, see: The Annot Lyle, above, at 116). Nowadays the court may be prepared (provided that the appeal has sufficient merit) to grant a stay, even where that test is not satisfied, if enforcement of the money judgment under appeal would result in the appellant's house being sold or his business being closed down. But if such a stay is granted the court should impose terms which (so far as possible) ensure that the respondent is paid without delay, if the appeal fails, and that appellant is prevented from depleting his assets in the meantime, except for any legitimate and necessary expenditure. This approach was endorsed in Linotype-Hell Finance Ltd v. Baker [1992] 4 All E.R. 887 (Staughton L.J., sitting as a single Lord Justice). It was also endorsed in Winchester Cigarette Machinery Ltd v. Payne (No. 2) (1993) The Times, December 15, but the Court made it clear that a stay should only be granted where there are good reasons for departing from the starting principle that the successful party should not be deprived of the fruits of the judgment in his favour. The Court also emphasised the indications in past cases do not fetter the scope of the Court's discretion."

Mr. McCoy accepted that the passage quoted represents good law.

6. In the premises, I refused to consider the "new evidence" and proceeded to look at the evidence the Defendant has the duty to produce. The evidence is the Second Affirmation of Chui Man Lung which is really based on the Credit Report. The Credit Report reveals that the Plaintiff has been at the wrong end of a number of claims and actions in court. On the face of it, the sky may be falling on the Plaintiff. However, there is an affidavit by Mr. Hiscoke on behalf of the Plaintiff which explains that some of the claims and actions have been settled, some are being resisted and some are in fact in the back burner. In sum, according to the Plaintiff's evidence which I must take at face value, the Plaintiff is not under seige by creditors.

7. As I have mentioned to counsel, one should not assume that a party facing litigation is necessarily approaching insolvency. The instant action is a case in point. The Defendant is being sued for excess of HK$2 million and has in fact being adjudged to be liable for at least HK$1.7 million. This does not mean that the Defendant will not be able to satisfy judgment. There are people, like the Defendant, for various reasons, who do not like to pay their creditors until the court has rendered judgment. And I am in no position to say whether and to what extent the Plaintiff is liable in each of the claims and actions listed in the Credit Report.

8. Mr. McCoy pointed out that the Plaintiff has not filed any evidence to show its financial position. With respect, the Plaintiff has no duty, for the purposes of a summons for stay of execution, to disclose its financial affairs. The burden is on the Defendant applying to satisfy the court that there is no reasonable probability of recovery. In fact, the Defendant has provided evidence against its case. The Credit Report indicates that the financial condition of the Plaintiff is medium. Mr. Harris said that this cannot be taken to mean there is no reasonable probability.

9. I must say I do not quite understand how the ratings and index in the Credit Report are calculated. There is no explanation at all. It would be dereliction of my judicial duty if I simply accept a mysterious "significant" credit risk index pinned on the Plaintiff by Dun and Bradstreet.

10. In conclusion, the Defendant has not produced sufficient evidence to satisfy me that there is no reasonable probability of recovery of judgment sum if paid to the Plaintiff. One must also bear in mind that justice delayed is justice denied. The whole point of providing for procedure for summary judgment is to enable a Plaintiff with a meritorious cause to obtain judgment without delay. There is no point in granting summary judgment if enforcement is held back whenever the Defendant appeals. The application for stay was accordingly dismissed.

11. Mr. Harris asked for costs to the Plaintiff to be paid forthwith. Mr. McCoy, S.C. resisted by relying on this passage form the White Book para. 59/13/10 at p. 1077: -

"Costs of application - The costs are in the discretion of the court (see Adsair v. Young [1879] 11 Ch. D. 136); the modern practice is for the costs to be made costs in the appeal, unless the applicant is appealing out of time or has, in some other way, been dilatory."

Mr. Harris suggested that the passage should be taken to apply where the Defendant is successful in getting stay of execution. I think he must be right. In exercise of my discretion, I followed the general principle that costs follow the event. This being the event, I ordered the Defendant to bear the Plaintiff's costs in this summons to be taxed if not agreed and to be paid forthwith.