DENNIS KWOK HON MING v. POON SUI CHEONG ALBERT AND OTHERS

HCMP 1526/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1526 OF 2013

________________________

________________________

________________________

MISCELLANEOUS PROCEEDINGS NO 1527 OF 2013

________________________

________________________

________________________

MISCELLANEOUS PROCEEDINGS NO 1528 OF 2013

________________________

________________________

________________________

(Consolidated pursuant to the Order of
the Honourable Mr Justice Harris dated 27 January 2015)

________________________

REASONS FOR JUDGMENT

________________________

Introduction

1.  By my judgment dated 6 April 2017 (following a hearing on 5 April 2017), I dismissed the summons of the Majority Shareholders seeking (inter alia) a stay of execution of my judgment dated 14 December 2016 (“the Main Judgment”) and subsequent decisions dated 21 February 2017 and 15 March 2017 (together “the Three Decisions”), pending an application to the Court of Appeal for a stay of execution pending appeal of the Main Judgment.  I use the same abbreviations and definitions as used in the Main Judgment.

2.  As a consequence of the Three Decisions, the parties are required to appoint a valuation panel to produce a valuation report within 60 days of 15 March 2017.  The Majority Shareholders do not wish to do so where they assert an intention to appeal the Three Decisions, and the possibility that the costs of valuation will be wasted if their appeals are successful.

3.  By a Summons dated 7 April 2017, the Majority Shareholders seek an interim stay of execution of the Three Decisions pending an intended application to the Court of Appeal for a stay of execution pending appeal.  On 12 April 2017, I notified the parties that the application for an interim stay was refused, with reasons to follow.  I set out my reasons below.

4.  On behalf of the Majority Shareholders, Mr Solomon Tseng (R2) has made a 4^th affirmation dated 7 April 2017 (“Tseng 4”) stating that the Majority Shareholders intend to apply to the Court of Appeal for a stay of execution as soon as reasonably practicable and no later than 14 April 2017, and that they also intend to seek leave to appeal the February Decision out of time from the Court of Appeal, and to seek leave to appeal the March Decision from the Court of Appeal.

5.  I note that there is no solicitors’ undertaking to file the proposed application in support of which a stay of execution is sought.  This does not appear to be consistent with normal practice (see Hong Kong Civil Procedure 2017 59/13/7).  However, this could presumably be remedied by the imposition of a condition, and will not affect my decision on this Summons.

6.  I note that I am not asked to address any of the Majority Shareholders’ proposed applications to the Court of Appeal, and only to deal with the question of interim stay of execution pending such proposed applications.

7.  The Majority Shareholders lodged their Summons and written submissions late on Friday 7 April 2017, stated that they had asked P to respond by 10 April 9 am, and asked that the Summons be determined on paper by Monday 10 April. P has informed the Court that the Summons was delivered to his mailbox at 8 pm on Friday 7 April. P requested and was granted further time to respond until 4 pm on 11 April. MCA Lai Solicitors LLP went back on the record for P on 10 April (P having been unrepresented at the hearing on 5 April 2017). P lodged skeleton submissions on 11 April 2017.

8.  In addition to the application for an interim stay, P has by his solicitors requested in writing that the costs in respect of the earlier summons of 22 March 2017 (for leave to appeal and a stay pending appeal) should be taxed on a common fund basis. The Majority Shareholders by their solicitors have responded in writing to oppose such an order.

Applicable principles for interim stay

9.  The Court has jurisdiction to grant an interim stay of execution pending an application to the Court of Appeal for a stay of execution: RHC Order 1B, rule 1(2)(e).

10.  The Majority Shareholders submit that the applicable principles for a stay of execution — as set out in Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 para 9 — are varied in the case of an interim stay as opposed to “a stay proper” in that the applicable test is “slightly less stringent” and the applicant need only demonstrate a “respectable argument” to be ventilated on appeal.  In support of that submission, the Majority Shareholders rely on the decision of Louis Chan J in Lau Tin Cheung v Tianjin Development Holding Ltd HCA 422/2011,(unreported, 18 February 2015).

11.  Having regard to the principles applicable on stay applications, I am not at all sure that the Star Play approach is to be varied on interim stay applications as submitted.

 (a) Lau Tin Cheung para 4 stated the learned judge’s view that the test for an interim stay pending an application for a stay is slightly less stringent than that for an application for stay as adumbrated by Ma J (as he then was) in Wenden Engineering HCCT 90/1999 (unreported, 17 July 2002).

 (b) In Wenden Engineering, Ma J repeated the principles which he had set out in Star Play.

 (c) Louis Chan J did not cite (in Lau Tin Cheung) any authorities in support of his view that a different test be applied for interim stay applications.

 (d) Indeed, the test actually applied by Louis Chan J in Lau Tin Cheung appears to have been the Star Play approach, namely that where the appeal is arguable (rather than strong or hopeless), then the court will consider whether there is other good reason for a stay such as the appeal would be rendered nugatory if there were no stay.  In Lau Tin Cheung,there was good reason for an interim stay where the appeal was arguable and the applicant had offered to pay the judgment sum into court (and, I note, the length of interim stay was known as the hearing for the stay application before the Court of Appeal had been set down).

   (e)     There is nothing in Lau Tin Cheung to suggest that, for an interim stay, it is only necessary to show an arguable case on appeal.

12.  The starting-point for a stay of execution application is that a successful litigant ought not to be deprived of the fruits of his litigation without good reason.  I accept that the length of interim stay is a relevant matter to be taken into account when considering the likely prejudice to each side in the balancing exercise to be conducted when considering if there is good reason for a stay.  However, the Star Play approach, in my view, remains the relevant test for any stay application.

The interim stay application

13.  As I stated in my 6 April judgment:

 (a) The only ground of appeal I considered strongly arguable would impact on the valuation of the P’s shares, but not the buy-out order (Ground 7.4) (see paras 25 and 27 of my judgment).

 (b) The other grounds of appeal were at most arguable (paras 20-24).

14.  I declined to grant a stay pending appeal because, where the grounds were arguable rather than strong, I found no other reason for a stay, and, in particular, I was not satisfied that the appeal would be rendered nugatory without a stay on the basis of P’s alleged inability to repay the Majority Shareholders’ potentially wasted costs.  See paras 28 – 32 of the 6 April judgment.

15.  The Majority Shareholders submit that the proposed stay of execution application to the Court of Appeal might succeed notwithstanding it failed before me because the Majority Shareholders intend to file “further evidence to demonstrate that [P] would be unable or unlikely to repay the Majority Shareholders’ costs and/or buy-out sum in the event that the appeal is successful”.  I am not shown such evidence nor am I told what it is and, therefore, I cannot be satisfied that the application to the Court of Appeal for a stay pending appeal has any greater prospects of success than the application before me, dismissed on 6 April 2017.

16.  I am not satisfied that there is good reason to delay the valuation process for the shorter but unknown period of time it would take to bring on the proposed application for stay of execution to the Court of Appeal (as opposed to a stay pending determination of the actual and proposed appeals themselves).

17.  In those circumstances, I dismiss the application for an interim stay.

18.  Although they do not affect my decision, I note that P has made the following extra submissions:

 (a) The proposed engagement letter for the valuers (exhibited to Tseng 4) permits termination of the valuation services contract on 7 days’ notice.

 (b) The valuation costs would not be wasted even if the appeals are successful because the Companies are required to conduct an annual valuation of the Lands pursuant to the Shareholders’ Agreement.

 (c) The Majority Shareholders’ written submissions dated 10 February 2017 paras 21-22 asserted that the payment for P’s Shares should be in 3 instalments over 6 months, and that a lump sum payment was not practical — thereby suggesting that the Majority Shareholders might not be financially capable of buying out P’s Shares.  P submits that the Majority Shareholders, who have been represented by 2 or 3 counsel at each hearing, are using their limited resources on vexatious litigation at the expense of the Court and P.

19.  Accordingly, a prompt application for a stay of execution to the Court of Appeal on the basis of any, as yet unknown, winning evidence (within the control of the Majority Shareholders) and a suitably early hearing before the Court of Appeal (which I note is not within the parties’ control after lodging of the application), may — if successful — enable valuation costs to be reduced by termination of the valuation services contract.

20.  I do not rely on the Companies’ annual valuation obligation. The contractual obligation to conduct a valuation may not require the same valuation as required by the court in order to price the Shares for buy-out.

21.  It may be possible to infer from the Majority Shareholders’ submissions dated 10 February 2017 that the Majority Shareholders are not financially capable of meeting the buy-out order in one lump sum immediately after the price of the Shares is fixed. However I do not, for present purposes have to determine their financial capabilities; nor whether they seek to spend their resources on litigation rather than payment to P under the order for buy-out. I believe P was only raising this issue in the event that I was inclined to order an interim stay, in support of the imposition of terms.

 Costs of this Summons

22.  It seems to me that, irrespective of whether the actual or proposed appeals from the Three Decisions are ultimately successful, the interim stay application (as with the stay pending appeal application) was unjustified on the available evidence.  Accordingly, I make a costs order nisi that the costs of this Summons are to P in any event.

Costs of the Majority Shareholders’ Summons of 22 March 2017 determined on 6 April 2017 (“the 1^st Leave and Stay Summons”)

23.  I have received written submissions for P (by 3^rd letter of MCA Lai dated 10 April 2017) and the Majority Shareholders (by letter of F Zimmern dated 11 April 2017) in respect of P’s request that the costs of the 1^st Leave and Stay Summons be taxed on a common fund basis.

24.  The court has a discretion to order costs to be taxed on a common fund or indemnity fund basis, i.e. a more generous basis than party and party, pursuant to RHC Order 62, rule 28(3).

25.  P’s first argument is that P made a “without prejudice save as to costs” offer by letter dated 28 March 2017 to the effect that if an offer was made to withdraw the 1^st Leave and Stay Summons by 31 March 2017, P would accept with no order as to costs. P argues that pursuant to RHC Order 62, rule 5(1)(d), its offer letter (which received no reply) should be taken into account, and such account should lead to a common fund basis taxation.

26.  It is not suggested that the offer made by P was a sanctioned offer within RHC Order 22. It is apparent, from Order 62, rule 5(1)(d) and Wong Yim Man Anthea v Wong Ho Ming Felix [2016] 3 HKLRD 249, that the Court might order a more generous basis of taxation if a without prejudice save as to costs (or Calderbank) offer had been made. In the Wong v Wong case, no such enhanced order was made in light of other circumstances, in particular the successful party’s unsatisfactory conduct during the proceedings. I note that in Lung Po Kwan v Tam Kam Sheung CACV 164/2010 (unreported, 5 May 2011) (cited at Hong Kong Civil Procedure 2017 62/28/2), the Court of Appeal awarded indemnity costs in favour of the appellants where the unsuccessful respondents had failed to accept the successful appellant’s generous offer.

27.  I have not had my attention drawn to any particular cases addressing when a common fund basis taxation might be ordered.

28.  The 1^st Leave and Stay Summons primarily sought (1) leave to appeal in respect of the March 2017 judgment and (2) a stay of execution pending appeal from the Main Judgment.  The 1^st Leave and Stay Summons, although unsuccessful in all respects, was in any event necessary insofar as it sought leave to appeal before seeking leave to appeal from the Court of Appeal. P’s Calderbank offer was to withdraw the leave to appeal application as well as the stay application.  I am conscious that it is not yet known if the leave application(s) will ultimately be successful, but then again nor am I sure that the leave to appeal applications will be pursued. Accordingly I will decide the basis of costs taxation on the information known to me now. On the basis that P has beaten the Calderbank offer, that factor militates in favour of an order for taxation on a common fund basis.

29.  The Majority Shareholders correctly contradict P’s second argument that I found in my 6 April 2017 judgment that part of the Majority Shareholders’ case could have offended the extended res judicata principles. Rather, para 24(c) of my judgment finds one of the grounds of appeal to be fanciful on the basis that P could not realistically run the claims suggested by the Majority Shareholders without offending such res judicata principles.

30.  P, by way of third argument, referred to my own comment on the past conduct of the Majority Shareholders in the proceedings and, in particular, taking out unwarranted applications, as justifying a common fund basis taxation.  P has not specified which of my comments or which of the Majority Shareholders’ conduct or unwarranted applications are relied upon. Insofar as the 1^st Leave and Stay Summons is concerned, I note that I was concerned with the presentation of the Majority Shareholders’ case (1) in the inaccurate factual representation in respect of events leading to the lack of evidence from the Majority Shareholders as to the identity of the valuation panel, as recorded at paragraph 16(h) of the 6 April judgment; and (2) in failing to acknowledge and address (in the context of Ground 8 of the appeal from the Main Judgment) that the Majority Shareholders had run a contrary case at trial (discussed at paragraph 26 of the 6 April judgment). This certainly does not militate in favour of the Majority Shareholders’ position on costs, but I note that these related to two of many points argued, and the leave application was a necessary precursor to an application to the Court of Appeal, so I would not rely on this conduct issue to order an enhanced basis of taxation.

31.  The Majority Shareholders argue (in support of their submission that the application for a stay pending appeal was reasonable) that at least one of the grounds was held to be reasonably arguable (referring to Ground 7.4); and that their suggestion that P’s Shares may not be readily realizable was found to be with some justification.

32.  In fact, I found 5 of the grounds of appeal to be arguable (at most) but not strong, and 1 ground of appeal relating to valuation to be strong but that would impact only on quantum. More materially, whether or not the Shares were readily realizable was not a factor to be considered in isolation when dealing with whether the appeal would be nugatory without a stay; or whether P would be unable to make repayment if the appeals succeeded and there was no stay.  The Majority Shareholders did not have satisfactory evidence that P would be unable to make repayment.

33.  These considerations in the foregoing paragraph are reasons for me to find that the costs of the Summons should be paid by the Majority Shareholders in any event.  However, I do not believe that they justify a more generous basis of taxation by themselves.

34.  Finally, the Majority Shareholders argued that P was a litigant in person at the hearing.  It appears that P was legally represented for at least part of the time after the 1^st Leave and Stay Summons was taken out.  In any event, P is still entitled to seek costs as litigant in person under Order 62, rule 28A.

35.  Having regard to these matters, I will order that the costs of the 1^st Leave and Stay Summons be taxed on a common fund basis.