X v. A AND OTHERS

HCMP 222/2021

[2021] HKCFI 1739

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 222 OF 2021

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DECISION

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1.  On 3 June 2021, I handed down a judgment (“the Judgment”)[1], in which I dismissed the Company’s application for the Injunction. On 9 June 2021, the Company has lodged an appeal against the Judgment, ie CACV 301/2021. On 10 June 2021, the Company took out a summons (“the Summons”) for stay of execution of the Judgment pending the outcome of the appeal.

2.  The facts and the reasons for dismissing the Company’s application have been set out in the Judgment and would not be repeated herein.  For ease of reference, the abbreviations used in the Judgment are adopted in this decision.  With no objection from the parties, I also publish this decision, without revealing the identities of the individuals and the companies involved.

3.  The principles concerning stay of execution pending appeal are not in dispute.  Those principles have been set out by Ma J (as he then was) in Star Play Development Ltd v Bess Fashion Management Co Ltd.[2] In order to have a stay, the applicant must demonstrate that he has an arguable appeal.  In the absence of an arguable appeal, no stay should be granted.

4.  The Company submits that they have an arguable appeal.  Having considered the submissions, with respect, I am unable to agree.

5.  On the bona fide dispute point, I have found that both the Overall Agreement and the Representation are incapable of being believed.  My findings are based upon contemporaneous documents.  In my view, the Company has failed to demonstrate that I may have erred in principle in making those findings.  In my judgment, no arguable appeal on the bona fide dispute point has been shown.

6.  On the jurisdiction point, I am also not satisfied that an arguable appeal has been shown.

(1)  It is indisputable that the Company is the owner of 35.59% of the shares in the HK Co.  The HK Co is a company incorporated in Hong Kong, and the 35.59% shareholding is an asset in Hong Kong.

(2)  Although the 35.59% shareholding is a minority interest, it is still an asset in Hong Kong which can be sold by the liquidators of the Company.  Since the HK Co is a company incorporated in Hong Kong, the sale would be conducted in accordance with the Hong Kong law.  The liquidators appointed by the Hong Kong Court would certainly have the authority to effect the sale.

(3)  The Company is heavily relying upon Re China Huiyuan Juice Group Limited[3]and says that there would be no practical benefit of selling the 35.59% shareholding in the HK Co, for the underyling assets could not be accessed.  However, in Re China Huiyuan, the company did not hold any Hong Kong subsidiaries, and the underlying assets were indirectly held by the company through some BVI subsidiaries.  In this case, the Company directly owns a substantial interest (although a minority interest) in the HK Co, and this interest can be realized by the liquidators appointed by the Hong Kong Court.  There is a fundamental difference between Re China Huiyuan and this case.

(4)  The Company also argues that there is a substantial risk that any transfer of the 35.59% shareholding would not be registered since the other shareholder is P[4]. However, P could not have any legitimate reason to refuse the registration of the transfer done by the liquidators of the Company appointed by this court.  If P refuses to do so without any legitimate reason, the liquidators may apply to the court for an order to effect the registration.

(5)  The creditors applying for the winding-up order may obtain practical benefits as a result of the realization of the 35.59% shareholding.

(6)  In my view, it has not been shown in what way I may have erred in my analysis on the jurisdiction point as set out in the Judgment.

7.  Since I am not satisfied that there is an arguable appeal, the Summons must be dismissed.  I dismiss the Summons.

8.  Costs should follow the event.  Costs of the Summons be to the Banks, with a certificate for 2 counsel and be summarily assessed.  There be leave to the Banks to file and serve a bill of costs for summary assessment within 7 days, and leave to the Company to file and serve a written reply to the said bill within 7 days thereafter.

9.  I have been told that the Company will make another application for stay of execution to the Court of Appeal.  I would allow the Company to have some leeway to prepare this application and to seek the necessary directions from the Court of Appeal.  I would continue the stay given in the Judgment for a further period of 28 days.  However, since I have ruled against the Company in the Judgment and have also dismissed the Summons, no further stay would be granted by me.  The Banks should not be deprived of the fruit of the litigation.

10.  I thank all counsel for the helpful assistance rendered to the court.