TOBRIX B.V. (a company incorporated in the Netherlands) v. HONGKONG TRIPOD LTD

DCCJ 291/2021

[2025] HKDC 404

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 291 OF 2021

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BETWEEN

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DECISION

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1.  On 31 December 2024, after an 8-day trial in May 2024, Deputy District Judge YW Hew delivered a judgment (“Judgment”) finding that:

(a) The defendant was liable to pay the plaintiff three sums, amounting to EUR338,642.76 in total;

(b) There be an order nisi that pre-judgment interest was awarded at the rate of P+1% from the date of the writ up to the date of the said judgment;

(c) The defendant’s counterclaim be dismissed; and

(d) There be an order nisi that costs of the action (including all costs previously reserved or ordered to be in the cause) be to the plaintiff with certificate for two counsel, to be taxed if not agreed.

2.  On 21 January 2025, the defendant took out an application for leave to appeal against the Judgment (“Leave Application”). The directions for the disposal of the said application are pending.

3.  The present hearing deals with the defendant’s summons filed on 11 February 2025 (“Summons”) for an order that the execution of the Judgment be stayed pending the disposal of the defendant’s appeal. Ancillary to the intended stay, the defendant also applies for:

(a) An order that the plaintiff be restrained from taking any further steps to enforce the Judgment;

(b) An order that the release of two sums, HK$300,000 each, paid into the court by the plaintiff previously as security for costs (“Security”) be stayed;

pending the disposal of the defendant’s appeal.

4.  There are also the following applications by both parties pending disposal:

(a) On 14 January 2025, the plaintiff filed a summons seeking to vary the cost order nisi granted in the Judgment. The directions for the disposal of which are pending;

(b) On 17 January 2025, the plaintiff filed a summons seeking for the release of the Security (“Release Summons”), which was originally fixed to be heard before Master Vivian Lee on 25 February 2025. At the end of the oral hearing on 18 February 2025, I adjourned the scheduled hearing to 12 March 2025.

Applicable principles

5.  The principles in relation to stay of execution pending appeal has recently been summarized by the Court of Appeal in Indian Overseas Bank v Seabulk Systems Inc & Ors [2023] HKCA 889, at paragraph 23:

(a) The applicant is required to demonstrate a “good reason” for a stay of execution.

(b) Generally speaking, the existence of merely an arguable appeal cannot by itself amount to a sufficient reason to justify a stay. It is the minimum requirement before a court would even begin to consider granting a stay.

(c) In other words, if the court is not convinced that there exist arguable grounds of appeal, no stay will be granted however exceptional the circumstances may otherwise be justifying a stay of execution.

(d) On the other hand, the existence of a strong appeal or a strong likelihood of success will usually by itself enable a stay to be granted because this would constitute a good reason for a stay.

(e) In most cases, where the court is faced with simply the existence of an arguable appeal, it becomes necessary for the applicant to provide additional reasons as to why a stay is justified.

(f) Commonly, this is done by demonstrating that without a stay the appeal would be rendered nugatory, for example, because of an appreciable risk that the respondent to the appeal would not be able to repay in the event of a successful appeal against a money judgment, or because the failure to grant a stay would have a serious deleterious effect on the applicant.

(g) In considering an application for a stay pending appeal, it would be impractical and even undesirable for the court to go deeply into the merits or strengths of the appeal, although the court must still form a preliminary view of these aspects.

6.  Also, the Court of Appeal in Rickeed Industries Limited & Anor v Hong Kong Tohkoh Company Limited [2023] HKCA 231 explained the Court’s role in assessing the merits of the intended appeal:

“26. In accordance with established principle, we do not think it necessary or appropriate to embark upon a detailed discussion of the merits of the appeal. The application before us is not a dry run of the appeal, and it will suffice to express a broad preliminary view on the merits.”

The defendant’s application for stay

7.  In the supporting affirmation filed by Mr Johannes Jozef Bults, which is very brief, the defendant relies on three grounds to justify the intended stay:

(a) The appeal has a reasonable prospect of success given the errors in factual findings and legal interpretation;

(b) There is a risk of irreparable harm that (i) if the Security is to be released to the plaintiff, it would be difficult or impossible to recovery the fund from the plaintiff which is a company incorporated in the Netherlands, and (ii) the enforcement of the Judgment would cause irreparable harm to the defendant’s business and reputation; and

(c) The balance of convenience lies in favour of the defendant as the Security remains in the Court and no prejudice will be suffered by the plaintiff if a stay is granted.

8.  Notwithstanding the minimum requirement to demonstrate at least an arguable appeal as a threshold for further consideration, I shall dispose of the second and third grounds first as there are salient problems.

9.  The last ground is plainly wrong. A successful party should not be deprived of the fruit of a judgment without good reasons, hence the need to establish those matters summarised in the applicable legal principles above. A stay without good reason is by itself a prejudice that the plaintiff would suffer as it would be an unjustifiable deprivation of the fruit of the Judgment. The same can also be said about the Security, as the plaintiff should not be deprived of the use of the said sum without good reasons after its success in obtaining the Judgment.

10.  The second ground involves two allegations. First, given the plaintiff is a company incorporated in the Netherlands, the Security, once returned to the plaintiff, would be difficult if not impossible to recover. The plaintiff refers me to the judgment of Recorder Rachel Lam SC in John Joseph McGee v Nold (HK) Limited & Ors [2023] HKCFI 409, where the learned Recorder rejected an argument that as long as the successful plaintiff was a foreigner, a stay generally ought to be ordered, regardless of the merits of the intended appeal. The learned Recorded emphasized that every given case must be considered on its own circumstances, and in that case there was no evidence that the foreign plaintiff was prone to not abiding by the procedures of the Hong Kong Court. In the present application, the defendant has not referred to any evidence about the plaintiff being prone to such conduct at all.

11.  The second allegation is that the enforcement of the Judgment would cause irreparable harm to the defendant’s business and reputation. However, there is nothing in the affirmation substantiating such allegation. As the evidence stands, it remains to be a bare assertion. At the substantive hearing, Mr Bults (appearing on behalf of the defendant) urged the Court to infer the defendant was impecunious based on the fact that the defendant was without a legal representative. I cannot draw such an inference. The defendant has not adduced any evidence demonstrating its updated financial situation. There is no basis for the Court to draw any inference as suggested by Mr Bults.

12.  Therefore, the defendant has not demonstrated how the intended appeal would be rendered nugatory if the execution of the Judgment is not stayed.

13.  As such, the only remaining possible ground for a stay is that the defendant can demonstrate a strong appeal or a strong likelihood of success, not merely a reasonable prospect of success.

14.  In the Leave Application, which is yet to be heard, the defendant has set out three very brief grounds of appeal without any elaboration:

“1. The first-instance court erred by misinterpreting the defendant’s intention to enter into a sales contract with the plaintiff.

2. The defendant’s actions, although imperfect, were ratified by the plaintiff and should not be construed as establishing a seller relationship.

3. Any determination of a sales contract should be limited to specific transactions and not extended to the KY order, where the defendant acted solely as an agent per the plaintiff’s instructions.”

15.  It appears from the intended grounds of appeal that the defendant seeks to challenge the key factual findings of the learned trial judge. The relevant legal principles are well established in the Court of Final Appeal’s judgment in Ting Kwok Keung v Tam Dick Yuen [2002] 3 HKLRD 1, at paragraphs 32 to 47, that, inter alia, the question of the Court of Appeal is whether, even though it does not enjoy the advantages enjoyed by the trial judge who received the evidence at first-hand, it is nevertheless satisfied that his conclusion on the facts is plainly wrong.

16.  In other words, the threshold for successfully challenge the trial judge’s finding of facts is a high one.

17.  Just one hour before the substantive hearing, the defendant filed into Court a brief written submission[1] to:

(a) briefly elaborate its intended grounds of appeal; and

(b) adduce the decision of the Intermediate People’s Court of Dongguan City, Guangdong Province, in respect of the appeal by one Wu Xiaoxia dated 28 May 2024 (“Appeal Decision”).

18.  The plaintiff objected to the adducing of the Appeal Decision for failing to meet the requirements under the test in Ladd v Marshall [1954] 1 WLR 1489, that:

(a) the Appeal Decision was delivered by the relevant Court before the Judgment was handed down; and

(b) in any event, the first instance decision in relation to the conviction of Wu Xiaoxia was already in the trial bundles, such that the Court was aware of the seizing of the 3^rd Batch of masks as part of a criminal investigation (see paragraph 27(2) of the trial judgment), which however did not have any impact on the outcome of the case. Therefore, the fact that the conviction against Wu Xiaoxia was upheld on appeal would not have any material effect on the mind of the trial judge.

19.  As the matter stands, the defendant has failed to satisfy the test in Ladd v Marshall.

20.  The defendant has not taken out any application for adducing the Appeal Decision. Nor has he filed any affirmation to explain why the Appeal Decision could not have been obtained before the Judgment was delivered. Mr Bults explained in his oral submissions that there was difficulty in obtaining the Appeal Decision earlier as he was not a party to the proceedings. The explanation of Mr Bults was not properly set out in an affirmation in support of the application to adduce the Appeal Decision as further evidence on appeal, and therefore it is inadmissible. In any event, the explanation was not sufficiently substantive or specific for the purpose of satisfying the first requirement of the test in Ladd v Marshall, namely to prove that the new evidence could not have been obtained at the trial with reasonable diligence. There is no specific evidence proving Mr Bults could not have obtained the Appeal Decision before the Judgment was handed down on 31 December 2024.

21.  Secondly, the defendant has not demonstrated how the Appeal Decision would have a material effect on the mind of the trial judge. The first instance decision, whereby Wu Xiaoxia was convicted, was adduced as evidence in the trial. The mere fact that such decision was upheld on appeal adds nothing to the substantive evidence. Furthermore, the defendant could not demonstrate how the subsequent upholding of the conviction of Wu Xiaoxia would have any material relevance to any issues in the case as set out in paragraph 19 of the Judgment.

22.  The attempt (rather than a proper application) to rely on the Appeal Decision is therefore rejected.

23.  I have considered the brief grounds of appeal, the defendant’s written submission filed on 18 February 2025, as well as the supplemental written submission filed on 26 February 2025. I have also considered the written submissions of the plaintiff filed on 14 and 21 February 2025 respectively.

24.  It would be inappropriate for this Court to embark on a detailed analysis of the grounds of appeal, particularly when the Leave Application is pending. Simply approaching the question by how the defendant has argued so far, I have grave doubt as to whether the proposed grounds of appeal are arguable, let alone having strong merits. A summary of certain salient problems of the proposed grounds would suffice for the present purpose:

(a) The defendant challenged the trial judge’s finding (which is significant to the present dispute) that the relationship between the plaintiff and the defendant was one of seller and buyer (as the plaintiff contended), rather than one of principal and agent (as the defendant contended). However, the defendant has not elaborated on this ground in its submissions.

(b) The defendant has made certain arguments that are distinct from issue of whether it was an agency or buyer-seller relationship, e.g. waiver of implied warranties under the Sales of Goods Ordinance, Cap. 26 (“SOGO”), ratification by the plaintiff, the exemptions of a seller’s liability under sections 16(2)(a) – (c) and 16(3) of SOGO, and frustration based on KY’s criminal act (“Further Arguments”). None of those matters were pleaded in the re-amended defence and re-amended counterclaim (the original and first amended version of which were settled by Counsel).

(c) It is trite that parties need to put forward the entirety of their respective cases (including fallback or alternative cases) in their pleadings. The Further Arguments ought to be pleaded as defence case in the alternative to the defendant’s pleaded primary case that it was a mere agent of the plaintiff and therefore was not responsible for the quality of the face masks. It is misconceived to argue that the learned trial judge should have offered the defendant an opportunity to present the Further Arguments “once the Court had decided it is a seller relationship”. Such argument is apparently based on a misunderstanding of the rules of litigation.

(d) Insofar as the proposed ground that the learned trial judge had failed to assess the “KY Order” separately, I agree with the submission of Mr. Siu of the plaintiff’s solicitors at the hearing, that paragraphs 99 to 101 and 132 of the Judgment could demonstrate that the learned trial judge has conducted a separate analysis for the “KY Order”.

25.  On the other hand, the Judgment was 137-page long with a detailed analysis of a very substantive body of the evidence. Notwithstanding the impressive submissions by Mr Siu, it would be risky for this court, which has no access to most of the evidence adduced before the trial judge, to conclusively rule that the intended appeal has no prospect of success. The prospect of success of the intended appeal is best assessed at the substantive hearing for the Leave Application, which is likely to be heard by the learned trial judge.

26.  Having considered the above matters, it appears that a conditional interim stay pending the disposal of the Leave Application, or further order of the court, is the most just and fair in the present circumstances.

27.  In the absence of any evidence in relation to the financial status of the defendant, I order that if, and only if, the defendant makes a payment of EUR 424,318.07 into court within 28 days from the date herein:

(a) The execution of the Judgment be stayed until the disposal of the Leave Application;[2]

(b) The Summons be further adjourned to the hearing of the Leave Application; and

(c) Cost be in the cause of the Summons.

28.  Should the defendant fail to make the payment into court as ordered in paragraph 27, the Summons shall be dismissed with costs to the plaintiff, to be summarily assessed if not agreed.

29.  The orders in relation to cost above are order nisi.

30.  For completeness, I do not make any order in respect of the Release Summons. Parties should draw my order at paragraphs 27 to 29 above to the attention of Master J. Chow at the hearing of the said summons on 12 March 2025.