HKSAR v. GLOBAL MERCHANT FUNDING LTD

HCMP 929/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 929 OF 2013

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REASONS FOR JUDGMENT

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1.  The respondent was the defendant in a criminal prosecution instituted by the applicant in the magistrate’s court in which it was acquitted after trial of the offence of “carried on the business of a money lender without a licence” and was awarded costs of the trial.

2.  The amount of costs was agreed at $2.25 million.

3.  The applicant appeals by way of case stated under section 105 of the Magistrates Ordinance, Cap 227 against the decision of the magistrate and a date has yet to be fixed for the hearing.  This is an application for stay of execution of the costs order made by Master D Ho on 13 March 2013 in Chambers pending the final determination of the appeal.

4.  After hearing the parties the court allows the application and the court now gives its reasons.  As there is a criminal appeal pending the reasons will be brief.

BASIS OF APPLICATION

5.  The applicant seeks to rely on Order 45 Rule 11 of the Rules of High Court in this application.  The court, however, agrees with the respondent that the applicant cannot succeed pursuant to this provision because it fails to satisfy the court that matters have occurred since the date of the order of the master which would justify a stay of execution.

6.  The court is also of the view that the present application does not come within Order 59 Rule 13 because the rule applies to application for stay of execution of judgment pending appeal to the Court of Appeal while the appeal by way of case stated in the present case is made to the Court of Instance.

7.  The applicant further seeks to rely on the inherent jurisdiction of the court in its application.  Both the applicant and the respondent have no dispute that the court has the discretion to grant the stay under its inherent jurisdiction.  It is, however, trite law that a court should not deprive a party from obtaining the fruits of a judgment unless there are good reasons to do so.

LEGAL PRINCIPLES

8.  The applicant and the respondent cite a number of authorities and they all boil down to the principles set out by Ma J, as he then was, in Star Play Development Ltd v Bess Fashion management Co Ltd [2007] 5 HKC 84. Basically, it was said in the case that it is for the applicant to justify a stay of execution and the practice of the court is that justification can be demonstrated only if good reasons exist.  It was further said that while it is wrong to set out any exhaustive definition of what would constitute good reasons, reference is commonly made to factors such as whether the absence or existence of a stay would render an appeal nugatory, bringing into focus the relative prejudice that may be caused to the appellant and to the respondent by a stay of execution, and the merits of the appeal.

9.  The merits or strength of the appeal are therefore a factor to be considered.  As there is a criminal appeal pending in the present case, it is obviously undesirable to go deeply into the matter.  But, as pointed out by Ma J in the Star Play Development Ltd case, the court has to inevitably form a preliminary view of the issue in deciding whether a stay should be granted.

10.  The applicant submits that it has strong grounds of appeal in the case stated. The court does not intend to go into details of the submission.  Suffice to say that it has an arguable case in the appeal which, according to the Star Play Development Ltd case, is the minimum requirement before a court would consider granting a stay.

11.  The applicant submits that as the respondent is a limited company having a paid up share capital of only $3,511 with no apparent realisable assets of value, in the event of the applicant succeeding in the appeal there will be no reasonable prospect of recovering the sum of $2.25 million if paid.  The respondent has no dispute about the amount of share capital and value of assets held by it but argues that it has extensive business interests in Hong Kong, Singapore and Taiwan and that its holding company has a paid up share capital of more than $40 million with average cash balances of at least $15 million in bank accounts.  The respondent contends that it has sufficient resources to repay the costs of $2.25 million should it be required to do so.

12.  The submission of the respondent, however, overlooks the fundamental principle that a holding company and its subsidiary company are separate entities and that the applicant would have no recourse to the holding company in respect of the financial matters of the respondent.  Under such circumstances the court is of the view that there is a real and substantial risk that the respondent will be unable to repay the costs paid to it should the costs order be quashed by higher court.

13.  Although in the appeal by way of case stated the applicant has not and in fact has no need to specifically appeal against the costs order, the order will almost for certain be quashed in the event of the appeal being allowed, and any costs paid will have to be returned.  Under such circumstances the appeal will be rendered nugatory if the execution of the costs order is not stayed.  According to the affirmation of the co-founder and managing director of the respondent such a stay of execution will not cause any financial hardship to the respondent.

CONCLUSION

14.  The application of the applicant is allowed.

COSTS

15.  Both parties agree that the costs of and occasioned by this application be costs in the cause of the appeal by way of case stated and the court so orders.