TSAI SHAO CHUNG v. ASIA TELEVISION LTD AND OTHERS

CACV 185/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 185 OF 2011

(ON APPEAL FROM HCMP NO. 749 OF 2011)

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BETWEEN

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J U D G M E N T

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1.  On 16 September 2011, Barma J acceded to an application by the plaintiff, Mr Tsai, for an order that he be entitled to inspect various classes of documents of the 1^st defendant, Asia Television Limited, of which he is a director. Pursuant to an application made immediately following the pronouncement of his decision, Barma J granted an interim stay of execution of his inspection order so that the order would not come into effect until 30 September 2011.

2.  The 2^nd defendant, Mr Shing, the executive director of ATV, being dissatisfied with the order for inspection has instituted an appeal to this court, the appeal being brought as of right. Since the notice of appeal was only issued on 23 September 2011, no date has yet been fixed for the hearing of the appeal.

3.  The summons before me today is an application by Mr Shing as appellant for a stay of execution of the order for inspection pending the determination of this appeal.

4.  This appeal is but one part of a wider and protracted dispute between rival shareholders seeking to secure control over ATV.  The background to that has been dealt with in the judgment of Barma J dated 30 April 2010 in HCA 317 of 2010.  Part of the ongoing litigation includes HCA 773 of 2010 in which Mr Tsai’s father, Tsai Eng-Meng, is suing to protect his rights under a letter of intent dated 7 April 2009.

5.  It is, of course, trite that an appeal does not operate as a stay of execution.  Thus, unless the party appealing can justify a stay of execution, one will not be granted.

6.  In the present case, Mr Anson Wong, counsel for Mr Shing, submitted that a stay pending appeal should be granted since there are strong grounds of appeal.  His fallback argument was that, even if the court were not convinced of the strength of the grounds of appeal, a stay of execution should be granted in view of the fact that the appeal is at least arguable and would be rendered nugatory if no stay were granted.

7.  Although he has yet to hand down his written reasons for his decision, Barma J stated his reasons briefly and a transcript of those reasons has been included in the bundles for this hearing.

8.  The grounds of appeal in the Notice of Appeal that has now been filed replicate, in summary, the same three grounds argued before the Judge below in opposition to the inspection order, namely:

(1)  On its proper construction, article 159 of the articles of association of ATV prevents a director having individual access to the company’s books of account and only permits the board to have such access;

(2)  Mr Tsai has misused or will misuse the documents by using them for purposes other than those connected with the business of ATV; and

(3)  The scope of the documents of which inspection is sought is too wide.

9.  This application is, of course, not the hearing of the appeal but I am nevertheless required to reach a preliminary view of the merits or strength of the appeal.

10.  I have considered each of the grounds of appeal carefully.  I am not persuaded that they give rise to a strong appeal or a strong likelihood that the appeal will succeed.  If they did, that would on its own be sufficient to justify the grant of a stay of execution.

11.  As to the question of whether the grounds of appeal disclose an arguable appeal, being an appeal with a reasonable prospect of success, the question is whether the intended appeal enjoys a real, or a sensible, as opposed to fanciful, prospect of success.

12.  For my part, I have some reservations as to whether the grounds of appeal do disclose an arguable appeal.  On the other hand, despite the able submissions of Mr Manzoni, counsel for Mr Tsai, I am not persuaded at this stage that the grounds for resisting the inspection order are, as he described them, “hopeless”.  However, since these will need to be addressed by the Court of Appeal when it hears the appeal itself, I do not propose to say any more about the merits of the respective arguments for and against the appeal at this stage.  It is sufficient for me to say that I am prepared to accept, as the Judge apparently did below when he granted the interim stay, that the argument that the use of the documents for an improper purpose should result in some restriction being placed on the inspection gives rise to an arguable ground of appeal.

13.  What is of concern at this stage is the fact that the refusal of a stay may render the appeal nugatory, yet against this, the grant of a stay will deprive Mr Tsai of the fruits of his success before the Judge.

14.  The refusal of a stay would render the appeal nugatory if the appeal, if successful, results in the setting aside of the order for inspection.  However, the notice of appeal is not limited to seeking the setting aside of the order and the alternative order sought is limited to imposing a condition on the inspection by Mr Tsai.

15.  In the circumstances, whilst I am not inclined to grant a stay in general terms, it seems to me there is merit in the half-way house proposed by Mr Wong, namely that, pending the determination of the appeal, Mr Tsai’s inspection of the documents in question should be subject to the condition “that all documents and materials obtained shall not be disclosed or used by P [i.e. Mr Tsai] otherwise than for the purpose of discharging his duties owed to ATV as its director”.

16.  Mr Manzoni submitted this condition would be unworkable but I do not think the practical difficulties are insuperable.  Mr Tsai will be able to inspect the documents in order to discharge his duties as a director of ATV acting in its best interests.  Insofar as he were to pass documents to Antenna Investment Limited (which is the shareholder of ATV whose interests Mr Tsai represents on the board), which Mr Wong appeared to accept would be permissible, the further use to which Antenna might put the documents would not, in the absence of evidence showing the contrary, be a matter for which Mr Tsai would be responsible.  Pending the determination of the appeal in the meantime, Mr Tsai will be subject to a condition which may or may not ultimately be confirmed by the Court of Appeal as one under which his access to the documents should be subject.

17.  I therefore grant an order in terms of paragraph 2 of Mr Shing’s summons (save for the words “or such other conditions as this Court may think fit”).  The costs will be in the cause of the appeal.