SHANGHAI TONGJI SCIENCE & TECHNOLOGY INDUSTRIAL CO LTD v. CASIL CLEARING LTD

FAMP No. 2 of 2003

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 2 OF 2003

(ON AN INTENDED APPEAL FROM CACV NO. 365 OF 2002)

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R U L I N G

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Mr Justice Ribeiro PJ:

1. In 1998 the plaintiff, which is the applicant before me today, arranged for the Agricultural Bank of China to open a letter of credit in the sum of US$401,620 naming the defendant as beneficiary. The defendant presented the stipulated documents and negotiated the credit through its own bank. The action which underlies this application is brought by the plaintiff against the defendant in respect of transactions culminating in the L/C payment, alleging that an implied contract between itself and the defendant, or alternatively, a restitutionary claim against the defendant for money had and received, had thereby come into being.

2. On 22nd August 2002, after trial of the action (HCCL 140/1999), Stone J gave judgment in favour of the plaintiff on both of the aforesaid grounds and ordered the defendant to pay to the plaintiff the sum of US$401,394.84 plus interest.

3. The learned judge, however, stayed execution of that judgment pending appeal to the Court of Appeal on terms that the defendant should pay the entire judgment sum into court. Payment into court was duly made. The Court of Appeal (CACV 365/2002, 6 June 2003) subsequently allowed the appeal and ordered the plaintiff's claim to be dismissed.

4. On 25 July, the plaintiff sought two orders from the Court of Appeal. The first was for leave to appeal to the Court of Final Appeal. That order was granted as of right. At the same time, the plaintiff applied for what was described as a stay of execution of the Court of Appeal's judgment. What was sought was an order that the sum which the defendant had paid into court should be ordered to remain in court. That application was refused. Instead, the Court of Appeal ordered that sum to be paid out to the defendant's solicitors, but suspended implementation until the result of the present application was known.

5. The plaintiff now applies for an order that the Court of Appeal's judgment "be stayed pending the outcome of the plaintiff's intended appeal" to the Court of Final Appeal or "alternatively, [that] the sum of $4,160,000 paid into court by the defendant ...... together with interest accrued thereon shall continue to remain in court pending the outcome of the plaintiff's intended appeal ......"

6. Provision is made in section 26 of the Court of Final Appeal's statute regarding applications for a stay of execution pending appeal. It provides, so far as material for present purposes, as follows :-

(1) Where a judgment appealed from requires the appellant to pay money or perform a duty, the Court of Appeal or the Court, as the case may be, shall have power, when granting leave to appeal or subsequently, either to direct that the judgment shall be carried into execution or that the execution shall be suspended pending the appeal.

7. The section is accordingly concerned only with cases where "a judgment appealed from requires the appellant to pay money or perform a duty". The plaintiff applicant in the present case does not come within section 26. It has not been required by the judgment appealed from to pay any money or to perform any duty. The Court of Appeal merely reversed Stone J's judgment and dismissed the plaintiff's claim against the defendant. Consequentially, the Court of Appeal directed the High Court Registry to effect payment out to the defendant's solicitors of the sum in court.

8. Mr Paul Shieh SC, appearing with Mr Jin Pao for the applicant, does not put his application on the basis of section 26. He submits, relying on the Determination of Mr Justice Bokhary PJ in Secretary for Justice v To Kan Chi [2000] 2 HKLRD 499, that the Court has power to grant a stay based on its inherent jurisdiction which goes beyond the powers conferred by section 26. That jurisdiction, he argues, extends to granting the relief sought in the present application, so as to prevent the pending appeal being rendered nugatory. Mr Shieh seeks to demonstrate that the respondent company is of doubtful worth and part of a group which is in grave financial difficulties so that, if the money in court were to be released to the respondent and the applicant were eventually to secure judgment on appeal, it is likely to find it difficult to effect recovery.

9. Section 26 reflects well-established principles which underlie the court's discretion to grant a stay of execution. It addresses the situation where an appellant, who has been ordered by the court below to pay money or to perform some act, asks to be relieved from complying with the judgment pending appeal on the ground that execution to secure immediate compliance with the judgment would undermine the potential benefits of success on the appeal, rendering the appeal nugatory.

10. Mr Shieh is no doubt correct in submitting that, as Mr Justice Bokhary held in Secretary for Justice v To Kan Chi, the Court's power to grant stays of execution is not wholly circumscribed by section 26. Cases may exist where immediate execution of a judgment may render an appeal nugatory even though the lower court's judgment does not require the appellant to pay money or to perform any particular act. In such cases, the court plainly has an inherent jurisdiction, in its discretion, to stay execution. However, it does not follow that there are no limits to the inherent jurisdiction or its discretionary exercise.

11. In Secretary for Justice v To Kan Chi, there were competing claims to funds in court standing in the name of a Taoist temple. In holding that the Court possessed, and ought in that case to exercise, an inherent jurisdiction to grant a stay of execution beyond the bounds of section 26, Mr Justice Bokhary was seeking to preserve the subject-matter of the suit. The appeal, if successful, was likely to be rendered nugatory without a stay since dispersal of the funds in court would probably result in an irrevocable dissipation of the subject-matter of the dispute. His Lordship stated:-

"In my judgment, the Court of Final Appeal has inherent jurisdiction to grant a stay such as the one which the Secretary for Justice seeks. It has inherent jurisdiction to grant such a stay in order to protect its process by seeing to it that its judgment, if ultimately in favour of the Secretary for Justice, would not be rendered nugatory by a prior distribution of the contested funds." (Italics supplied)

12. The situation arising in the present application is very different. The defendant paid the sum in question into court out of its own resources as the main condition for securing a stay of execution of Stone J's judgment pending appeal to the Court of Appeal. The premise of that payment was therefore the existence and need to stay execution of what was then a valid and compulsory judgment directed against the defendant. When the Court of Appeal reversed Stone J, the premise for that payment disappeared. In the absence of some special justification for ordering otherwise, the defendant became entitled to have its own money back.

13. It is, in my view, questionable whether the inherent jurisdiction of the Court can be invoked to override someone's proprietary rights in the funds in court in the manner suggested. It is one thing for an appellant to ask to be allowed to defer having to part with his own property as required by a judgment, pending appeal. Similarly, one can well see that an appellant may justifiably ask the court to defer giving possession of contested property to the respondent pending the appeal concerning entitlement to that property. However, it seems to me to be quite another thing for an appellant to ask the court to prevent a respondent recovering back his own property, effectively requiring him to put up security for the appellant's so far unsuccessful claim, pending the appeal.

14. However, the scope of the inherent jurisdiction is not something which presently requires to be decided. It suffices to state that even assuming the existence of a power to make the order sought, I would not be prepared to exercise it as a matter of discretion. The plaintiff is not seeking an order to preserve the subject-matter of the dispute or to relieve it from having to comply with a judgment pending appeal. Nor is it claiming Mareva relief. To grant the relief sought would be effectively to constitute the plaintiff a secured judgment creditor in circumstances where presently there does not even exist any judgment or other debt in its favour. Such relief would place the plaintiff in a better position than it could possibly have attained before trial. I see no basis upon which the plaintiff should be favoured in this way and accordingly dismiss the present application.

15. Mr Benjamin Chain, appearing for the defendant, also advanced certain arguments concerning the jurisdictional basis for challenging the Court of Appeal's direction for payment out of the sum in court. However, as it appears that this was not advanced as an independent ground for resisting the present application, it does not require further treatment in this ruling.