GREEN ELITE LTD (in Liquidation) v. FANG ANKONG AND ANOTHER

HCA 1779/2022

[2024] HKCFI 1349

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1779 OF 2022

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REASONS FOR DECISION

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1.  Before me to be heard together were 2 applications:

(1)  Paragraph 1 of the 1^st and 2^nd Defendants’ (respectively “Fang” and “HWH”, together “Ds”)  summons dated 5 June 2023 applying for an interim stay of this action pending the final determination of their appeal against the foreign judgment of the Court of Appeal of the Eastern Caribbean Supreme Court dated 9 January 2023 (BVIHCMAP 2022/0013)  to the Judicial Committee of the Privy Council (“the Privy Council Appeal”)  or until further order of the Court (“the Stay Application”); and

(2)  The Plaintiff (“Green Elite”)’s summons dated 28 August 2023 applying for summary judgment against Ds (“the O14 Application”).

2.  On 30 April 2024 and responding to the parties’ joint letter, this Court issued certain directions nisi, among others, on the order of speeches at this hearing.  As Green Elite’s submissions developed, it became necessary to, and this Court did during the hearing, rule that the Stay Application be heard first, with reasons given orally immediately after the ruling.

3.  At the conclusion of the hearing of the Stay Application, this Court ordered (a)  an interim stay in terms as sought with the exception that Green Elite be at liberty to apply for an order freezing or preserving the HK Funds (defined below)  for the purpose of satisfying any potential judgment in Green Elite’s favour in this action, and (b)  the substantive hearing of the O14 Application be adjourned sine die with liberty to restore after the expiry of the said stay.

4.  These are my reasons.

Background

5.  By a judgment given after trial by the Eastern Caribbean Supreme Court, British Virgin Islands (“BVI Court”)  on 17 January 2022 (and recorded in an order dated 20 January 2022 and entered on 26 January 2022)  in favour of Green Elite against, inter alios, Fang and HWH (“BVI Action” and “BVI Judgment”), Fang was ordered to pay Green Elite HK$150,000,000 and HK$8,733,490.88 with interest and HWH was ordered to pay Green Elite HK$3,450,000 with interest.

6.  Fang is the sole shareholder and director of HWH, a BVI company.

7.  By an order dated 23 February 2022 (“BVI Injunction Order”), Green Elite obtained in BVI a worldwide freezing injunction against Fang, restraining him from (a)  dealing with or diminishing the value of any of his assets in the PRC up to the value of HK$195,000,000 and (b)  dealing with or diminishing the value of any of his assets up to the value of US$24,975,717 (equivalent to HK$195,000,000 at the time)  whether they are in or outside BVI (which does not apply to Fang’s assets in the PRC)  until further order of the court.

8.  On the same occasion, Ds’ application for a stay of execution of the BVI Judgment was refused by the BVI Court.

9.  On 16 December 2022, Green Elite commenced this common law action in Hong Kong for the enforcement of the BVI Judgment.

10.  On 9 January 2023, Ds’ appeal against the BVI Judgment was dismissed by the BVI Court of Appeal (“BVI CA”).

11.  On 25 May 2023, Ds obtained conditional leave from BVI CA as of right to appeal to the Privy Council.  On the same occasion, Ds’ application to the BVI CA for a stay of execution of the BVI Judgment was refused without reasons being given.

12.  Fang’s shares in HWH have since become the subject matter of a BVI charging order which is currently subject to a limited stay pending the Privy Council Appeal.

13.  On 2 June 2023, Lisa Wong J handed down her Decision herein ([2023] HKCFI 1505)  dismissing Green Elite’s application for an interim-interim Mareva Injunction against Ds pending the substantive hearing of Green Elite’s inter partes summons herein dated 24 April 2023 applying for a Mareva Injunction pending trial or further order.

14.  Sometime in 2023, Green Elite also commenced an action in the Republic of Singapore against Fang to enforce the BVI Judgment there as against him.  By an order by consent made on 14 December 2023, the proceedings in Singapore were stayed pending the final determination of the Privy Council Appeal upon an undertaking given by Fang that he would not dispose of or diminished the value of his assets in Singapore.

15.  Very recently, on 30 April 2024, the contested hearing of Green Elite’s application for Mareva Injunction against Ds was heard before Coleman J ([2024] HKCFI 1191)  who dismissed it at the conclusion of the hearing.  The principal reason for the dismissal was that the learned Judge concluded that Green Elite has not established a real risk of dissipation of assets by Ds.  The dismissal was without prejudice to Green Elite making any similar or related application upon any contingent circumstances as may arise in the future.  One likely contingency is the possible release of the HK Funds in the future, as explained below.

16.  The Privy Council Appeal has been scheduled to be heard in November 2024, upon Ds having earlier fulfilled the conditions to the leave to appeal.

The HK Funds

17.  For the present purpose of the Stay Application, I need to briefly introduce the HK Funds and thus mention the HK Proceedings.

18.  It is Ds’ stance not seriously disputed by Green Elite that in substance the BVI Action is but one set of proceedings ventilating “the wide-ranging disputes on many fronts”[1] between the two camps - the “Delco” group of companies on one part, and Fang and his companies on the other – involving “a complex set of commercial relationships spanning a period of more than ten years”[2] following their falling out after having successfully operated together their joint venture in scrap metal recycling business in the 1990s and 2000s and the public listing of the business.

19.  Apart from the BVI Action, the Privy Council Appeal and the said action in Singapore, there are in Hong Kong 3 High Court actions litigating between the two camps, namely HCA 2943/2015, HCA 3040/2015 and HCA 2939/2016 (“the HK Proceedings”), the trial of which has already taken place and the delivery of the judgment is pending.

20.  It is common ground that (a)  HWH has paid into Court under the HK Proceedings HK$41,900,000, and (b)  Messrs Stephenson Harwood are holding in escrow Fang and HWH’s money in the sum of HK$64,067,118 (together “the HK Funds”), which are subject to the BVI Injunction Order and are placed into successive time deposits with the consent of Fang, HWH, Delco, and Green Elite, and cannot be withdrawn at any time without regard to the maturity date and/or without penalty[3].

21.  Green Elite is concerned that, notwithstanding the BVI Injunction Order, should the trial court adjudicates the HK Proceedings in any manner favourable to Fang and his companies such that all or part of the HK Funds were to be released to Fang and HWH, they would be free to dissipate them out of the reach of Green Elite.

The applicable principles

22.  Mr Wong referred to Poon Ka Man Jason v Cheng Wai To & Ors [2018] HKCFI 771 in which Q Au-Yeung J summarized the principles relevant to a stay, at §§36 to 39 :

“36.  The court has discretion, as a matter of case management, to grant a stay of proceedings generally or until a specified date or event: High Court Ordinance, Section 16(3); Order 1B, rule 1(2)(e)  of the Rules of the High Court (“RHC”).

37.  Where, as here, the action was commenced as of right, the court should only grant a stay when there are “very good reasons” and in “rare and compelling circumstances”.  The stay must not cause injustice to the Plaintiff, and the Defendants must show that continuing the proceedings would be unjust to them.  See: Zhang Xiuhong v Liu Wenchen & ors (HCA 2118/2012, 20 July 2017), §34, per Au-Yeung J, citing Ng J’s judgment in AIG Europe Ltd & ors v Fast-Link Express Ltd & ors (HCAJ 114/2014, 10 January 2017), §§9-13.  The ultimate question is what would serve the ends of justice.

38.  Exercise of discretion would involve balancing between (1)  possible wastage of Court’s time and resources and also parties’ time and costs (if there is no stay)  on the one hand and (2)  possible delay of the proceedings for a short period of time (if there is a stay)  on the other hand: see The Al Dhabiyyah [1999] 4 HKC 414, at p 420A-F.

39.  The court must bear in mind that the underlying objectives of the court is to increase cost-effectiveness of court proceedings; ensure that a case is dealt with as expeditiously as is reasonably practicable; promote reasonable proportion and procedural economy in the conduct of proceedings; and to facilitate settlement of disputes: Order lA, rule 1(a), (b), (c)  and (e)  of the RHC.”

23.  Mr Wong also cited 廈門新景地集團有限公司 v. Eton Properties Ltd and Others [2018] HKCFI 910 in which Mimmie Chan J observed, after considering Poon Ka Man Jason and The Al Dhabiyyah :

“27. With respect, I agree with the analyses and observations made by both Au-Yeung J and Waung J [in The Al Dhabiyyah], that this Court has the general and wide power under s16 (3)  to stay the proceedings before it, “where it thinks it fit so to do”, and that this is essentially a matter of sensible case management, to be decided with the objectives in mind of what is fair and just, as well as the other matters set out in Order 1A RHC as being the underlying objectives of the RHC (including the powers of management under Order 1B).

28.  In Eastman Chemical Ltd v Heyro Chemical Ltd [2012] 2 HKLRD 135, Deputy High Court Judge Lisa Wong SC (as Her Ladyship then was)  also applied the underlying objectives in Order 1A when she dealt with an application to stay proceedings pending the hearing of a winding up petition, taking into account what would serve the ends of justice between the parties and the administration of justice generally, whether a stay will cause injustice to the plaintiff, whether continuing the proceedings would be unjust, and that a plaintiff commencing proceedings as of right should not be deprived of the right to continue those proceedings in the absence of very good reasons.  No doubt, these are the applicable principles in determining whether proceedings which take place before this Court should be stayed.”

24.  Mr Wong further submitted that the Court has an equitable jurisdiction to stay the execution of a foreign judgment where there is a pending appeal from it in the foreign court, and this jurisdiction to stay may be exercised upon proper terms or subject to conditions, citing China NPL Holdings Pte Ltd v Mo Haidan [2021] 1 HKLRD 344, at §27-29, per Lam VP (as he then was)  giving the judgment of the Court :

“27. Thus, when an appeal in the foreign court is pending, Hong Kong court may enforce the foreign judgment subject to conditions which will save the interests of the appealing party. In Nouvion v Freeman (1889)  15 App Cas 1, Lord Watson made these observations at p.13:

“ In order to its receiving effect here, a foreign decree need not be final in the sense that it cannot be made the subject of appeal to a higher Court; but it must be final and unalterable in the Court which pronounced it; and if appealable the English Court will only enforce it, subject to conditions which will save the interests of those who have the right of appeal.”

28. After quoting this dicta, the learned editors of Dicey Morris & Collins, The Conflict of Laws Vol.1, 15^th Edn, at paragraph 14-026 continued:

“ So in a proper case a stay of execution would no doubt be ordered pending a possible appeal.”

29. Commenting on the same topic, the learned editors of Cheshire, North & Fawcett, Private International Law,15^th Edn, at p.550 summarized the common law position as follows:

“ … Neither the fact that the judgment may be reversed on appeal, nor even the stronger fact that an actual appeal is pending in the foreign country, is a bar to the effectiveness of the judgment in England; though where an appeal is pending the English court has an equitable jurisdiction to stay execution, which it will generally exercise. If, however, the effect under the foreign law of a pending appeal is to stay execution of the judgment, it would seem that, in the interim, the judgment is not effective in England.” (our emphasis)”

25.  Ms Mak did not dispute these principles.  She emphasized that the Court should only grant a stay when there are “very good reasons” and in “rare and compelling circumstances.”.  Ms Mak also relied on certain passages in China NPL Holdings Pte Ltd to support of (a)  her argument that great weight should be given to the refusal of a stay by the BVI CA, and (b)  her fall-back position – that if this Court was minded to grant some form of stay, this Court should proceed to hear the O14 Application substantively and then to grant a stay of execution of the judgment should the Court accede to the application, rather than granting an interim general stay of proceedings and thus adjourning the substantive hearing of the O14 Application.

Discussion

26.  Mr Wong submitted that Ds’ case for the stay was a straightforward one.  First, it would be wastage of judicial resources and the parties’ time and costs if there were no stay and the Privy Council Appeal turned out to be successful.  Second, the stay would cause no or little real prejudice to Green Elite.  Third, the refusal of stay would be unjust to Ds (a)  as Green Elite was contemplating threatening bankruptcy proceedings against Fang should it obtain the summary judgment, and (b)  it was seriously doubtful whether Green Elite, now in liquidation, would be able to pay Ds their costs (already incurred and further costs to be incurred)  should a stay be refused and the Privy Council Appeal be successful.  Fourth, a stay of execution would likely be granted even if Green Elite were successful in the O14 Application, therefore it was plainly wasteful, and also of little utility, for Green Elite to continue to press for judgment by hearing the O14 Application substantively.

27.  Green Elite did not seriously dispute that the said threat of commencing bankruptcy proceedings against Fang or the eventuality that Green Elite might not be able to pay Ds’ incurred and future costs (in case the Privy Council Appeal is successful)  were potential injustice to Ds.  It is also indisputable that there would be a wastage of costs and judicial resources if the stay was not granted and the Privy Council Appeal turned out to be successful.

28.  Green Elite put forth a number of matters and contentions to resist the stay.

29.  Green Elite emphasized that this action was commenced by Green Elite as of right, that there was no defence and therefore a stay would “deprive” Green Elite of judgment and it was, as always, an important aspect of the right of any claimant that he/she should be able to get to the fruit of judgment as soon as reasonably practicable, and thus any delay was in and of itself prejudicial to him/her. 

30.  Apart from this general right being curtailed by the stay (which Ds did not dispute), Green Elite did not put forth any other specific matters causing other prejudice to Green Elite.

31.  Green Elite referred to the fact that (a)  Ds lost twice in BVI, once before the BVI Court and another before the BVI CA (b)  Ds application for stay was refused twice in BVI, and (c)  Ds were allowed to appeal to Privy Council as a matter of right.

32.  The fact that the appeal to Privy Council was as of right per se could only be a neutral factor insofar as whether it reflects on the merits of the appeal is concerned.  When pressed as to whether Green Elite was contending that the Privy Council Appeal lacked substance and was a mere delaying ploy, that it had a low chance of success or was completely lacking in merits, Ms Mak stated that Green Elite was not so contending. She also accepted that in the materials before this Court, it could not be readily shown that the Privy Council Appeal lacked merits.  I think that was a fair and right concession, as (a)  the BVI Court, in refusing the stay, merely said, among others, that “I don’t consider this is a case where the ground of appeal is so strong”[4], (b)  while the BVI CA did not give any reasons for the refusal a stay, (c)  the draft Grounds of Appeal, Written Submissions and Supplemental Written Submissions of the Appellant for the hearing before BVI CA for leave to appeal consisted respectively of 6 pages, 12 pages and 4 pages and the latter two were settled by King’s Counsel and they appeared to be raising points of some substance.  Therefore, I would be considering the Stay Application on the basis that the Privy Council Appeal is at least arguable.

33.  Ms Mak referred to part of the analysis by Lam VP (as he then was)  in China NPL Holdings Pte Ltd concerning the rationale for the rule that “under the common law English court would not enforce the foreign judgment subject to such a stay [a stay by the foreign court]”in which the learned Judge opined :

“49. In our judgment, the present situation falls squarely within the kind of stay contemplated by Russell LJ. As held by all members of the Court of Appeal in Berliner Industriebank v Jost, supra, under the common law English court would not enforce the foreign judgment subject to such a stay. We hold that the same approach is applicable under the common law in Hong Kong.

50. Different analysis had been put forward for this rule: (a)  the stay (viz lack of present enforceability)  rendered the foreign judgment not final and conclusive (per Russell LJ in Colt Industries Inc v Sarlie (No.2), supra; Salmon and Phillimore LJJ in Berliner Industriebank v Jost, supra; Eder J in Enercon GmbH v Enercon (India)  Ltd, supra); (b)  comity (Teare J in Midtown Acquisitions v Essar Global, supra); (c)  the lack of a presently due and payable in the terms of the obligation flowing from the foreign judgment (Salmon and Phillimore LJJ as well as Lyell J in Berliner Industriebank v Jost, supra).

…

52.  As presently advised, we do not find it necessary to go that far in this judgment.  Instead, we prefer to rest our analysis on rationale (b)  and (c).  Comity and obligation are the two theoretical underpinning for the recognition and enforcement of foreign judgment at common law, see Cheshire, North & Fawcett, Private International Law,15^th Edn, at p.525-526[5].  …”

34.  Ms Mak contended that the learned Judge clearly opined that comity and obligation were the two theoretical underpinning for the recognition and enforcement of foreign judgment at common law, therefore, this Court should give a “greater weight” to the 2 refusals for stay in BVI.

35.  However, it is one thing to recognize that comity is one of the theoretical underpins for recognizing and enforcing a foreign judgment, it is quite another to say that therefore in exercising case management discretion in the enforcement proceedings of that foreign judgment in Hong Kong, the Hong Kong Court should “achieve comity” by giving a “greater” weight to the foreign court’s case management decision such as to have to follow it closely.  I do not accept China NPL Holdings Pte Ltd is authority for such a proposition, nor do I see any good reason, as a matter of principle, to do so.  I thus do not accept such contention that, as a matter of course or as a matter of principle, the BVI refusals should be given “greater” weight.  The discretion whether to grant a stay should remain flexible and facts sensitive and be exercised according to the principles summarized above.

36.  Indeed, I accept Mr Wong’s contention that, if the court is to consider what happened in the foreign court(s)  as weighty matters, as much, if not more, consideration should be given to the fact that Green Elite actually consented in Singapore to an interim stay of its action to enforce the BVI Judgment there, as the Singaporean action is of the exact same nature as this action.

37.  Green Elite explained that it consented in Singapore because Fang gave an undertaking to the Singapore Court that he would not dispose of his assets in Singapore, whereas Fang did not give any such undertaking in Hong Kong.  Be that as it may, I accept that Ds have a valid point - that it was thereby shown, that given the assets were secured in the interim, Green Elite did not really mind the delay as much as it claimed here, as it did not seek to contest the stay in Singapore based on the claimed prejudice of delay in getting to the fruit of judgment.

38.  I understand it was suggested by Green Elite that a stay might accentuate the potential risk of dissipation of assets. However, and as mentioned, the application for a Mareva Injunction taken out by Green Elite to address that very concern was dismissed by Colemen J with the principal reason that he was not satisfied that there was a real risk of dissipation of assets.  Moreover, in the course of hearing, Ds readily agreed to provide for an exception to the interim stay such as to enable Green Elite to make an application, if it was minded, to secure the HK Funds.

39.  As a fallback, Ms Mak contended that if a stay was to be granted, the appropriate course to take was to continue to hear the O14 Application substantively, which was what was scheduled to occur on this occasion, and there was no defence, and then grant a stay of execution of the judgment.

40.  Ms Mak referred to China NPL Holdings Pte Ltd in which Lam VP (as he then was)  observed obiter that

“54. … Second scenario: the foreign judgment is actually subject to a pending appeal which has been duly filed. A variant of this scenario is that steps were being taken to seek leave to appeal. According to Nouvion v Freeman, supra and Colt Industries Inc v Sarlie (No.2), supra, in none of these scenarios would the enforcing court preclude judgment being entered under the common law though in the second scenario the enforcing court may consider granting a stay of execution pending the determination of the appeal in the foreign court.”

She submitted that therefore the course, as alluded to by the learned judge in that obiter, of entering judgment and then granting a stay of execution pending the determination of the appeal in the foreign court should be adopted.  However, the learned judge only observed that “in none of these scenarios would the enforcing court preclude judgment being entered” (my emphasis), and therefore it was only said that the entering of judgment is something the enforcing court could do.  At the hearing, Ms Mak accepted, in my view rightly, that the obiter was not meant to, and did not, effect any change in the general principles governing whether to grant a stay in the present set of circumstances.

41.  Mr Wong disputed Green Elite’s claim that there was no defence.  He submitted, as is trite, that as a matter of law, there was available defence based on lack of jurisdiction, fraud, public policy or against natural justice.

42.  As this is not the hearing of the O14 Application, Mr Wong gave but a broad outline of Ds’ defence case thus, (a)  that Delco (as equal share holder of the shareholding in Green Elite with the Fang camp)  had in fact been paid US$6,275,000 for the CT shares and thus ceased to have further interest in the CT shares, (b)  the BVI Action was commenced by liquidators of Green Elite to recover the proceeds of the CT shares from Fang essentially for the benefit of Delco (as one of the contributories), (c)  the proceeds of the CT shares have been distributed to the Three Employees by Fang in fulfilment of the sole purpose of incorporating Green Elite, (d)  the payment of US$6,275,000 was an issue in the BVI Action, while the actual payment, and if so the nature of payment, of the same sum was also one of the many hotly disputed factual issues in the HK Proceedings[6] in relation to the complex commercial dealings between the two camps, and (e)  therefore it was blatantly unjust for Delco to recover something it has already received payment for and before these factual issues were resolved, and (f)  no summary judgment should be entered either on the basis that there was an arguable defence or that there were some other reasons it should not be granted.

43.  Green Elite would dispute many, if not all, of these allegations.

44.  The clear picture was that there would be substantial arguments to be heard and to be resolved and substantial numbers of documents to refer to regarding the O14 Application such that substantial judicial resources, the parties’ time and costs would need to be spent thereon.

45.  As said, Mr Wong’s point was that such would be potentially a wastage and would be of little utility as a stay of execution would very likely be granted even after this Court were to conclude that summary judgment ought to be given.

46.  Ms Mak contended that if the O14 Application were to be adjourned, there would have to be a delay of several months to retore its substantive hearing if the Privy Council Appeal were to be unsuccessful.

47.  In the scheme of things including (a)  disputes between the two camps have been subjected to litigations for 9 years since 2015, (b)  many of the underlying factual disputes are close to some form of resolution in the HK Proceedings, (c)  as noted in §16 of the Decision of Lisa Wong J herein dated 2 June 2023, Green Elite was “complacent and laid back” in its enforcement of the BVI Judgment in Hong Kong as shown by the procedural chronology of this action, (d)  the Singaporean action was stayed by consent of Green Elite pending the Privy Council Appeal, (e)  there is no specific complaint of prejudice save general delay, and (f)  there is no risk of dissipation of assets, and (g)  the potential injustice to Ds, I considered a general stay appropriate and I did not consider the several months’ potential delay mentioned in the preceding paragraph was of much significance.

48.  Thus, I was of the clear view that the proper balance and sensible case management decision was to grant the stay with the said exception and to adjourn the substantive hearing of the O14 Application to be heard, if at all, after the expiry of the stay.

49.  I thank Mr Wong, Ms Mak and Mr Phang for their able assistance.