PANG SAI YU the manager of “PANG SHE YAN TSO” v. WINNER DAY INVESTMENT LTD AND OTHERS

HCMP 788/2014

[2024] HKCFI 3685

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 788 OF 2014

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D E C I S I O N

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INTRODUCTION

1.  On 14 March 2024, I handed down the judgment in this action: [2024] HKCFI 548. The 1^st, 2^nd and 4^th defendants have lodged an appeal in CACV 140/2024. By summons dated 27 June 2024, they apply for stay of execution pending their appeal.

2.  By consent of the parties, the application is dealt with on the papers.

3.  I shall adopt below the defined terms used in the judgment.

THE JUDGMENT

4.  After trial, I upheld all the causes of action pursued by the plaintiff against the defendants, namely (1) trespass against the 1^st, 2^nd and 4^th defendants, (2) breach of fiduciary duties by the 4^th defendant, and (3) dishonest assistance and knowing receipt against the 1^st and 2^nd defendants.

5.  I also dismissed the defendants’ counterclaim.

6.  I made a number of orders in favour of the plaintiff, as set out in para 232 of the judgment. The orders can be divided into two groups. First, the orders relating to the Lots, including the delivery of vacant possession and injunctive reliefs. Second, an award of damages to the plaintiff. The damages were awarded pursuant to the plaintiff’s election to claim mesne profits under the cause of action of trespass instead of equitable compensation under the other causes of action: see paras 113 and 114.

THE GROUNDS OF APPEAL

7.  In the appeal, the defendants put forward three grounds. The first two grounds concern my rulings on trespass. The third ground concerns my ruling on the counterclaim.

8.  Under the first ground, the defendants contend that I erred in rejecting, as a matter of law, the proposition that the plaintiff could not confer exclusive possession of the Lots on the 4^th defendant, whether by leasing or otherwise, as he is a male member of the Tso and hence holds a lifetime interest in the Lots.

9.  Under the second ground, the defendants contend that I erred in law in ruling that since ouster was not canvassed by the pleadings, the plaintiff’s complaint of trespass did not call for an enquiry whether there had been an actual expulsion of other members of the Tso by the 4^th defendant. Further, I was wrong in refusing to accept the 4^th defendant’s evidence that other Tso members had parked their cars on the Lots without being charged any fees.

10.  Under the third ground, the defendants say that I erred in law in not giving any credit to the enhancement works carried out at the Lots by the 2^nd defendant.

11.  It is important to note at the outset that there is no appeal against my rulings on the causes of action concerning breach of fiduciary duties, dishonest assistance and knowing receipt.

THE GROUND FOR STAY

12.  The 2^nd and 4^th defendants have filed affirmations to support the stay application. Apart from saying that their grounds of appeal are well justified, the only reason which is put forward for staying the execution is that if vacant possession is to be delivered now, the 1^st defendant will no longer be able to operate the car park on the Lots. This is its only business operation. It will lose its only revenue source and customers whom it has built up over the years. The 1^st defendant will have to close down. It would amount to irreparable damage which cannot be reversed even if the appeal is successful.

13.  I would immediately note that the above ground only concerns the orders relating to the Lots. The defendants have not said anything about why the order for damages should be stayed.

LEGAL PRINCIPLES

14.  The principles governing applications for stay pending appeal are well-established: see Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 at paras 6 to 10. I would highlight the following which are presently material.

15.  It is for the applicant to justify a stay of execution. He needs to show that there are good reasons for a stay: para 7. It is important to have regard to the nature of the order that is the subject matter of the appeal. If it is a money judgment, the court will require evidence as to why the levying of execution will result in the appeal being rendered nugatory, eg, if the respondent would not be able to repay in the event of a successful appeal: para 9(1). The existence of an arguable appeal, that is one with a reasonable prospect of success, is the minimum requirement before a court would even consider granting a stay: para 9(6). Conversely, the existence of a strong appeal or strong likelihood that the appeal would succeed will usually by itself enable a stay to be granted because this would constitute a good reason for a stay: para 9(7).

DISCUSSION

16.  As stressed in Star Play, it is important to first have regard to the nature of the order which is sought to be stayed. I should therefore make a distinction between the orders relating to the Lots and the order for damages in this discussion and I will deal with them separately.

17.  In a stay application, the logical sequence is usually to first look at whether the grounds of appeal are reasonably arguable, and then if so, whether there are good reasons for a stay. In this case, however, I do not propose to follow that sequence. This is because even if the appeal succeeds, the orders relating to the Lots would still stand and the relief for damages would still likely stand, even though the amount may be different. For these reasons, the stay application should be dismissed.

Orders relating to the Lots

18.  The first and second grounds of appeal challenge my rulings on trespass. If they succeed, the trespass claim may be dismissed. However, as held, the 4^th defendant is separately liable for breach of fiduciary duties, and the 1^st and 2^nd defendants are liable for dishonest assistance and knowing receipt: see paras 228 to 230 of the judgment. There is no appeal against that part of the judgment.

19.  I have found that the 1^st and 2^nd defendants have been in exclusive possession of the Lots and operating a car park there for profit, such use was without the consent or authorisation of the Tso, the 4^th defendant knew that and he, as officer of the Tso, was in a position of conflict when he allowed the 1^st and 2^nd defendants to do so. I have further found that the 4^th defendant made alterations to the accounting books in order to conceal his involvement from the Tso, and that he had incorporated the 1^st defendant to operate the car park with a view, once again, to concealing the defendants’ use of the Lots from the Tso. Lastly, I have found that the 2^nd defendant knew about the lack of authority of the 4^th defendant. See paras 199, 203 to 206 of the judgment. Based on these factual findings, I made the rulings in paras 228 to 230 that the various causes of action were made out.

20.  Even assuming that the trespass claim will be dismissed on appeal, based on the above findings and rulings made in respect of the other causes of action, the plaintiff should still be entitled to the orders relating to the Lots. The background context is that only the managers of the Tso have the authority to manage its properties and assets. That was not disputed in the trial: see para 74. Here, the simple facts are that the car park was not authorised or allowed by the Tso and the defendants should therefore cease operating the car park and return the Lots to the Tso. Hence, there is no reason to stay the execution of the orders now.

21.  In their written submissions, the defendants argue that the cause of action based on trespass and the other causes of action are “two sides of the same coin” as both were based on the defendants’ exclusive occupation of the Lots. Hence if the appeal relating to trespass succeeds, the other causes of action should also be dismissed.

22.  I do not agree with that submission because regardless of whether the defendants’ occupation was exclusive or not, the 4^th defendant would still be in breach of his fiduciary duties.

23.  The 4^th defendant was an officer of the Tso. The basis of his breach of fiduciary duties lies, in essence, in his knowingly allowing the 1^st and 2^nd defendants to use the Lots for profit without the consent of the Tso and his proactively concealing his own involvement and the defendants’ unauthorised use from the Tso. This cannot be said to be the other side of the same coin of the trespass claim.

24.  Under the second ground of appeal, it is contended that I ought to have held that the defendants’ possession of the Lots was not exclusive because the 4^th defendant had allowed other Tso members to use the car park: see para 200. Even assuming that this contention is arguable, it should not alter the ruling on breach of fiduciary duties. Whether the defendants’ occupation was exclusive or not, the car park was unauthorised by the Tso and was being operated without its knowledge. Hence, the 4^th defendant would still be in breach of his fiduciary duties.

Order for damages

25.  For the same reason, even if the first and second grounds of appeal succeed such that the trespass claim would be dismissed, the defendants would remain liable to pay equitable compensation to the plaintiff under the other causes of action. (The quantum may however be different.) As regards the third ground of appeal, even if the counterclaim succeeds, it would serve as a set off against the equitable compensation payable by the defendants. It is not known at this stage how the calculations would work out eventually. In this application, it is for the defendants to justify a stay. They have not shown that if they succeed on appeal, they would not be liable to pay the plaintiff anything (or they would only be liable to pay an amount much less than what is presently awarded). For that reason, the order for damages should not be stayed.

26.  Alternatively, as highlighted in Star Play, in order to stay a money judgment, the court will require evidence as to why the levying of execution will result in the appeal being rendered nugatory. As noted above, the defendants have not put forward any reason for staying the order for damages. (For instance, it is never suggested that the Tso would not be able to repay in the event that the appeal succeeds.) Furthermore, in my view, the defendants have not demonstrated a strong likelihood that the appeal would succeed. There is therefore no reason to stay the order for damages.

CONCLUSION

27.  I dismiss the 1^st, 2^nd and 4^th defendants’ stay application.

28.  I make an order nisi that the defendants should pay the plaintiff its costs of the application to be taxed if not agreed, with a certificate for two counsel.