Wong Man Hon Frederick v. China Times Securities Ltd

HCMP 608/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 608 OF 2017

(ON AN INTENDED APPEAL FROM HCA 2715/2016)

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D E C I S I O N

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Hon Barma JA (giving the Decision of the Court):

1.This is an application by the plaintiff seeking leave to appeal against the judgment of Deputy High Court Judge Hunsworth dated 3 February 2017, the reasons for which were given on 15 February 2017. By his judgment, the judge dismissed the plaintiff’s application for the continuation of an ex parte injunction (which had by the time of the hearing been replaced by an undertaking from the defendant) to prevent the defendant from disposing of or dealing with shares in a listed company called Agritrade Resources Limited (“Agritrade”), which the plaintiff had deposited with the defendant in its capacity as collateral agent in respect of a loan which the plaintiff had obtained from a company called 360HK Limited (“360HK”), for which the shares had been pledged as security. The judge dismissed the plaintiff’s application to him for leave to appeal on 3 March 2017 (reasons being given on 10 March 2017). This is the plaintiff’s renewed application to this court for leave to appeal.

2.There is also an application by the plaintiff for leave to adduce fresh evidence for the purposes of the intended appeal, and this application.  This relates to other proceedings (HCA 548/2017) by another claimant against 360HK (but not the defendant), in which allegations similar to those in the present proceedings were made, and in respect of which Lisa Wong J gave judgment continuing an interlocutory injunction against 360HK which had been granted to the plaintiff in those proceedings.

3.The background to the proceedings can be briefly stated.  The plaintiff had entered into a loan agreement with 360HK, under which the plaintiff’s Agritrade shares were to be pledged as security.  The shares were lodged with the defendant, which was to act as 360HK’s collateral agent, and were thereafter held by the defendant under the terms of a Collateral Agency Agreement and other associated agreements, all of which were signed by the plaintiff.  The plaintiff says that he discovered, based on an analysis of information available from CCASS, that the Agritrade shares lodged by him with the defendant had, in breach of the agreements between him and the defendant, been transferred away from the defendant to a company called Beaufort Securities Limited (a subsidiary of Standard Chartered Bank), and thereafter sold.  The defendant does not dispute that the shares were transferred to Beaufort (which they say was merely their custodian), but denies that the shares were ever sold.  Statements sent by Beaufort to the defendant and by the defendant to the plaintiff after the time of the alleged sales appear to indicate that the shares were still held by Beaufort for the defendant and by the defendant for the plaintiff.  The plaintiff alleges that the sale of the shares was part of a scheme to depress the share price, to enable the defendant to profit by buying back the shares at a lower price in the future, before it was required to return them to the plaintiff.

4.On the basis of these allegations, the plaintiff commenced proceedings against the defendant, and applied for and obtained an ex parte injunction to restrain the defendant from dealing in any way with the plaintiff’s Agritrade shares.  As we have noted, the injunction was discharged upon undertakings to similar effect being given by the defendant pending a full inter partes hearing.  That was the hearing before the judge, who came to the conclusion that the plaintiff had failed, for a number of reasons, to make out a good prima facie case so as to justify the grant of an injunction.  In particular, he held that the plaintiff had failed to make out a serious issue to be tried that the defendant was in breach of the relevant contracts, properly construed, that even if there had been a breach the plaintiff had failed to show any loss, that there was no credible evidence that the shares had been sold, and that the plaintiff had in any event given an indemnity to the defendant, thus rendering the claim pointless.  The judge also considered that even if the plaintiff’s claims could be made out, damages would clearly be an adequate remedy, so that no injunction should be granted in any event.  He therefore released the defendant from the undertakings it had given.

5.We shall deal first with the application for leave to adduce fresh evidence for the purposes of the appeal and this application for leave to appeal.  It is well known that for such an application to succeed it is necessary for the party seeking to adduce the fresh evidence to show that (1) it could not, with reasonable diligence, have been obtained for use at the hearing below, (2) it is reasonably credible, and (3) it would have had a significant impact on the outcome of the hearing.  In our view, the application must be dismissed.  Quite apart from the fact that we have considerable doubt as to whether or not the first condition is satisfied, we think it clear that, for the reasons we explain below in relation to the question of whether damages would be an adequate remedy for the plaintiff’s claims, that the evidence now sought to be adduced would have no impact on the intended appeal, as it does not address that question.  It also seems to us doubtful whether what is essentially similar fact evidence is likely to assist the plaintiff in making out its claims in the present case.

6.So far as the application for leave to appeal is concerned, the plaintiff puts forward three grounds of appeal in his draft notice of appeal.  These are that (1) the judge erred in failing to find that there was a serious question to be tried as to whether or not, on the true construction of the Collateral Agency Agreement or the account opening documentation signed by the plaintiff, the defendant was in breach thereof, (2) the judge erred in having regard to the plaintiff’s equity of redemption as the defendant was not the mortgagee, and (3) the judge was wrong not to hold that there was clearly a factual dispute as to whether or not the shares had been sold, which could not be resolved on the material before him.

7.With respect to Mr Kim, we do not think that these grounds have any reasonable prospect of success.  The judge’s construction of the relevant agreements seems to us to be clearly correct. Similarly, his conclusion that no claim would lie until such time as the plaintiff was entitled to have his shares back would seem to be unexceptional. As for his views as to whether or not the evidence before him showed, on a prima facie basis, that the plaintiff’s shares had been sold, we see no reason to differ.  However, it seems to us that there is a more fundamental difficulty in the plaintiff’s path.

8.It will be noted that the plaintiff does not, by the draft notice of appeal, challenge the judge’s additional reason for refusing relief by way of interlocutory injunction – namely, that damages would clearly be an adequate remedy (see paragraph 30 of the judgment below).  Why damages would not be an adequate remedy was not addressed anywhere in the plaintiff’s evidence, whether for the hearing below or in the fresh evidence sought to be adduced. For our part, we think that the judge was clearly right in concluding that damages would be an adequate remedy.  If the defendant were in breach of its obligations to the plaintiff, such that the plaintiff’s shares were not available to him, full compensation would be provided by the payment to the plaintiff of the value of the shares.  Insofar as the plaintiff may seek to contend that the value of the shares was depressed by the defendant’s alleged misdeeds, it appears to us that even if such a claim were viable (as to which we express no view one way or the other) the difference between the value of the shares on the market and what it would have been but for the defendant’s wrongdoing is equally capable of assessment for the purposes of an award of damages to the plaintiff.  Moreover, there is no suggestion that the defendant would or might not be in a position to meet any award of damages that might be made.

9.Where damages are an adequate remedy, it is the settled practice of the court to decline to grant interlocutory injunctive relief. We can see no reason to depart from that settled practice here.  Thus, even if the plaintiff were able to make good his grounds of appeal, this would take him nowhere, as damages would, for the reasons we have just explained, be an entirely adequate remedy for any wrong that the plaintiff may have suffered. That being so, the appeal would be bound to fail.  Leave to appeal must therefore be refused.

10.So far as costs are concerned, we make an order that the plaintiff is to pay the defendant’s costs of these applications.  The parties agreed that the defendant’s costs should be assessed on a gross sum basis at  HK$150,000, and we accordingly assess such costs in that amount.

Mr Minju Kim, instructed by Lam & Co, for the plaintiff / appellant

Mr Jose Maurellet SC, instructed by DLA Piper Hong Kong, for the defendant / respondent