Patrick Cowley and Wong Wing Sze Tiffany (Joint and Several Trustees in Bankruptcy of the Property of the Bankrupt) v. All Powerful Investment Ltd

HCMP 1076/2020

[2021] HKCFI 1944

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1076 OF 2020

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Before: Deputy High Court Judge William Wong SC in Chambers

Date of Hearing: 30 June, 2021

Date of Decision: 30 June, 2021

Date of Reasons for Decision: 5 July, 2021

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REASONS FOR DECISION

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APPLICATION

1.By a summons dated 7 May 2021 (the “Summons”), the Defendant applied to this Court for a stay of execution pending an appeal from this Court’s Judgment dated 30 December 2020 (the “Judgment”).

2.The Defendant filed a notice of appeal on 21 January 2021 against the Judgment. However, so far the appeal has not been set down by the Defendant.

3.I am informed that the Defendant refused to comply with this Court’s orders and failed to execute any deed of release, as such on 23 March 2021, the Plaintiff’s solicitors wrote to the Registrar requesting the Registrar to execute the deeds of release.

4.On 29 March 2021, the Registrar gave directions in connection with the execution of the deeds of release.

5.On 12 April 2021, the Defendant’s solicitors informed the Registrar that they would apply for a stay of execution of the Judgment.

6.On 3 May 2021, the Registrar directed that, unless the Defendant applied for a stay of execution by 10 May 2021, the Registrar would procure the execution of the deeds of release.

APPLICABLE LEGAL PRINCIPLE AND ANALYSIS

7.The principles governing the grant of a stay of execution pending appeal are well-established.  I only need to refer to principles as set out by Ma J (as he then was) in Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 at §6-10.

8.The key issue that whether there exists reasonable grounds of appeal.  I am of the view that this question is to be answered in the negative.  Mr Cheung for the Defendant relied very heavily on a running account and the existence of a general credit facility as stated in the mortgage documents themselves. However, Mr Ho for the Plaintiff is right that there is no evidence at all of any such credit facilities.

9.Indeed, the Defendant’s admitted rationale for the pre-petition mortgages contradicts the notion that the pre-petition mortgages were to secure future advances.  The Defendant admitted that the pre-petition mortgages were to secure sums already due from the Bankrupt to the Defendant at the time of the pre-petition mortgages.

10.Further, as set out in paragraph 30 of the Judgment, in the present case none of the directors of the Defendant, or the Bankrupt came forward to explain to the Court which sums were drawdown pursuant to the general credit facilities.

11.In paragraph 31 of the Judgment, this Court also stated that the sum of HK$119,887,125 was written off by the Company.  If the said sum is related to any of the mortgages, there is no fathomable reason as to why the Defendant would not enforce such outstanding debts against the mortgages but to have the same totally written off.  Mr Cheung for the Defendant submitted that this written off exercise was done by the auditors on their own volition without inputs from any directors.  However, there is no evidence to that effect.

12.The Defendant’s grounds of appeal all relates to the point that this Court has failed to take sufficient consideration of the five matters set out in the Notice of Appeal.  However, I am of the view that this Court did take into consideration of the arguments raised and have given them proper consideration.

13.As far as the failure to turn the current action from one of originating summons to that of a writ action in concerned, as set out in the Judgment, first, there was no summons issued by the Defendant to that effect before this Court. At best, it was only raised in the Defendant’s Skeleton Submissions.  Secondly, the Defendant has not raised bona fide factual disputes which merits the turning of the presenting proceedings into a writ action.  The burden is on the Defendant to persuade this Court that there are bona fide factual disputes.  However, the Defendant has adduced no such evidence.  Indeed, the Bankrupt did not even file affirmation to explain the running account, the drawdown and what credit were actually utilized in exchange of the mortgages.

14.Accordingly, I am of the view that the Defendant does not have arguable grounds of appeal.

15.Further, I am also not convinced that absent a stay, the Defendant’s appeal will be rendered nugatory.  It will take time for the Plaintiff as professionals to proceed to sell the mortgaged properties and even if they did, they would be prudent in dealing with the proceeds of sale of the mortgaged properties pending the Defendant’s appeal.

16.One factor, which this Court takes into consideration in its balancing exercise is that the Defendant has an unexplained delay in setting down its appeal.  This Court handed down its judgment on 30 December 2020. Six months have passed and yet the appeal has not been set down. But for an unless order, the Defendant would not have applied for a stay of execution of the Judgment.  Mr Cheung for the Defendant fairly submitted that he has no instructions on the reasons for such inordinate delay.  Had the Defendant proceeded expeditiously to prosecute its appeal, the appeal might have been heard.  In that sense, the Defendant is the author of its own misfortune if it were to lose its priority should its appeal be successful.

17.Of course, this Court has also to take into consideration that the Plaintiff and behind the Plaintiff, the general body of creditors, should not be unduly delayed in getting their rightful and fair distribution on the bankruptcy proceedings.

DISPOSITION

18.For all the reasons stated above, the Defendant’s Summons is dismissed.

19.I also make a cost order nisi that the Defendant is to pay the costs of and occasioned by the Summons to the Defendant, on a party and party basis, to be taxed if not agreed.  The costs order nisi will be made absolute within 14 days hereof unless the parties apply to vary the same within the 14-days period.

20.Finally, I thank Mr Cheung for the Defendant and Mr Ho for the Plaintiff for their helpful assistance.

Mr Look Chan Ho, instructed by ONC Lawyers, for the Plaintiff

Mr Tom Cheung and Mr Kenny Siu, instructed by S K Wong & Co, for the Defendant