Asparouh Ianev Dimitrov As Administrator of the Estate of Kaloian Ianev Dimitrov (Deceased) v. Dominic Tak Ming Lau also known as Lau Tak Ming and Another

CACV 568/2020

[2021] HKCA 1196

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 568 OF 2020

(ON APPEAL FROM HCMP NO 887 OF 2018)

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Before:  Hon Au and Chow JJA in Court

Date of Decision: 17 August 2021

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D E C I S I O N

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

A.      INTRODUCTION

1.By way of a judgment dated 28 September 2020 (“the Judgment”), Deputy High Court Judge William Wong SC (“the Judge”) granted the plaintiff, inter alia, an order (“the Order”) for sale of the Property (as defined below) and dismissed the 2^nd defendant’s summons to vacate the registration of, discharge or set aside, the charging order made against the Property.

2.On 22 October 2020, the 2^nd defendant filed a Notice of Appeal to appeal against the Judgment.

3.This is the 2^nd defendant’s renewed application for stay of execution of paragraphs 2,3,4,5 and 8 of the Order (which relate to the sale of the Property) pending the determination of the appeal.

4.On 9 November 2020, the 2^nd defendant first applied to the Judge for a stay of execution of the Order pending the final outcome of her appeal.  The Judge rejected it on the basis that there were no arguable grounds of appeal[1].  She now renews the application before us.

5.After reviewing the parties’ respective written submissions[2], we are of the view that it is proper to dispose of this application on paper pursuant to Order 59, rule 14A of the Rules of the High Court (Cap 4A) (“the RHC”).  This is our decision.

B.      BACKGROUND

6.The background matters were succinctly summarized by the Judge at [4] - [10] of the Judgment.  We only need to highlight the following relevant to this application.

7.The plaintiff is the administrator of the estate of the late Kaloian Ianev Dimitrov (“Kal”).  On 25 October 2017, the plaintiff obtained a summary judgment against the 1^st defendant (as the only defendant in HCA 1079/2015) for the sum of US$24,180,000 as a debt owed to Kal with interests[3].

8.The 1^st defendant was then the registered owner of the property located at Unit B on Ground Floor & Portions on the Lower Ground Floor, No 24 Shek O Headland, Hong Kong (“the Property”).

9.In seeking to enforce the summary judgment, the plaintiff obtained a charging order nisi against the Property on 20 November 2017, which was registered with the Land Registry on 23 November 2017.

10.On 15 January 2018, the charging order nisi was made absolute after the court rejected the 1^st defendant’s opposition.  The charging order absolute was later registered with the Land Registry on 25 January 2018[4].

11.On the other hand, after the hearing on 15 January 2018, the plaintiff discovered that by way of an assignment dated 3 January 2018, the 1^st defendant had already assigned the Property to the 2^nd defendant, his ex‑wife, purportedly made pursuant to a divorce arrangement documented in a deed of settlement dated 13 December 2017 and an arbitration award dated 28 December 2017.  The assignment was registered with the Land Registry on 19 January 2018, that is, after the registration of the charging order nisi but before the registration of the charging order absolute.

12.On 13 June 2018, the plaintiff brought the present proceedings by way of Originating Summons (“OS”) seeking, among others, (a) a declaration that the charging order nisi and charging order absolute do retain priority over the assignment, and (b) an order for sale of the Property.

13.The 2^nd defendant opposed the OS.  Further, she also later took out a summons[5] seeking to vacate the registration of, discharge or set aside the charging orders nisi and absolute.

C.      THE JUDGMENT

14.The OS and the 2^nd defendant’s summons were heard together before the Judge on 21 September 2020.

15.The 2^nd defendant had raised a total of 12 grounds in opposition of the OS and in support of her summons.  The 1^st and 2^nd defendants each has filed three affirmations (thus a total of six affirmations) in support of the 2^nd defendant’s case.

16.Most of these grounds of opposition are premised upon the primary contentions that:

(1)  The 2^nd defendant is the entire beneficial owner of the Property as the 1^st defendant had promised to give her the Property as a gift when she agreed to marry her in 1988.  In the premises, given the principles of presumption of advancement and / or proprietary estoppel, the 2^nd defendant has since become the beneficial owner of the Property; or

(2)  Alternatively, the 2^nd defendant beneficially owns half of the interest in the Property (which is the matrimonial property) under the relevant Chinese law or pursuant to the divorce agreement and arbitration award.

17.The 2^nd defendant further contended before the Judge that the charging orders registered against the Property were of no effect as:

(1)  when the Property was charged, the 1^st defendant did not have any beneficial interest in it;

(2)  the plaintiff had had actual or constructive notice of the 2^nd defendant’s beneficial interest in it; and / or

(3)  when the charging order was made, the 1^st defendant was out of the jurisdiction or notice of the application for making the charging order absolute was not served on the 2^nd defendant.

18.In this respect, it is noted that the 2^nd defendant’s counsel contended before the Judge that, given the factual disputes raised by way of the various affirmations filed by the defendants, the OS should either be dismissed or alternatively be allowed to proceed to trial so that the 2^nd defendant’s right in respect of the Property could be properly ascertained[6].

19.As mentioned above, the Judge rejected the 2^nd defendant’s summons and also granted the plaintiff an order for sale of the Property as sought under the OS.  His reasons can be summarized as follows:

(1)  As a matter of law, after looking at the history of the registration of the respective documents, he concluded that the plaintiff’s charging order took priority over the defendants’ assignment.  See [16] - [24] of the Judgment.

(2)  Further, the Judge found the 2^nd defendant’s case on her claimed full beneficial interest in the Property not believable after assessing her assertions made in the defendants’ affidavits against the available contemporaneous documents, the absence of other relevant supporting contemporaneous documents, her changing positions as to the extent of her asserted beneficial interest in the Property, common and commercial sense, and the relevant objective contexts.  See [25] - [42] of the Judgment.

(3)  He therefore further found that the 2^nd defendant’s arguments mounted on proprietary estoppel and / or promissory estoppel also lacked evidential support: [43] - [46] of the Judgment.

(4)  Finally, the Judge also rejected the 2^nd defendant’s original position that she had a 50% beneficial interest in the Property under Chinese marriage laws as he found that there was no evidence to show that the Property was their matrimonial home.  Further and in any event, he also concluded that (a) as the divorce documentations[7] relied on by the 2^nd defendant were all created after the registration of the charging order nisi, whatever interest that the 2^nd defendant might have been entitled to by way of these documentations under the PRC law would be irrelevant, and (b) the 2^nd defendant had also failed to adduce any PRC law expert evidence to show how she would be entitled to the Property that had already been charged to a creditor: [47] - [62] of the Judgment.

D.      THIS APPLICATION

D1.    Legal Principles

20.The governing principles for grant of stay of execution are well established.  As provided under Order 59, rule 13(1), an appeal does not operate as a stay of execution.  The court will only consider exercising its discretion to grant a stay of execution pending appeal if the appellant can demonstrate there are good reasons to justify a stay.

21.In Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84, Ma J (as he then was) at [9] has laid down the following principles concerning the exercise of the discretion:

(1)  The existence of a strong appeal will usually by itself be a good reason for granting a stay.  However, if there exists only an arguable appeal, the appellant must provide additional good reasons to justify a stay, namely, the appeal would be rendered nugatory if a stay was not granted;

(2)  The court must not at any stage forget the position of the successful party.  It is always relevant to consider the prejudice that would be caused to the successful party in the event a stay is granted and if necessary, to impose conditions so as to minimize the prejudice caused to him.  A fortiori, the court must consider any contention that the appeal would be rendered nugatory to him (in the event the appeal is dismissed) should a stay of execution be imposed;

(3)  Ultimately, the court embarks on a balancing exercise and uses its common sense, but bearing in mind at all times the starting point that the successful party is not to be deprived of the fruits of his success.

22.Bearing these legal principles in mind, we now turn to consider the present application.

D2.    Discussion

23.The 2^nd defendant argues that good reasons for the stay of execution exist in that, first, she has “much merits” in her appeal and, secondly, the absence of a stay will render her appeal nugatory[8].

D2.1  Merits of the appeal

24.The 2^nd defendant has advanced some 16 grounds of appeal in her Notice of Appeal.  These grounds effectively seek to argue that the Judge had erred in each of his findings and conclusions in the Judgment in rejecting the 2^nd defendant’s various grounds of opposition as summarized above.

25.However, it should be noted that Mr Lam for the 2^nd defendant has fairly submitted that the “main thrust” of the 2^nd defendant’s appeal under all these grounds is that the Judge wrongly decided the case summarily on affirmations only[9], and it is for this reason that Mr Lam further submits that the 2^nd defendant has “at least a good arguable case” in the appeal.

26.On the other hand, Mr D’Souza, counsel for the plaintiff, contends that none of the grounds of appeal has any merits, as they have been rightly rejected by the Judge in his detailed analysis.  In particular, Mr D’Souza says the 2^nd defendant’s principal complaint that the Judge had wrongly decided the matter summarily is without any substance as the parties had in fact agreed not to adduce oral testimony when the case was heard before the Judge.  This is noted by the Judge at [29] of the Judgment and at [12] of his decision to refuse a stay of execution.

27.Purely for the purpose of considering this stay application, and without going into any details in examining the merits of each of the grounds of appeal, we are prepared to accept that the appeal is arguable (and we put it no higher than that) that the Judge wrongly decided the matter on a summary basis based on the affirmation evidence.  This is so as:

(1)  Given the various factual allegations deposed to by the 1^st and 2^nd defendants in their affirmations in support of the 2^nd defendant’s claim of her underlying beneficial interest, and the ways the Judge analysed the allegations in some detail in rejecting them, it is not wholly unreasonable for the 2^nd defendant to argue that the Judge had erred in engaging in a mini-trial on affidavits.

(2)  In this respect, as we have pointed out at [18] above, when opposing the OS before the Judge, Mr Lam for the 2^nd defendant indeed in his skeleton submissions had asked the Judge to direct the OS to proceed to trial to determine the 2^nd defendant’s interest in the Property[10].  It is also noted that one of the orders now asked by the 2^nd defendant in the Notice of Appeal is to direct that the OS to be treated as if it is begun by writ and that the parties are to file their pleadings.  The fact that Mr Lam was content to have the hearing before the Judge determined without adducing oral testimony does not by itself render unarguable the complaint that the Judge had erred in summarily disposing of the OS in favour of the plaintiff.

D2.2  Appeal nugatory?

28.We now turn to look at the issue of whether the appeal would be rendered nugatory if a stay is not granted.

29.In our view, the answer is in the affirmation in the present case:

(1)  The order under appeal is an order for sale of the Property.  By its very nature, once the order is executed, the appeal is likely to be rendered nugatory even if the 2^nd defendant is successful in her appeal as it is most unlikely that she would be able to recover the Property.

(2)  That the appeal will be rendered nugatory is further underlined by the fact that the plaintiff is a foreign resident in UK[11] and is the administrator of the estate.  This is so as once the Property is sold, the proceeds would be received by the plaintiff, who in the natural course of events, will most likely proceed to distribute it to the beneficiaries, whose identities are unknown and who are also likely be outside this jurisdiction.  This would make it very difficult, if not impossible, for the 2^nd defendant to recover the proceeds even if she is eventually successful in her summons and in opposing the OS.

D3.    Dispositions

30.For the above reasons, we consider that there should be a stay of execution pending the determination of the appeal.

31.Mr D’Souza has also asked the court to impose a condition on the stay by ordering the 2^nd defendant to make payment into court in the sum of HK$40 million (being the market value of the Property) to protect the plaintiff’s interest.  Mr Lam in his reply skeleton submissions however argues that as a matter of principle, a conditional stay of execution is only appropriate for an order made in relation to monetary judgment but not one that concerns property rights, a submission which Mr D’Souza disagrees.

32.We do not find it necessary to determine this point.  In our view, given the charging order now registered against the Property, the plaintiff’s interest is sufficiently protected in the interim pending the determination of the appeal. However, we agree that the appeal should be disposed of expeditiously given the grant of a stay of execution.

33.In the premises, we would make the following orders:

(1)  Paragraphs 2 - 5 and 8 of the Order dated 28 September 2020 be stayed pending the determination of the 2^nd defendant’s appeal to the Court of Appeal.

(2)  The parties shall forthwith, and in any within seven days of this order, proceed to fix the date of the appeal herein.

(3)  Costs of this application be in the cause of the appeal.

Mr Robin D’Souza, instructed by Boase Cohen & Collins, for the plaintiff

Mr Andy Lam, instructed by Ivan Tang & Co, for the 2^nd defendant