Capital Century Textile Co Ltd v. Li Dianxiao and Another

HCA 263/2012

[2023] HKCFI 320

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 263 OF 2012

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BETWEEN

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DECISION

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1.In this decision, unless otherwise stated, I shall continue to use the definitions and abbreviations adopted in the reasoned judgment I handed down on 27 September 2021 [2021] HKCFI 2216 (“Reasoned Judgment”).

RELEVANT PROCEDURAL HISTORY

2.By the Reasoned Judgment, I held in favour of CCT (plaintiff) against both defendants and gave reasons for such determination. More particularly, insofar as it is material for present purposes:

(1) As against Mr Li (1^st defendant), I declared (a) that he held and still holds the China Harbour Office on trust for CCT and (b) that he held the Tanner Garden Flat on trust for CCT between 7 September 2004 and 3 July 2007. See [157(1) and (2)(c)]. In consequence of the declaration regarding the China Harbour Office, I further ordered Mr Li to, inter alia, transfer the property to CCT or at its direction. See [157(3)].

(2) As against Mr Cong (2^nd defendant) who became the registered owner of the Tanner Garden Flat by virtue of the purported sale and purchase of the same between him and Mr Li by the agreement for sale and purchase and the assignment dated 3 July 2007:

(a) I declared that he has since 3 July 2007 been holding the Tanner Garden Flat on trust for CCT.

(b) I set aside the said purported sale and purchase of the Tanner Garden Flat.

(c) I ordered him to, inter alia, transfer the Tanner Garden Flat back to CCT or at its direction.

(d) I further ordered him to account for all the money and benefits received by him by holding the Tanner Garden Flat since 3 July 2007 and to pay CCT all sums found to be due from him to CCT on the taking of such account.

See [158].

3.Following the handing down of the Reasoned Judgment, on 5 October 2021, CCT submitted for the court’s approval a draft of the judgment that it proposed to invite the court to seal (“Draft Sealed Judgment”).

4.Insofar as it is presently material, the Draft Sealed Judgment contained the following provisions:

(1) In addition to transferring the China Harbour Office to CCT or at its order and direction, Mr Li shall forthwith deliver vacant possession of such property together with all its title deeds and documents to CCT (paragraph 2).

(2) In case Mr Li should default in transferring the China Harbour Office to CCT within 28 days, the Registrar of the High Court (“Registrar”) is authorised to execute all transfers, assignments and/or deeds necessary to transfer the legal title of such property to CCT or at its order and direction (paragraph 3).

(3) In addition to transferring the Tanner Garden Flat to CCT or at its order and direction, Mr Cong shall forthwith deliver vacant possession of such property together with all its title deeds and documents to CCT (paragraph 14).

(4) In case Mr Cong should default in transferring the Tanner Garden Flat to CCT within 28 days, the Registrar is authorised to execute all transfers, assignments and/or deeds necessary to transfer the legal title of such property to CCT or at its order and direction (paragraph 15).

(5) The defendants shall pay CCT interest on all sums found and as may be found payable by them or each of them (paragraph 19).

5.With a view to affording the defendants an opportunity to consider and make submission on the formal judgment (if so advised) and to eliminating any unnecessary argument in the future, this court directed CCT to provide a copy of the Draft Sealed Judgment to each of the defendants.

6.CCT did so under cover of a letter of the same date (i.e. 5 October 2021) from its solicitors, Messrs Liu, Choi & Chan (“LCC”), to the court and copied to

(1) Mr Li (who was then unrepresented) at the Hong Kong address given by him in his notice to act in person dated 22 September 2016 (“Mr Li’s Address”); and

(2) Mr Cong’s solicitors, Messrs C S Chan & Co (“CSC”).

7.Mr Li did not respond to LCC’s letter.

8.As for Mr Cong, by a letter dated 6 October 2021 from CSC to the court and copied to LCC and Mr Li (at Mr Li’s Address), Mr Cong disputed only paragraph 19 of the Draft Sealed Judgment, pointing out that a claim for pre-judgment interest must be specifically pleaded; that CCT had failed to plead such a claim in the ASOC; and that CCT was therefore not entitled to any award of pre-judgment interest. Save for its objection to the provision for interest under paragraph 19, Mr Cong did not take issue with the rest of the Draft Sealed Judgment, specifically paragraphs 14 and 15 thereof.

9.After considering LCC’s letter of 5 October 2021 and CSC’s letter of 6 October 2021, by a letter dated 8 October 2021 to all parties, this court directed that the question of interest should be left to the Master taking the various accounts as it would depend on whether any sums are found to be due to CCT from both or either of the defendants.

10.On 22 October 2021, CCT submitted for this court’s approval a revised version of the Draft Sealed Judgment, which removed paragraph 19 (“Revised Draft Sealed Judgment”). Upon this court’s approval given on the same day, judgment as per the Revised Draft Sealed Judgment (“Sealed Judgment”) was sealed and filed on 27 October 2021.

11.The Sealed Judgment (indorsed with a penal notice) was then personally served on Mr Cong on 29 October 2021.

12.In partial breach of paragraph 14 of the Sealed Judgment, Mr Cong has refused and/or failed to transfer the legal title to the Tanner Garden Flat to CCT. In this regard, CCT has, by LCC’s letter dated 12 November 2021 to CSC, provided Mr Cong with a draft assignment (“Assignment”) for his execution by 26 November 2021.

13.In further breach of paragraph 14, Mr Cong has not delivered up vacant possession, or any title deeds or documents, of the Tanner Garden Flat either.

14.In view of Mr Cong’s refusal and/or failure to execute the Assignment whether by 26 November 2021 or at all, CCT invoked paragraph 15 of the Sealed Judgment and submitted the Assignment to the Registrar for his execution. See LCC’s letter dated 14 January 2022 to the Registrar, drawing his attention to paragraphs 14 and 15 of the Sealed Judgment; CSC’s letter of 12 November 2021 to LCC with the Assignment attached; and Mr Cong’s neglect in executing the Assignment in breach of paragraph 14 of the Sealed Judgment.

15.In response, by a letter dated 24 January 2022 to LCC and CSC, the Registrar pointed out that the provisions in paragraphs 14 and 15 of the Sealed Judgment for (1) the delivery of vacant possession and the title deeds and documents of the Tanner Garden Flat and (2) the authorisation of the Registrar to execute the Assignment in the event of default by Mr Cong were not part of the orders made against Mr Cong at [158] of the Reasoned Judgment. CCT and Mr Cong were invited to make submissions on the following questions: (1) the legal basis for requesting the Registrar to execute the Assignment which was not provided for in the Reasoned Judgment; (2) whether such relief was prayed for in the ASOC; and (3) whether the addition of paragraphs 14 and 15 to the Sealed Judgment was by consent or argued and or was drawn to my attention or granted by me. The parties’ attention was specifically directed to Pang Man Ming v Pang Wan Li Yan [2020] 4 HKLRD 864.

16.To cut a long story short, after considering the respective submissions of CCT and Mr Cong, on 16 February 2022, the Registrar directed the parties to seek clarification and directions from this court.

17.In the meantime, both Mr Li and Mr Cong have appealed from the judgment against them by notices of appeal respectively issued under CACV 471/2021 and CACV 472/2021.

18.Insofar as Mr Cong is concerned, the supplemental notice of appeal dated 8 July 2022, which raised 3 new grounds of appeal (“Ground 3”, “Ground 4” and “Ground 5” respectively and “Grounds” collectively), supersedes the notice of appeal dated 15 October 2021[1].

APPLICATIONS BEFORE THE COURT

19.Against such procedural background, there are now before the court the following applications (“Applications” collectively):

(1) by Mr Cong by summons dated 11 July 2022 for stay of execution of the judgment against him pending the determination of his appeal under CACV 472/2021 (“Stay Application”); and

(2) by CCT by summons dated 29 August 2022 for “clarification” of [157] and [158] of the Reasoned Judgment and paragraphs 2, 3, 14 and 15 of the Sealed Judgment (““Clarification” Application”).

“CLARIFICATION” APPLICATION

20.I can immediately say that the citation of Order 20 rule 11 of the Rules of the High Court (Cap 4A), which is popularly referred to as the “slip rule”, in the margin of CCT’s summons is misconceived.

21.The true principles are those stated by Lam JA (as he then was) in Lam Chi Tat Anthony v Kam Yee Wai Andrew (No. 2) [2013] 2 HKLRD 1085 at [7] to [9]

“7. Very often, in a reasoned judgment the court focuses on matters argued before it. There may well be matters which are consequential and per se uncontroversial between the parties which the court does not deal with expressly in the reasoned judgment. It does not mean that such matters should not be attended to in the formal order. On the contrary, there is every reason why the formal order should cover those consequential matters. Parties should do their best in coming up with a draft order which deals with every indisputable consequential item that needs to be addressed in the proceedings. Otherwise, it would simply be a recipe for further applications before the court which would generate more costs and time to be incurred. That would not be consistent with underlying objectives in Order 1A. Of course, if there are outstanding matters which are disputed, it would not be appropriate to include those in a draft order as if it is undisputed, at least not until such disputes have been properly ventilated and decided by the court.

8. Therefore, whenever a party responsible for drawing up a formal order detects there are matters which are within the ambit of the legal proceedings but not expressly addressed in the reasoned judgment, he or she should discuss with the other parties to see to what extent such matters are consequential and uncontroversial. Parties should be mindful of what we said above and their duties under Order 1A Rule 3 in handling the situation. If parties can come to agreement on those matters, they can submit a draft order (endorsed with their consent) covering those matters for the approval of the court. If the parties cannot agree, and if one party has good reason to believe that the additional paragraph should not be disputed, he or she can write to the court with a draft order seeking directions. However, in cases of serious disputes, he or she should make an application by summons. In the meantime, the formal order would not be perfected.

9. It must be emphasized that what we said above is confined to matters properly within the ambit of the set of legal proceedings which the court is seised with. Matters outside the ambit of the proceedings cannot be added to the formal order as the court has no jurisdiction to entertain the same.”

22.Applying these principles, focusing first on paragraphs 2 and 14 of the Sealed Judgment, the enjoyment of possession and the custody of the title deeds and documents are natural and essential incidents of land ownership. The declaration of beneficial ownership and the transfer of legal title, without being accompanied by the delivery up of possession and the title deeds and documents, would be incomplete and ineffective as relief. Once it is found that CCT is the beneficial owner of the China Harbour Office and the Tanner Garden Flat, it could not be suggested that CCT should nevertheless still be deprived of possession, or the title deeds and documents, of the properties. And it was not so suggested by either of the defendants whether at the trial or upon being provided with the Draft Sealed Judgment for their consideration and comment. The defendants subsequently simply jumped on the bandwagon when the Registrar called for submission on paragraphs 2, 3, 14 and 15 of the Sealed Judgment.

23.Turning then to paragraphs 3 and 15 of the Sealed Judgment, the jurisdictional basis for such provisions is s 25A(1)(a) of the High Court Ordinance (Cap 4), which empowers the Court of First Instance to nominate any person to sign any conveyance, contract or other document, the execution of which has been ordered in a judgment or order if the person ordered to execute such conveyance, contract or other document neglects or refuses to comply with the judgment or order.

24.In Pang Man Ming v Pang Wan Li Yan, supra, at [17], Queeny Au-Yeung J identified the 2 matters that an applicant under s 25A must prove:

(1) a pre-existing judgment directing a person to execute a conveyance or other document; and

(2) neglect by that person to comply, which is usually after efforts have been made to request him to sign within a specified time.

25.In many cases, the party in whose favour the pre-existing judgment for the execution of document is made would make the application under s 25A(1) in subsequent and separate proceedings after the opposite party has neglected to comply with the judgment. See the procedure and the safeguards discussed in Pang Man Ming at [18] and [19].

26.Nevertheless, I can detect no objection in principle to the alternative practice of incorporating in the same judgment:

(1) the obligation on the unsuccessful party to execute the subject document in the first instance; and

(2) the identification and authorisation of a third person to do so in place of the unsuccessful party in the event of default,

provided that:

(a) the unsuccessful party has had an opportunity to address the court on the inclusion of the s 25A(1) direction; and

(b) it is made clear that the third party can and should be called upon to execute the document only on proof, whether on oath or otherwise, of neglect by the party primarily obligated to do so.

27.The obvious advantage of such a practice is the saving of the time and costs of a potentially unmeritorious and delaying satellite applications under s 25A.

28.In the instant case, both the defendants had in fact been afforded an reasonable opportunity to contest (if so advised) the terms of the Sealed Judgment when they were copied the Revised Draft Sealed Judgment for their consideration and comment. In particular, in the case of Mr Cong, by objecting to paragraph 19 only, he can be taken as consenting to, or at least not opposing, the remaining provisions of the Sealed Judgment including paragraphs 14 and 15.

29.To conclude, not only was I alerted to paragraphs 2, 3, 14 and 15 of the Sealed Judgment, I fully intended to grant formal judgment in terms including those paragraphs, after being satisfied that the defendants had had a reasonable chance to persuade me otherwise, if so advised.

STAY APPLICATION

Principles governing grant of stay of execution pending appeal

30.An appeal does not operate as a stay of execution of proceedings: Order 59, rule 13(1).

31.The principles governing an application for a stay of execution of a judgment pending appeal are well established. A summary of such principles can be found in, for example, the judgment of Chow J (as he then was) in Astro Nusantara International BV v PT Ayunda Prima Mitra (No 2) [2016] 1 HKLRD 591 at [15] as follows, following the decision of Ma J (as the former Chief Justice then was) in Stay Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84:

“(1) The applicant is required to demonstrate a “good reason” for a stay of execution.

(2) Generally speaking, the existence of merely an arguable appeal cannot by itself amount to a sufficient reason to justify a stay. It is the minimum requirement before a court would even begin to consider granting a stay.

(3) In other words, if the court is not convinced that there exist arguable grounds of appeal, no stay will be granted however exceptional the circumstances may otherwise be justifying a stay of execution.

(4) On the other hand, the existence of a strong appeal or a strong likelihood of success will usually by itself enable a stay to be granted because this would constitute a good reason for a stay.

(5) In most cases, where the court is faced with simply the existence of an arguable appeal, it becomes necessary for the applicant to provide additional reasons as to why a stay is justified.

(6) Commonly, this is done by demonstrating that without a stay the appeal would be rendered nugatory, for example, because of an appreciable risk that the respondent to the appeal would not be able to repay in the event of a successful appeal against a money judgment, or because the failure to grant a stay would have a serious deleterious effect on the applicant.

(7) In considering an application for a stay pending appeal, it would be impractical and even undesirable for the court to go deeply into the merits or strengths of the appeal, although the court must still form a preliminary view of these aspects.”

Discussion

Ground 3

32.Ground 3 is based on the supposed discrepancies between [157] and [158] of the Reasoned Judgment and paragraphs 2, 3, 14 and 15 of the Sealed Judgment.

33.For the reasons stated under the above section on the “Clarification” Application, I am not satisfied that Ground 3 is arguable.

Grounds 4 and 5

34.These grounds can be dealt with together.

35.To put them in proper context, I made the following chain of findings of fact in the Reasoned Judgment that impact upon the beneficial ownership of the Tanner Garden Property:

(1) Beginning from about 1988, Kingpower functioned as the Beijing Company’s Hong Kong branch office/window company ([17] and [18]).

(2) In the course of the co-operation with the Beijing Company, Kingpower took up the assignments of the Eternal Building Flats, with the assistance of an instalment loan of $1,770,000 from KWB, for the benefit of the Beijing Company ([20] and [21]).

(3) In about the late 1980’s or early 1990’s, the co-operation between the Beijing Company and Kingpower ceased ([22]).

(4) In place of Kingpower, CCT was set up on 5 October 1990 to be the Beijing Company’s new branch office/window company in Hong Kong ([21(2)], [25], [26]).

(5) As part of the arrangement made upon termination of the co-operation between Kingpower and the Beijing Company, Kingpower transferred the Eternal Building Flats into Mr Li’s name on 6 September 1990 free of any actually paid consideration, save that CCT as the Beijing Company’s replacement branch office/window company in Hong Kong shall repay the outstanding KWB loan and discharge the costs and expenses incidental to the transfers ([21(2)], [23]).

(6) It was CCT that repaid the KWB loan then outstanding on the Eternal Building Flats and discharged the costs and expenses incidental to the transfers by Kingpower to Mr Li ([24(6)).

(7) There was no evidence that Mr Li then had the personal means to afford these payments ([24(6)).

(8) Mr Li held the Eternal Building Flats on trust for CCT ([24]).

(9) CCT kept the net proceeds of $4,056,032.04 realised from the sales of the Eternal Building Flats in 1994. Four million of such proceeds were subsequently deployed by CCT to reduce the mortgage loan due in respect of the Provident Centre Flat, likewise acquired and held in the name of Mr Li on trust for CCT ([24(7), [58], [61], [64]).

(10) The Tanner Garden Flat were acquired and paid for by CCT ([68], [83]).

(11) The defendants’ case that Mr Li had provided consideration for the Tanner Garden Flat, which was transferred from CCT to Mr Li by a purported agreement for sale and purchase and an assignment respectively dated 10 August 2004 and 7 September 2004, with the use of the proceeds of sale of the Eternal Building Flats cannot stand ([105]-[111]).

(12) Mr Li had not paid any consideration for the Tanner Garden Flat ([112]).

(13) Mr Li held the Tanner Garden on a resulting trust for CCT ([113]).

(14) Mr Li could not subsequently validly pass to Mr Cong the beneficial title to the Tanner Garden Flat ([114]).

36.In gist, by Grounds 4 and 5, Mr Cong seeks to attack my findings at to the beneficial ownership of the Eternal Building Flats.

37.The principles for the appeal court to disturb the findings of fact of the trial judge are well settled. See, for instance, the Court of Appeal’s summary of the threshold for an appeal against findings of fact at [33] and [34] of Yu Man Fung Alice v Chiau Sing Chi Stephen [2021] HKCA 1456:

“Palpable errors, whether of law or of fact, must be identified, and they must be sufficiently material to undermine the conclusions of the trial judge. In the absence of material errors, an appeal court will interfere with the findings of fact made by a trial judge only if it is satisfied that his decision cannot reasonably be explained or justified. What matters is whether the decision is one that no reasonable judge could have reached. That the judges in the appeal court may have reached a different conclusion is not a ground for intervention.

The principles for appellate intervention apply also to inferences of fact drawn from primary facts (unless the finding is based purely on inferences or otherwise has nothing to do with the witnesses’ demeanour or the trial judge’s having received the evidence at first hand), and findings of mixed fact and law, or an issue on which the judge had to come to a judgmental conclusion after taking a number of factors into account. The correct approach in reviewing such a conclusion is to treat the judge’s decision with utmost respect, and refrain from interference unless satisfied that it proceeded upon some erroneous principle or was plainly wrong. It is similar to an appeal against an exercise of discretion.”

38.First, Mr Cong questions my acceptance of Ms Lai’s evidence that it was CCT that repaid the KWB mortgage loan secured by the Eternal Building Flats and discharged the costs and expenses occasioned by the transfers of such properties from Kingpower to Mr Li on 6 September 1990. In support, Mr Cong relies on the incorporation of CCT after 6 September 1990. What is being suggested is that CCT could not have made payments that accrued before its formation.

39.With respect, such reasoning displays a failure to appreciate the background against which CCT came into existence. CCT was formed or acquired with the backing of the Beijing Company to take over the business that the Beijing Company had formerly carried on in Hong Kong through the co-operation with Kingpower and the assets generated by such co-operation and business, including the Eternal Building Flats.

40.In any event, Ms Lai was not cross-examined on paragraph 49 of her witness statement, where she dealt with CCT’s payments in respect of the Eternal Building Flats.

41.Second, it is argued that Mr Li’s non-payment of the stated considerations for the Eternal Building Flats should, at most, give to Kingpower a lien against Mr Li for the unpaid purchaser price and should not deprive Mr Li of the beneficial ownership of the Eternal Building Flats.

42.With the greatest respect, this argument misleadingly treats the transfers of the Eternal Building Flats from Kingpower to Mr Li as arm-length commercial sales and purchases, which they were not. Though taking the form of a sale and purchase, the transfers of the Eternal Building Flats to Mr Li were in substance a return, or division, of assets upon termination of the co-operation between the Beijing Company and Kingpower. The concept of liens that may arise in a sale and purchase simply has no application.

43.For the above reasons, I am not persuaded that there is any palpable error (whether of law or fact) in the judgment against Mr Cong. It is thus inappropriate to, and I will not, stay the execution of such judgment pending Mr Cong’s appeal under CACV 472/2021.

44.Accordingly, I allow the “Clarification” Application and dismiss the Stay Application.

45.I also order on a nisi basis that Mr Cong shall pay CCT’s costs of and occasioned by the Applications to be taxed on a party and party basis, if not agreed, with certificate for counsel.

Mr K M Chong and Mr Alvin Chong, instructed by Liu, Chan & Choi, for the plaintiff

Mr Chu Ming Tung, instructed by C S Chan & Co, for the 1^st defendant

Mr Kwok Kam Kwan, instructed by C S Chan & Co, for the 2^nd defendant