Read the full judgment text of CACV 000076/1990 on BabelCite. This Court of Appeal judgment was delivered on 15 May 1990 before Hunter JA.
Civil procedure – interlocutory injunction – stay pending appeal – whether appeal would be rendered nugatory – share mortgage – equity of redemption – assignment of mortgage – priority of competing equities – whether mortgagor's right to redeem is in personam against the individual mortgagee – Polini v Gray principle – undertaking in damages. The dispute concerned 110 million shares in Jademan (Holdings) Limited, which James Capel (Far East) Limited held as mortgagee by way of memorandum of deposit to secure an indebtedness of Tony Wong (1st Defendant) of over HK$90 million, reduced to HK$55 million by August 1989. On the evening of 19 April 1990, James Capel accepted a written offer from Tony Zie (9th Defendant) to assign the mortgage in consideration of Zie paying HK$55 million qua guarantor to discharge his obligation as guarantor of a co-debtor, Mr Lam, to James Capel. The agreement became unconditional between 9 and 10am on 20 April 1990 with the assent of the HongKong Bank. At about 1pm that same day, Wong tendered a banker's draft for over HK$55 million, funded by his backer Arbus, to redeem the mortgage; the tender was rejected and James Capel executed the assignment in favour of Zie. On 7 May 1990, Mortimer J dismissed Wong's application for an injunction restraining James Capel from executing the assignment. Wong appealed. Held: appeal allowed; interim injunction granted. Applying the principle in Polini v Gray [1879] 12 Ch 438, where Cotton LJ stated that if a reasonable ground of appeal exists and denial of relief would render the appeal nugatory, the court should interfere to suspend the right of the party who has established their rights. The court considered three issues identified by the judge below: (1) whether Wong has an accrued right to redeem by his tender of 20 April; (2) whether there was a valid agreement to assign the mortgage between James Capel and Zie made before the tender; and (3) whether Wong's right to redeem is affected by that agreement. The court was not impressed by the arguability of the second issue on the facts, but found the two points of law, issues (1) and (3), to be arguable. As to issue (1), the court held it was arguable that Wong's tender gave him an accrued right of redemption enforceable against James Capel, given conceptual difficulties with treating the equity of redemption as a floating remedy in rem rather than a right in personam attaching against the individual mortgagee. As to issue (3), the court held the question of priority between Wong's equity of redemption and Zie's equity arising from the oral agreement was arguable both ways. Because denying relief would extinguish both arguments and render the appeal nugatory, and there were reasonable grounds of appeal, interim relief was warranted. On the balance of convenience, the court found the risk to James Capel's security insignificant given the control premium attached to the share parcel and the clamour to redeem, so only an undertaking in damages was required. James Capel was restrained from executing any assignment of the shares in favour of Zie pending the determination of Wong's appeal, with the appeal to be heard on either Friday 29 June or Friday 6 July 1990.
Legal issues: Whether interim relief should be granted to prevent the appeal from being rendered nugatory · Whether Wong's tender arguably gave him an accrued right of redemption enforceable against James Capel · Whether there was a valid agreement to assign the mortgage between James Capel and Tony Zie made before the tender · Priority between Wong's equity of redemption and Zie's equity from the oral assignment agreement
Outcome: Appeal allowed; interim injunction granted restraining James Capel from executing any assignment of the 110 million Jademan shares in favour of Tony Zie pending the determination of Wong's appeal.