Nobleseed Partners Ltd v. Zhang Qian Qian

HCA 706/2020

[2025] HKCFI 5633

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 706 OF 2020

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BETWEEN

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DECISION

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A. BACKGROUND

1.By summons dated 17 March 2025 (“Summons”), the Defendant seeks a stay of execution of my judgment dated 20 February 2025 in [2025] HKCFI 753 (“Judgment”) pending determination of her appeal.

2.This decision should be read in conjunction with the Judgment, which sets out the relevant facts. Unless otherwise specified, the definitions and abbreviations in the Judgment are adopted.

B. LEGAL PRINCIPLES ON STAY OF EXECUTION

3.The principles applicable to an application for a stay of execution pending appeal are not in dispute and they have been set out in Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 at §§6-10 by Ma J (as he then was):

(1) An appeal does not operate as a stay of execution of proceedings.

(2) In order to justify a stay of execution, the appellant must show that good reasons exist. Relevant factors include whether the absence or existence of a stay would render an appeal nugatory, and the merits of the appeal.

(3) The existence of an arguable appeal is the minimum requirement before the court will even consider granting a stay. The existence of a strong appeal would usually by itself enable a stay to be granted, because this would constitute a good reason for a stay. But where there only exists an arguable appeal, the appellant would need to provide the court with additional reasons as to why a stay is justified, for example, that the appeal would be rendered nugatory. It is impractical and even undesirable to go deeply into the merits and strengths of the appeal, but the court must form a preliminary view of these aspects.

(4) As to whether an appeal would be rendered nugatory, the court must first have regard to the nature of the order which is the subject matter of the appeal. Evidence will be required as to why the appeal would be rendered nugatory.

(5) The position of the respondent should not be forgotten. It is always relevant to consider the prejudice that would be caused to the respondent in the event that a stay is granted, and if necessary, to impose conditions so as to minimise the prejudice caused to him.

(6) Ultimately, the court embarks on a balancing exercise, with the starting point that the successful party is not to be deprived of the fruits of his success.

4.While the existence of a strong appeal would tend to lead the court to exercise its discretion in favour of granting a stay, the threshold is a high one. The court has held that for there to be a “strong appeal” such as would justify the grant of a stay without more, the situation must be one which would lead the court to conclude that something has grievously gone wrong with the process of law in the court below, or that the appellant is “almost bound to succeed”. Absent such a case, something more needs to be demonstrated: John Joseph Mc Gee v Nold (HK) Limited & Ors [2024] HKCA 354 at §30 (Barma JA).

C. THE DEFENDANT’S CONTENTIONS

5.In support of the Summons, the Defendant contends that (i) her grounds of appeal have strong likelihood of success; and (ii) the appeal would be rendered nugatory without a stay. Specifically, her grounds of appeal are as follows:

(1) The court erred in law in finding in favour of the Plaintiff’s unjust enrichment claim whilst dismissing the Plaintiff’s breach of contract claim (“Ground 1”).

(2) The court erred in law in ruling that the Defendant should not be allowed to run the argument at trial that the failure of consideration was not “total”. Further, the court erred in law and in fact in finding that there had been total failure of consideration in light of the evidence (“Ground 2”).

D. DISCUSSION

D1. Merits of the appeal

6.It is not necessary or appropriate to embark on a detailed discussion of the merits of the appeal. It suffices for me to express some preliminary views on the merits as the present application should not be taken as a dry run of the appeal proper.

7.Under Ground 1, Mr Simon So (with Mr Herman Ho) for the Defendant submits that it is reasonably arguable that the Court of Appeal would disagree with my conclusion in Judgment §40(3) that the key inquiry is to ascertain whether the counterparty has acquired an unconditional right to earn those payments. It is contended that there are authorities showing that where a payment is made pursuant to a subsisting contractual obligation, the payee should not be allowed to mount a claim in restitution since the parties’ relationship should be governed by the contract.

8.In this regard, the Defendant argues that Mann v Paterson Constructions Pty Ltd [2019] HCA 32 cited in Judgment §40(2) is distinguishable on two grounds: (i) it concerns a severable contract where partial performance was possible, whereas the Service Agreement in the present case is not; and (ii) the test in Mann was whether the “performing party” had an accrued right to payment, and the Defendant is the “receiving party” instead of the “performing party”.

9.Mr So also relies heavily on the analysis of the Court of Appeal in Ho Wai Kwong v Ho Kam Chui [2025] 1 HKLRD 1280, which was handed down shortly before delivery of the Judgment in the present case. At §68, the Court of Appeal held that Shanghai Tongji recognised that notwithstanding a contract has since been terminated for breach, the existence of rights and obligations accrued under the contract prior to its termination may nevertheless exclude a claim in restitution.

10.In my view, insofar as Ground 1 is based on the Defendant’s argument at trial that the unjust enrichment claim must fail because the Shares were transferred pursuant to a subsisting contract, I have considered those submissions and rejected them for the reasons given in Judgment §§38-41. Ultimately, it is common ground that no subsisting contract remained at the time of trial.

11.As regards the Defendant’s reliance on Ho Wai Kwong, I am not persuaded that the Court of Appeal’s reasoning takes the Defendant any further:

(1) Ho Wai Kwong concerns, inter alia, a claim on the basis of total failure of consideration where a defendant failed to pay any part of the price under a sale and purchase agreement for a shop: §25. The Court of Appeal held that the mother, having conveyed the property, had an accrued right to the price enforceable by an action in debt. Accordingly, the parties’ relationship is governed by contract, and there is no need or scope to bring in the law of restitution: §62.

(2) Following a detailed survey of authorities, G Lam JA observed that – citing Shanghai Tongji – “notwithstanding a contract has since been terminated for breach, the existence of rights and obligations accrued under the contract prior to its termination may nevertheless exclude a claim in restitution”: §68 (emphasis added). In other words, the focus is on whether the relevant party’s rights under the contract have accrued prior to its termination.

(3) At §70, G Lam JA expressly approved the holding in Mann (as summarised in Goff & Jones §3-15) that it is essential to distinguish between “benefits in respect of which no unconditional right to payment under the contract has accrued, and those in respect of which such a right has accrued”. This is consistent with the analysis in §40(2) of the Judgment, which considered the same passage in Goff & Jones.

(4) Further, at §71, G Lam JA reiterated that the mother in that case had “fully performed her obligations prior to any purported termination of the SPA and earned her contractual right to the price”. The situation in the present case is however different. On the facts found in the Judgment, the Plaintiff is unable to prove that the Defendant was in breach of the Service Agreement and hence, unlike what happened in Ho Wai Kwong, the Plaintiff in the present case could not establish that it has acquired any contractual right to the price of the agreement.: Judgment §§25-35. Having ruled that there was no breach on the Defendant’s part, the remaining question was whether the Plaintiff was entitled to unjust enrichment on the basis of total failure of consideration.

(5) As discussed above, the Defendant seeks to rely on a distinction between a several contract (as in Mann) and the Service Agreement in the present case which provides for a “singular and an entire payment obligation” on the part of the Plaintiff. According to the Court of Appeal’s reasoning in Ho Wai Kwong, the overriding question is whether the claimant for restitution “fully performed her obligations prior to any purported termination of [the agreement] and earned her contractual right to the price”. As analysed in the Judgment, the Plaintiff in this case has failed to establish such accrued contractual right prior to termination. Hence, there is no basis to say that the Plaintiff’s right to claim restitution has been excluded.

(6) Moreover, the Defendant’s argument that Mann is distinguishable because the Defendant here is the “receiving party” instead of the “performing party” also does not assist the Defendant in view of the analysis stated above.

12.Accordingly, I am not satisfied that Ground 1 amounts to a “strong” ground of appeal. Even assuming for present purposes that there is room for further developments of the legal principles regarding the dichotomy between a party’s accrued contractual right before termination of the contract and its right to claim restitution, Ground 1 is still largely fact-sensitive. In the circumstances, at most, it could only be said that Ground 1 is arguable and thus for the purpose of the stay application, it is still necessary for the Defendant to show that the intended appeal would be rendered nugatory in the absence of a stay.

13.Ground 2 complains that the court erred in holding that it was not open for the Defendant to run the argument that there was no “total” failure of consideration. Mr So for the Defendant submits as follows:

(1) The Defendant’s position that she had no obligation to perform the Service Agreement is not contradictory to her position that she in fact took some steps in the performance of the Service Agreement.

(2) The Plaintiff must have appreciated that the Defendant’s position was that she had performed part of the Service Agreement, hence there was no total failure of consideration.

(3) The court erred in finding that the Defendant’s witness statements did not make reference to any of the work she has alleged carried out.

(4) The court erred in ruling that even accepting the Defendant’s evidence, there was no counter-performance emanating from the Defendant which provided consideration for the transfer of the Shares.

14.I am not persuaded this ground carries a strong prospect of success. At trial, I specifically raised the point with Mr So, who accepted that he could not advance any argument beyond his pleaded case: see Judgment §42. Further, at §43 of the Judgment, I concluded on the facts that there is insufficient cogent evidence to support that the Defendant performed any part of the contractual obligations. In the circumstances, Ground 2 could hardly add any dimension or weight to the Defendant’s intended appeal

D2. Whether the appeal nugatory without a stay

15.An appeal may be rendered nugatory where there is 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 where the failure to grant a stay would have a serious deleterious effect on the applicant: Fung Shing Chung v Choi King Hung [2024] HKCA 1021 at §20(6) (Cheung JA).

16.The Defendant contends that the Plaintiff is likely to be either a shell company and/or impecunious, and has no business activities currently. In particular, the Defendant relies on the judgment in [2021] HKCFI 1534, whereby a winding-up order was made against NFG, which was the assignor of chose in action in respect of this action. However, I do not consider that the financial standing of NFG – a separate legal entity – has any bearing on the Defendant’s ability to repay.

17.The Defendant also relies on some prior judicial findings concerning the credibility of the Plaintiff’s sole director. Nonetheless, this factor per se does not provide meaningful insight in relation to the Plaintiff’s financial position.

18.I have not lost sight of the fact that the Plaintiff has elected not to file any evidence in opposition. There is also no positive evidence before me adduced by the Plaintiff regarding its financial standing. That said, it is important to bear in mind that the burden is on the Defendant to demonstrate that the appeal would be rendered nugatory without a stay. In view of the lack of information on the Plaintiff’s financial position, I am not satisfied that the Defendant has discharged such burden.

E. Disposition

19.For these reasons, the Defendant’s Summons should be dismissed and costs should follow the event. I have considered the Plaintiff’s Statement of Costs and also the Defendant’s objections to various items. I make a costs order that the costs of and occasioned by the Summons be paid forthwith by the Defendant to the Plaintiff, summarily assessed at HK$35,000.

Mr Wong Hok Yan, instructed by Patrick Mak & Tse, for the Plaintiff

Mr Simon So and Mr Herman Ho, instructed by Francis Kong & Co, for the Defendant