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HCA006387/1983
JUDGEMENT ON APPLICATION BY ATTLEE INVESTMENTS LIMITED
FOR A STAY PENDING APPEAL TO THE COURT OF APPEAL
Mr. Flung, on behalf of Attlee Investments Limited, applied to me on 24th August 1983 for a stay on my order pending Appeal from my decision to the Court of Appeal. He informers me that his application for such Stay was supported by the Defendant Company.
The application for such Stay was opposed by Mr. Maxwell Lewis on behalf of the Plaintiff.
THE CONTENTIONS OF THE PARTIES
Mr. Fung contended that if I dial not grant a Stay his client's right of Appeal to the Court of Appeal would be rendered nugatory.
Mr. Maxwell Lewis contended that if I granted such Stay I would be giving to Attlee Investments Limited and to the Defendant Company precisely the same power to frustrate the execution of the Plaintiff's Judgement against the Defendant Company which I had just concluded should not be granted.
CONCLUSIONS
I have concluded that there are exceptional circumstances here which render it inappropriate for rte to grant a Stay pending Appeal, namely
| 1. |
I have concluded that Attlee Investments Limited did net have jurisdiction to obtain the ex-parte Order for Stay of Further Proceedings by the Plaintiff against the Defendant. I recognize that the correctness of my conclusion on that point is highly arguable: but having reached that conclusion, I do not consider it appropriate for me to grant a Stay pending Appeal which would leave such an Order in force to the detriment of the Plaintiff.
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| 2. |
There was material non-disclosure of the relationship between Attlee Investments Limited and the Defendant Company on the ex-parte application before Mr. Justice Garcia. Further, if there is any power to grant a Stay of the nature obtained ex-parte by Attlee Investments Limited, it is a discretionary power: after hearing the matter inter-partes I have concluded that discretion to grant such an Order should net be exercised in the circumstances referred to in the written Judgment delivered on 24th August 1983.
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| 3. |
If I granted a Stay pending Appeal the practical effect might well be to give to Attlee Investments Limited and to the Defendant Company the same power to frustrate the execution of the Plaintiff's judgement which I have concluded that they should not be given. If a Winding-up Petition were heard and granted before the present proceedings were determined on Appeal to the Court of Appeal, no further steps by way of execution of the Plaintiff's judgement could ever be taken thereafter. It is reasonable to infer from the fact that the Defendant Company is supporting the present proceedings by Attlee Investments Limited, a share-holder in the Defendant Company, that the Defendant Company would take such steps in relation to the Winding-up Petition as would prevent execution of the Plaintiff's Judgement against them.
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| 4. |
My refusal of a Stay pending Appeal does not preclude Attlee Investments Limited from applying forthwith to the Court of Appeal for a Stay on my Order pending Appeal : if the matter were dealt with in that way the Court of Appeal could then consider whether to grant an immediate or expedited hearing of the proposed substantive Appeal by Attlee Investments Limited, within such time scale and upon such terms as would both enable Attlee Investments Limited to exercise its rights of Appeal and protect the interests of the Plaintiff against the likely consequences if there were any significant delay before determination of the proposed Appeal. |
COSTS
This application for a Stay pending Appeal could have been made at the conclusion of the hearing of the inter-partes summons on 22nd August, 1983. I have ordered that the Plaintiff's costs of this application be paid by Attlee Investments Limited.
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(Desmond Keane) |
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Deputy Judge of High Court |
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Hong Kong |
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25th August, 1983. |
IN THE SUPREME COURT 0F HONG KONG
HIGH COURT
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| IN THE MATTER OF AN APPLICATION BY ATTLEE INVESTMENTS LIMITED |
Applicant
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FOR AN ORDER STAYING FURTHER PROCEEDINGS IN
HIGH COURT ACTION NUMBER 6387 OF 1983
BETWEEN
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LEE CHUEN TRADING as LEE CHUEN FURNITURE COMPANY |
Plaintiff |
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AND
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DUNWELL INVESTMENTS LIMITED |
Defendant |
Coram: Deputy Judge of the High Court Keane Q.C.
Date of Hearings: 22nd August 1983 Inter parties summons in Chambers. Judgement delivered with oral reasons.
24th August 1983 Application on behalf of the Applicant For Stay pending appeal to the Court of Appeal.
Written Judgment on the summons and Judgement with oral reasons on the Application For Stay pending Appeal delivered.
For the Applicant: Miss Hughes (Zimmern & Company) 22nd August 1983 Mr. D. Fung (instructed by Zimmern & Company) 24th August 1983.
For the Defendant: (In support of the application) Miss C. Chung (Fairbairn and Kwok).
For the Plaintiff: (In opposition to the application) Mr. C. Maxwell Lewis (instructed by Hampton Winter and Glynn).
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JUDGMENT
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1.PROCEDUAL BACKGROUND AND RELATED HISTORY
Between November 1982 and February 1983 the Plaintiff, who is in business as a furnishing and decorating contractor trading under the name Lee Chuen Furniture Company, carried out decoration works and supplied goods and materials for the Plaintiff at premises in Kowloon including the Casa Mia Restaurant at the Harbour City World Commercial Centre. The Plaintiff submitted invoices for that work and supply of goods and materials for a total sum of HK$182,490.00; the date of the last invoice was 7th February 1983. The Plaintiff received from the Defendant HK$100,000.00, but the balance of HK$82,490.00 was not paid.
On May 25th 1983 the Plaintiff issued a writ against the Defendant claiming that balance due of HK$82,490.00, and appropriate interest thereon.
On May 31st 1983 the solicitors acting for the Defendant returned an acknowledgment of service of that writ stating that the Defendant intended to contest the proceedings.
On June 24th 1983 the Plaintiff's solicitors applied by Summons for Judgment under Order 14. That Summons included a notice to the Defendant relating to its rights to apply for a stay of execution, and the Summons was supported by an affidavit sworn by the Plaintiff justifying the application for Order 14 Judgment.
No defence, and no affidavit in opposition to the Order 14 Summons was filed on behalf of the Defendant.
On July 20th 1983 the plaintiff obtained, by Order of Master Barrington Jones, Judgment under Order 14 against the Defendant for HK$82,490.00 together with interest thereon at the rate of 8% per annum from 25th May 1983 to 20th July 1983.
On 5th August 1983 the Plaintiff's solicitors delivered a Praecipe for a writ of fieri facias to execute the judgment, and a writ of fieri facias was issued accordingly.
The Defendant took no steps either to dispute the validity of the Order 14 Judgment, or to apply for a stay of execution.
On Saturday 13th August 1983 when the Bailiff was about to execute the writ of fieri facias at the Defendant's premises, Attlee Investments Limited issued a summons for a stay of all further proceedings in High Court Action No. 6387 of 1983 between the Plaintiff and the Defendant, on the ground that on the previous day Attlee Investments Limited had presented a Petition (No. 194 of 1983) for the winding-up of the Defendant Company.
The application was supported by an affidavit from a director of Attlee Investments Limited, sworn on 13th August 1983, stating that since March 1983 the Defendant had been indebted to Attlee Investments Limited in the sum of HK$1,025,440.55 pursuant to a written agreement dated 11th September 1983. The affidavit did not disclose the circumstances in which that agreement was made, and the agreement was not exhibited to the affidavit. The affidavit stated that in addition to the sum owed to Attlee Investments Limited and to the Plaintiff, the Defendant had other debts of HK$3,330,000 which it was unable to meet.
That application was heard ex parte before Mr. Justice Garcia on Saturday 13th August 1983. At that stage the summons and affidavit had not been filed. On the solicitors for Attlee Investments Limited undertakings as to damages, and as to filing of the summons and affidavit forthwith, Mr. Justice Garcia made the following order:
"It is ordered that all further proceedings in the Action commenced in the Supreme Court of Hong Kong, High Court under Plaint No. 6387 of 1983 against Dunwell Investments Limited be stayed until disposal of the said Winding-up Petition Number 194 of 1983. "
On 15th August 1933 the Solicitors for Attlee Investments Limited issued and served upon the Plaintiff and Defendant a summons for the following orders:
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1.
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That all further proceedings in this action be stayed until the conclusion of the hearing of the Petition hereinafter mentioned or until further order on the grounds that a petition for a compulsory winding-up of the Defendant Company was presented on 12th August 1983 but no winding-up Order has yet been made herein.
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2.
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That the costs of this application be costs of this action. " |
2.THE CONTENTIONS ADVANCED ON THE INTER PARTIES APPLICATION
That summons was heard before me on 22nd August 1983. Miss Hughes for Attlee Investments Limited submitted that the Stay granted by Mr. Justice Garcia would have the effect of preventing the Plaintiff from taking any further steps to execute the judgment against the Defendant, that the ordering of such a stay was within the powers granted by the Companies Ordinance (Cap.32) Section 181, and that the only appropriate exercise of my discretion under Section 181 would be to make such order on the summons as would leave the stay granted by Mr. Justice Garcia in force until the conclusion of the hearing of the Winding-up petition. Miss Hughes submitted that if the writ of fieri facias were executed that would improperly prejudice the position of Attlee Investments Limited as Petitioning Creditors, and any other creditors to the winding-up proceedings. She submitted that it was not unreasonable for the Plaintiffs to be required to wait for the short period of say three weeks until the Winding-up Petition would be heard, and that if the Defendant Company were to be wound up it was appropriate that the Plaintiff should take its place as a creditor sharing equally with any other unsecured creditors in any assets realised on' winding-up.
Miss Chung for the Defendant adopted the submissions made by Miss Hughes, and added that if the writ of fieri facias were executed the goods of the Defendant might be sold under the writ at a low value, to the prejudice of the Defendant and its creditors generally.
Mr. Maxwell Lewis for the Plaintiff opposed the application by Attlee Investments Limited on grounds which can be summarised as follows:
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1.
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He submitted that there was no jurisdiction for Attlee Investments Limited to apply for or, for the court to grant a stay : the only provision in the rules of the Supreme Court empowering a stay of execution is Order 47 Rule 1, and that provision can only be relied upon by a judgment debtor or other party liable to execution, and accordingly cannot avail a stranger to the previous proceedings such as Attlee Investments Limited. He further submitted that Section 181 of the Companies Ordinance (Cap.32) only empowers a stay to be granted
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"(a) |
when any action or proceeding against the company is pending in any court ....... "
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or
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"(b) |
where any other action or proceeding is pending against the company ....... "
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and he submitted that those words were not apt to include steps to execute a judgment already obtained which a party is entitled to take without leave of the court, such as execution by writ of fieri facias.
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2.
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Alternatively if there was jurisdiction, he submitted that having regard to the following circumstances it would not be appropriate to exercise discretion to grant or continue an order staying execution by the Plaintiff:
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(a) |
The Plaintiff has already obtained judgment.
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(b) |
The Plaintiff has incurred time and expense in obtaining that judgment, and should not be deprived of the fruits of that judgment at this very late stage.
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(c) |
The Plaintiff has been kept out of his money unjustifiably, and for an appreciate period of time. The sum claimed is modest in comparison with the debt claimed by Attlee Investments Limited, and the other potential creditors, none of whom have obtained judgement, but is a significant burden of unmet debt for a small trader such as the Plaintiff.
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(d) |
There is reason to doubt the bona fides of Attlee Investments Limited in presenting this winding-up Petition, and this application for a stay, and the bona fides of the Defendant in supporting this application by Attlee Investments Limited. |
3.THE JURISDICTION POINTS
At the hearing on 22nd August 1983 it became clear that the jurisdiction points were difficult ones which could not properly be resolved without fuller argument, and likelihood of adjournment and reserved judgment, and the matter was clearly one in which an immediate decision was desirable. Accordingly, with the consent of the parties, I gave immediate judgment on the ground that even if there were jurisdiction to grant a stay on this application, it was a discretionary jurisdiction and one which in the circumstances should not be exercised in favour of granting or continuing a stay. It was agreed that if an appeal were contemplated a written judgement would be requested. I have now been requested to provide a written judgement, and to grant a stay pending appeal to the Court of Appeal.
In these circumstances I think it is desirable to deal with the jurisdiction points in this written judgement, because they are directly relevant to the application for stay pending appeal.
In the light of the authorities which I have been able to consider, and which may be in complete, I have come to the conclusion that there is no jurisdiction to grant on the application of Attlee Investments Limited a stay which would prevent the Plaintiff from executing its writ of fieri facias against the Defendant. I have reached that conclusion for the following reasons:
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(1)
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R.S.C. Order 47, Rule 1, makes express provision for application for stay of execution and defines those who are entitled to make such application in terms which do not extend to strangers to the proceedings. Therefore unless there is some express legislative provision to be found outside the Supreme Court Ordinance (Cap,4) and Rules thereunder, it would be wrong for the court to assume any inherent jurisdiction to order such a stay on the application of a stranger to the proceedings.
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Section 181 of Cap. 32 makes express provision for the circumstances in which a petitioning creditor such as Attlee Investments Limited may apply for a stay after presentation of a winding-up petition and before a winding-up order is made. Section 181 only applies
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"where any action or proceeding against the company is pending in any Court "
"when any other action or proceeding is pending against the company "
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(see Section 181(b)) and only empowers a stay of "proceeding" (see Section 181(a) and (b)).
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(3)
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So far as I am aware there is no Hong Kong Authority directly in point as to whether processes of execution such as execution of a writ of fieri facias constitute an "action" or a "proceeding" for the purposes of section 181. There are however English authorities both on the meaning of the terms "action" and "proceeding" and on the interpretation of an English provision which corresponds to Cap. 32 Section 181, namely the Companies Act 1948 Section 226. The following authorities support the conclusion that the terms "any action or proceeding" do not properly include execution, and, a fortiori, execution by of fieri facias which is obtainable without leave:
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(a) |
The authorities cited in Stroud's Judicial Dictionary 4th Edition Volume 1 at page 45 under the heading "Action" and Volume 4 at page 2124 under the heading "proceeding" and in particular T.C. Trustees v. J.S. Darwin (Successors) (1969 2 Q.B. 295 Per Winn L.J.).
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(b) |
In v. Bellaglade Limited 1977 1 AER 319 at page 320 J (Per Oliver J)
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Herbert Berry Associates Limited v. Inland Revenue Commissioner (1977 1. WLR 1437 H.L. at page 1438 B. (Headnote) and at page 1466 A-C Per Lord Simon and page 1448 A-F per Lord Russell of Killowen.)
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The difficulty which arises from those authorities is that a distinction is drawn between the proper interpretation of the terms "action or proceeding", and the way they appear to have been interpreted in practice without Parliamentary intervention (see in particular the passages cited in the Herbert Berry Case).
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The only authority directly to the contrary cited is Re Perkins (1878 7 Ch. D. 371.)
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But in my judgment the better view is that even if the term "action or proceeding" could include some processes of execution, or even the process of obtaining a writ of fieri facias, once as in the present cases a writ of fieri facias has been obtained, the ministerial execution of that writ by the bailiff does not constitute any "action" or "proceeding" and, a fortiori, does not constitute any "pending" action or proceeding.
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(4)
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The Sections of Cap. 32 which immediately follow Section 181, namely Sections 182 and 183 which relate only to the period after a winding-up by the court has commenced expressly make provision concerning "disposition of property" (Section 182) and "distress" and "execution" (Section 183); the difference between the terms used in Section 181, "action" and "proceeding" and the terms used in sections 182 and 183 may reasonably be presumed to have been intentional leading to the inference that if the Legislature had intended processes of execution to the subject to stay at the stage of events governed by Section 181 the Legislature would have included reference to "execution" in Section 181.
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For these reasons, I conclude that Attlee Investments Limited had no jurisdiction to apply for a stay in relation to the present stage of execution by the plaintiff against the Defendant.
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If my analysis of the jurisdiction point is correct, it also follows that any order staying "further proceedings" would be in effective, because the ministerial execution by the bailiff of the writ of fieri facias which has been issued does not involve any "further proceedings". |
4.DISCRETION
Even if there were jurisdiction to grant a stay on the application of Attlee Investments Limited to the effect that the Plaintiff or the Bailiff be restrained from carrying out the steps ordered in the writ of fieri facias, I am firmly of the view that the discretionary power of the Court to grant a stay should not be exercised here.
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(1)
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In addition to the affidavit and affirmation evidence on the Court files, it was established by production of share registers relating to the Defendant Company that Attlee Investments Limited was at all material times a share holder in the Defendant Company. It also emerged that the agreement between Attlee Investments Limited and the Defendant Company on which Attlee Investments Limited claimed entitlement to HK$1,025,440.25 was part of an internal financing arrangement between companies with interrelated share holdings. These matters were not disclosed on the ex parte application before Mr. Justice Garcia.
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Having regard to the procedural history I have doubts as to whether the Winding-up petition is a bona fide petition, or a mere device intended to delay payment to the Plaintiff; but even assuming, as I think I must in advance of determination of the Winding-up Petition, that the Petition is bona fide, this application for a stay is made at an unreasonably late stage of events. As a shareholder in the Defendant Company Attlee Investments Limited could and should have intervened much earlier if acting reasonably.
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If the Plaintiff had not already obtained judgment, there would be some evidential presumption in favour of a stay once a bona fide Winding-up Petition had been presented. (See for example Re Dynamics Corporation of America 1973 1 WLR 63 CA). Where however a judgment has already been obtained before presentation of the Winding-up Petition different considerations apply (see re Herbert Berry 1977 1 WLR 1437 HL at page 1444 G-H and Cases there cited). In the present case the plaintiff had not only obtained a judgment, but a writ directing execution of that judgment before the Winding-up Petition was present, and it would not be reasonable in the circumstances to prevent the Plaintiff from taking the benefit of those established rights.
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No explanation has been given as to why, given the order of magnitude of the financial arrangements between Attlee Investments and the Defendant, and between the Defendant and the other parties and companies referred to in the loan agreement and the affidavit of Mr. Shapro, some arrangement cannot be made to pay to the plaintiff the seeingly manageable sum due to the Plaintiff so as to avoid the process of sale of the Defendant's assets under the writ of fieri facias.
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There is no substantial merit in this application for a stay. |
5.JUDGMENT
For the reasons given above I have directed the order be made to the following effect.
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That the Order of the Honourable Mr. Justice Garcia made ex-parte on 13th August 1983 be set aside.
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That there be no further Order on the present summons (save as to costs).
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That the Applicant Attlee Investments Limited do pay to the Plaintiff the Plaintiff's costs of and incidental to this summons, such costs to be taxed if not agreed. |
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(Desmond Keane) |
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Deputy Judge
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High Court, Hong Kong |
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24th August, 1983. |
Representation:
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Miss Hughes (Zimmern & Company) 22nd August 1983 Mr. D. Fung (instructed by Zimmern & Company) 24th August 1983.
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| For the Defendant : |
(In support of the application) Miss C. Chung (Fairbairn and Kwok).
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| For the Plaintiff : |
(In opposition to the application) |
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Mr. C. Maxwell Lewis (instructed by Hampton Winter and Glynn) |
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