Cellplus (HK) Ltd and Another v. Team Products International Inc and Others

CACV 231/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 231 OF 2005

(ON APPEAL FROM HCA NO. 1034 OF 2004 AND

HCA NO. 786 OF 2004 (CONSOLIDATED))

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HCA 1034/2004

BETWEEN

HCA 786/2004

BETWEEN

(Consolidated by Order of Master de Souza dated 12 November 2004)

Before:  Hon Yuen and Tang JJA in Court

Date of Hearing:  1 September 2005

Date of Judgment:  12 September 2005

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J U D G M E N T

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Hon Tang JA (giving the judgment of the Court):

1.CellPlus is the 1^st plaintiff in HCA 1034 of 2004.  On 13 July 2005, Reyes J ordered Team Products, the 1^st defendant in HCA 1034 of 2004 to pay the sum of US$1,650,527.43 to CellPlus.

2.On 3 August 2005, Rogers VP granted a stay of execution of the judgment of Reyes J pending Team Products’ appeal.  This is CellPlus’ appeal from Rogers VP.

3.The background can be taken from Reyes J’s judgment at  para. 8:

“

8.

Typically, Team Products ordered goods (in particular, pest repellers) from CellPlus.  CellPlus would cause corresponding orders for the goods to be placed with Envirotec-PRC.  In due course Envirotec-PRC would ship the finished goods from its factory to Team Products.  Upon receipt of the goods, Team Products on-sold them to third parties, such as Wal-Mart.”

Shenzhen Envirotec is the 3^rd defendant in HCA 1034 of 2004 and the plaintiff in HCA 786 of 2004, which actions have been consolidated on 12 November 2004.  An earlier application for interim payment by Shenzhen Envirotec against CellPlus has failed.

4.It was against such background that Rogers VP ordered a stay.

5.This is what Rogers VP said in his extemporary judgment:

“	2.	The defence is that the defendant was led to believe that the 1st plaintiff was itself a manufacturer and, indeed, even reading the plaintiffs’ case, it seems to me that there may be something in that because when one read between the lines, even of the statement of claim, I begin to feel that there is something in that and certainly in the other defendants’ defence, there is something in that.
	3.	The other thing is that, subject to any claims which the plaintiffs have against the 2nd, 3rd and 4th defendants, a lot of the money that is being claimed by the 1st plaintiff will, in fact, if the 1st plaintiff’s claims fail against the 2nd, 3rd and 4th defendants, have to be paid over to the 2nd, 3rd and 4th defendants, or find its way there, because they produced the goods which were then sold to the 1st plaintiff, which were then sold on to the 1st defendant.
	4.	So in my view, given the involved nature of this case, I think that there should be a stay of execution.  I am not minded to order a payment into Court in this case.  I think there should simply be a stay of execution.”

6.The principles governing stay of execution pending appeal are well established, and can conveniently be found in the judgment of Ma J (as he then was) in Wenden Engineering Service Company Limited v Lee Shing Yue Construction Company Limited, unreported, HCCT 90 of 1999, 17 July 2002.  On the basis of such principles, Mr Coleman, who appeared for Team Products, here as well as below, submitted that we should read para. 2 of the decision of Rogers VP as saying that there was a strong likelihood that the appeal would succeed.  We do not believe that to be right.  Mr Coleman was unable to direct our attention to any of the pleadings referred to in para. 2, which are not clear or concise, which might support that view. 

7.As for the observation that “a lot of money that is claimed by the 1^st plaintiff will, in fact, if the 1^st plaintiff’s claim fails against the 2^nd, 3^rd and 4^th defendants, have to be paid over to the 2^nd, 3^rd and 4^th defendants, or find its way there”, Mr Coleman accepted he did not hold any brief for these defendants.  Nor should the fact that if CellPlus’ claim against these defendants fails, CellPlus would have to pay substantial sums to them, affect Team Products’ obligation to pay CellPlus.

8.In the circumstances, we are of the view we are required to consider whether in all the circumstances a stay should be granted.  Having regard to the view expressed by Rogers VP in para. 2 of his decision which we have quoted above, we proceed on the basis that Team Products has an arguable appeal. 

9.We believe the order we should make is to order a stay pending appeal provided that the judgment sum is paid into court to abide the outcome of the appeal or further order.  We make this order because we are satisfied on the evidence before us that CellPlus has not any substantial operation in Hong Kong and that the 2^nd plaintiff who owns and controls the 1^st plaintiff is a resident of New York.  We are satisfied that recovery of the judgment sum, if paid over to CellPlus, may be problematical.  There is new evidence before us from CellPlus which throws doubt on the financial situation of Team Products.  It is clear that Team Products is in the course of a major reorganization but there is no evidence that Team Products is in any imminent financial difficulty.  Nor is there evidence that Team Products would not be in position to make payment into court.  So we will order accordingly. 

10.We also make an order nisi that the costs of this application be in the cause of the appeal.

Ms June Wee, instructed by Messrs Herbert Smith, for the 1^st Plaintiff in HCA 1034 of 2004/Appellant

Mr Russell Coleman, instructed by Messrs Miller Peart, for the 1^st Defendant in HCA 1034 of 2004/Respondent