Dla Piper Hong Kong (A Firm) v. China Property Development (Holdings) Ltd and Another

CACV 142/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 142 OF 2009

(ON APPEAL FROM HCMP NO. 2377 OF 2008)

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Before: Hon Tang VP and Cheung JA in Court

Date of Hearing: 22 January 2010

Date of Decision: 22 January 2010

Date of Reasons for Decision: 25 January 2010

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REASONS FOR DECISION

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Hon Tang VP (giving the reasons for decision of the Court):

1.On 22 January 2010, we allowed China Property Development (Holdings) Limited’s (“CPDH”) appeal and set aside Fung J’s order of 26 May 2009.  Essentially, our decision was that Best China Holdings Limited (“Best China”) had no claim against DLA Piper Hong Kong (a firm) (“DLA”), the stakeholder, in respect of the stakeholder agreement.

2.Best China wishes to appeal to the Court of Final Appeal against our judgment, reasons for which were handed down on 19 January 2010.  Pending its application for leave to appeal to the Court of Final Appeal, Best China applied for a stay of execution.  The background of appeal concerns the sum of US$6,400,182.75 (being the deposit of 10%) plus interest which DLA has paid into court pursuant to Fung J’s order of 26 May 2009.  Since the money was in court pursuant to the order, and the order has been set aside, the money was liable to be paid out to DLA.

3.The principles governing a stay are those stated by Ma J (as he then was) in Star Play Development Ltd. v. Bess Fashion Management Co. Ltd. HCA 4726/2001 (unreported, dated 7 June 2002).  There is a minimum requirement of an arguable appeal.  Here we have first to consider whether it is arguable leave to appeal would be granted.

4.Mr Tommy Lo, for Best China, submitted that our judgment was a final judgment and that Best China is entitled to leave to appeal as of right.  The appeal was heard before two justices of appeal on the basis that it was an interlocutory appeal and there was no submission to the contrary at the time.  Mr Lo submitted that nevertheless the point is valid.  With respect, we do not agree.  Quite obviously, the interpleader summons, whether it failed or succeeded, would not determine the whole action which is the test.  See Sam Woo Bore Pile Foundation Ltd v. China Overseas Foundation Engineering Ltd, FAMV 21/2007 (unreported, dated 8 June 2007).  Although as was explained in Shell Hong Kong Ltd v. Yeung Wai Man Kiu Yip Co. Ltd [2003] 6 HKCFAR 222, a judgment in some circumstances may be final even if it does not finally determined the whole action, for example, a judgment given upon a trial of a preliminary issue, but this is not such a case.

5.Moreover, although the point was not arguable before us, and we do not decide it, we doubt whether Best China’s claim could be regarded as a liquidated claim.  Mr Lo accepted that any claim which Best China might have against CPDH under the Sale and Purchase Agreement (“SPA”), though subject to a ceiling of 10% of the purchase price, is not a liquidated claim.  In any event that claim is irrelevant for the purpose of the interpleader summons.  So far as Best China’s supposed claim against DLA is concerned, that also, is not a claim for a liquidated sum.  It was at best a claim under the stakeholder agreement, that the amount stakeheld should not to be paid out to CPDH. 

6.Mr Lo argued in the alternative that if our judgment was not final judgment, Best China might be granted leave on the basis that a point of great general or public importance is involved.  With respect, we could see none.  Nor had Mr Lo identified any.  Mr Lo essentially relied on clause 5 which provides that the stakeholder might pay CPDH or Best China in the event either it has obtained a final order of the court to the effect, that was entitled to payment from the stakeheld amount.  Clause 6 of the stakeholder agreement made no reference to it.  We believe it is clear that a judgment which came after the expiry of the guarantee period is irrelevant for the purpose of clause 6.  We would not repeat what we have said in our judgment.  In any event, this is not a point of great general or public importance. 

7.Mr Lo also sought to rely on an argument not raised before Fung J nor before us in the appeal, involving that clause 3.6 of the SPA which provides, inter alia, that:

“3.6   … If there is no dispute by [CPDH] in relation to the alleged Phase I Contingent Liabilities and/or Phase I Contingent Tax Liabilities, [CPDH] and [Best China] shall, on or before the expiry of [CPDH]'s Guarantee Period, issue a notice to [DLA] signed by both parties, stating the relevant amount of Phase I Contingent Liabilities and Phase I Contingent Tax Liabilities as the basis of making deduction under clause 3.3.3. …”

8.Mr Lo submitted that clause 3.6 only applies to a case where there was no dispute over the quantum of the contingent liabilities and not when liability was completely denied.  With respect, we find this argument difficult.  Mr Lo appeared to be submitting that since CPDH denied that it was liable at all clause 3.6 had no application.  And that since clause 3.6 had no application, somehow clause 6 of the stakeholding agreement also had no application.  We do not believe this is a valid argument and in any event it does not involve a point of great general or public importance.

9.Mr Lo also submitted that leave might be granted on the “or otherwise” basis.  With respect, we can see no basis for this Court to grant leave on the “or otherwise” basis.  Bill Chao Keh Lung v Don Xia [2004] 7 HKCFAR 260. 

10.For the above reasons, and on the basis that leave to appeal to the Court of Final Appeal would not be granted, there was no basis for us to grant a stay of execution.

11.Mr Lo mentioned that although no application to us for leave to appeal to the Court of Final Appeal had yet been made, and he could not apply for leave to appeal to the Court of Final Appeal under section 24(3) of the Hong Kong Court of Final Appeal Ordinance, Cap. 484.  Best China might apply to the Court of Final Appeal for leave to appeal under its inherent jurisdiction.  He asked for a stay pending the making of such an application.  We refuse a stay because we believe it is highly unlikely that the Court of Final Appeal would see fit to grant leave to appeal on such basis.  It is unfortunate that no application for leave to appeal to the Court of Appeal had been made.  If it had been made, although the hearing was 30 minutes hearing at 9:30 we would have been disposed to deal with it at once.  In that case, of course, an application for leave to appeal to the Court of Final Appeal might be made under section 24(3) upon our refusing leave.  In which event, we could then deal with the question whether this was a suitable case for a stay, pending an application to the Court of Final Appeal for leave.

12.Since the application for a stay was unsuccessful, cost should follow the event and we saw no reason to deprive DLA of their costs, so the cost of this application must be borne by Best China. 

13.Mr Shieh, SC, appearing for DLA, asked that an order should be made that the money paid in by them upon the order of Fung J should be paid out to them.  Mr Shieh informed us that his clients have been informed by the Registrar that the money would not be paid out in the absence of a court order, notwithstanding that the order for payment-in has been set aside.  For the avoidance of doubt, we made an order.

14.That being the case, it becomes unnecessary for us to deal with China Property’s summons asking for an order that the money in court be paid out to them.  In relation to China Property’s summons and Mr Shieh’s impromptu application for an order for payment-out.  We agreed that they would not have necessitated a hearing but for the application by Best China for a stay, and we ordered Best China to bear those costs as well.

15.Lastly, we dealt with the costs of the DLA’s own costs in the appeal.  In our judgment, we ordered that Best China should indemnify DLA in respect of the costs that they had been ordered to pay to the CPDH.  At the time, we were not asked to deal with DLA’s own costs.  By letter dated 20 January 2010 DLA asked that their costs be borne by Best China.  We took the opportunity during the hearing to hear the parties on the matter.  Mr Lo submitted that DLA should pay its own costs, basically repeating the submission that DLA ought not to have applied for interpleader relief.  It ought to have rejected Best China’s claim.  That is not a realistic approach and put too heavy a burden on a stakeholder.  There would have been no interpleader summons had Best China not made a claim.  Having made a claim, they have to take the consequence of being wrong.  In the circumstances of this case, as we have said, it was eminently sensible for DLA to apply for interpleader relief.  We ordered Best China to pay DLA's own costs in the appeal.

Mr. Tommy Lo, instructed by Messrs King & Wood, for the 2^nd Claimant.

Ms. Lisa K. Y. Wong, SC, instructed by Messrs Richards Butler, for the 1^st Claimant.

Mr. Paul Shieh, SC, instructed by Messrs DLA Piper Hong Kong, for the Applicant.