T v. Shiu Wai Tuen

HCA 2229/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2229 OF 2007

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R U L I N G

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Introduction

1.On 28 October last year, I handed down judgment in this action in which I dismissed the Plaintiff’s claim for $17.8 million and gave judgment on the Defendant’s counterclaim in the sum of $675,000.  The Plaintiff has appealed to the Court of Appeal and the appeal has been set down although a date is yet to be obtained for its hearing.

2.There are before me four matters which I need to rule on.  Three have much in common in the sense that to a great extent they are dependent on the view that I take on the merits of the Plaintiff’s appeal, both on the claim and on the counterclaim.  The other is a discrete issue which I have, in fact, already ruled on.

3.The lead summons, if I can so describe it, is the Plaintiff’s for a stay of execution of the Defendant’s judgment on the counterclaim.  Related to it, in the way that I have just mentioned, is the Plaintiff’s application to continue or renew the Mareva injunction granted by Wright J on 26 October 2007 and continued by me on 2 November 2007 until trial or further order.  There is also an appeal from the order of Master de Souza dated 24 November 2000 vacating a lis pendens registered by the Plaintiff in respect of the Defendant’s flat which is where he lives with his wife and child.  I will need to discuss all of these matters in a moment but before I do so I will mention the remaining matter upon which I have already made an order.

The Reporting Restriction

4.Given the sensitive nature of the case, at the start of the action, I decided to accede to an application by the Plaintiff to allow her anonymity by directing that she should be referred to as Madam “T” and that she should be identified by the initial “T” in the pleadings and in the cause list.  After the conclusion of the action and because she had been adjudged to be the losing party, I received an enquiry from a newspaper for its reporter to have permission to publish her name in full.  The Defendant was neutral on this request.  Her solicitors objected to that course pending the outcome of her appeal.  I have decided to retain the restriction on publication of her full name until the disposal of her appeal.  It seems to me that she should be able to maintain her anonymity until the outcome of her appeal is known, although there is no doubt that the Court of Appeal could if it wishes remove this reporting restriction, if it was so minded, before it hears the appeal.  For my part, I thought it right to give her, her family and her boyfriend, so called, peace and privacy whilst the action was being litigated. There is a public interest in allowing persons who are complaining that they have been subjected to blackmail in salacious circumstances such at these to come to court and fearlessly present their cases and not be exposed to the risk of what might, given the subject matter of the action, be sensational reporting at least until the outcome of the action is known and this, it might be thought, should extend as well to any appeal by the unsuccessful Plaintiff who is complaining that the trial judge was wrong to have dismissed her claim.

Stay of Execution on the Judgment on the Counterclaim

5.The Plaintiff appeals as of right in respect of both the claim and the counterclaim.  It is trite that the appeal does not operate as a stay of the judgment on the counterclaim, with the result that she needs to make this application.

6.The applicable principles which govern the exercise of the discretion of whether or not to grant at stay in circumstances such as these have been authoritatively and conveniently set out in the judgment of Ma J (as the Chief Justice then was) in Star Play Development v Bess Fashion Management Co. Ltd [2007] 5 HKC 84.  In the course of his judgment, Ma J set out the various considerations that should be taken into account, although the list was not intended to be exhaustive and the importance of one consideration or some considerations will assume greater importance in one case and less or, of no importance, in another.  Ultimately, the facts and circumstances of the particular case will be decisive.  This said it will be helpful if I set out here the part of the judgment of Ma J [pages 87-90] in which he set out the correct approach which, respectfully, I propose to follow:

“6. Though in the court’s discretion whether or not to grant a stay, it is important to bear in mind that the starting point is RHC O.59, r.13(1):

‘Except so far as the court below or the Court of Appeal or a single judge may otherwise direct —

(a) an appeal shall not operate as a stay of execution or of proceedings under the decision of the court below;

(b) no intermediate act or proceeding shall be invalidated by an appeal.’

7. In other words, unless the defendant can justify a stay of execution, one will not be ordered. The practice of the court is that justification can be demonstrated only if good reasons exist.

8. Good reason can exist in a variety of forms. It will be wrong to set out any exhaustive definition of what would constitute good reasons, but, commonly, reference is made to factors such as whether the absence (or existence) of a stay would render an appeal nugatory (thus bringing into focus the relative prejudice that may be caused to the appellant and to the respondent by a stay of execution), and the merits of the appeal.

9. In the context of these two factors, I would make the following observations:

(1) In determining the question whether or not an appeal would be rendered nugatory, the court must of course first have regard to the nature of the order that is the subject matter of the appeal. If the order appealed against is a money judgment, the court will require evidence as to why the levying of execution will result in the appeal being rendered nugatory, such as, for example, an appreciable risk that the respondent to the appeal would not be able to repay in the event of a successful appeal. Sometimes, though, the nature of the order will by itself almost be determinative of the question. Where the relevant order is, for example, an injunction (and particularly so if it is a mandatory injunction), it may well be that, without a stay, an appeal would be rendered nugatory in the event of a successful appeal. Similarly where, as in the present case, the relevant order is one for the possession of premises, again it can readily be appreciated that without a stay of execution, more often than not, it is likely than an appeal would be rendered nugatory: see Ketchum International plc v Group Public Relations Holdings Ltd [1997] 1 WLR4, at 10H.

(2) That said, whatever the nature of the order or judgment appealed from, the court will still require evidence as to why an appeal will be rendered nugatory in the event of a stay not being granted. The requisite quality of the evidence will, of course, depend on the nature of the order or judgment appealed against.

(3) I now deal with a common facet relied on in any argument relating to an appeal being rendered nugatory, namely that of financial ruin or serious financial consequences. Where, as in the present case, it is said that the levying of execution would result in financial ruin or serious financial consequences for the appellant, the court will require good evidence to support this contention, such as the production of accounts or other documents to justify the assertion. A bare assertion is unlikely to meet with such sympathy where more substantial evidence is available: see the observations of Mr Justice Litton, JA in World Trade Centre Group Ltd v Resourceful River Ltd (CACV 70/1993, 12 May 1993, unreported) Court of Appeal, at 3-4.

(4) An appeal being rendered nugatory does not mean in all cases that without a stay, the appellant faces financial ruin or the loss of all his property. Demonstrating that the failure to grant a stay would have a serious deleterious effect is enough: see Caine Tai Investment Co Ltd v Ayala International Finance Ltd [1983] 1 HKC 163, a decision of the Court of Appeal which made reference to Wilson v Church (No.2) (1879) 12 Ch D 454.

(5) How relevant then is the court’s consideration of the merits or strength of the appeal? In my view, while it is impractical and even undesirable for the court in dealing with an application for a stay of execution, to go deeply into the merits and strengths of an appeal, it must however form a preliminary view of these aspects. This I believe to be an inevitable consequence of the starting point I have earlier mentioned in referring to O.59, r.13(1).

(6) The existence of merely an arguable appeal cannot by itself amount to sufficient reason to justify a stay. It can be put this way: the existence of an arguable appeal (that is, one with reasonable prospects of success) is the minimum requirement before a court would even consider granting a stay. In other words, however exceptional the circumstances may be otherwise justifying a stay of execution, if the court is not convinced that there exist arguable grounds of appeal, no stay will be granted.

(7) Conversely, however, the existence of a strong appeal or a strong likelihood that the appeal would succeed, will usually by itself enable a stay to be granted because this would constitute a good reason for a stay: see World Trade at 2; Winchester Cigarette Machinery Ltd v Payne (No.2) (15 December 1993, unreported), English Court of Appeal (a case referred to by the Court of Appeal in Fung Wai Kwong William v The Insider Dealing Tribunal [2001] 1 HKC 44).

(8) In most cases, the court will not be dealing with the extreme situations I have referred to. Often, it will be faced with simply the existence of an arguable appeal. Here, it becomes necessary for the appellant to provide additional reasons as to why a stay is justified. The demonstration of an appeal being rendered nugatory is one example, albeit a common one. Here, where it is demonstrated that an appeal would be rendered nugatory if a stay was not granted, the court may require no more than the existence of an arguable appeal. Correspondingly, where it cannot be shown that an appeal would be rendered nugatory if a stay were not granted, the court will require, in the absence of any other factors, the appellant to demonstrate strong grounds of appeal or a strong likelihood of success. This I understand to be the sentiment found in authorities such as World Trade at 2 (in a passage cited with approval by the Court of Appeal Trade at 2 (in a passage cited with approval by the Court of Appeal in Fung Wai Kwong William at 48) and Mabul Properties Corp v Ahmed (24 June 1987), unreported), English Court of Appeal.

(9) I have so far referred to the position of the appellant. It is important to stress that the court must not at any stage forget the position of the successful party. It is always relevant to consider the prejudice that would be caused to the successful party (the respondent in the appeal) in the event a stay is granted and if necessary, to impose conditions so as to minimise the prejudice caused to him. A fortiori, the court must consider any contention that the appeal would be rendered nugatory to him (in the event the appeal is dismissed) should a stay of execution be imposed.

10.        Ultimately, the court embarks on a balancing exercise and uses its common sense, but bearing in mind at all times the starting point that the successful party is not to be deprived of the fruits of his success: see Winchester Cigarette Machinery, per Ralph Gibson LJ.”

7.I need to begin with the grounds of appeal against the judgment on the claim and on the counterclaim.  Whilst the outcome of the case depended to a very great extent on whose evidence I believed as between the two parties, Mr Bruce Lau, who now appears for the Plaintiff (he was not counsel at the trial), submits that I made an important error of fact in suggesting that the Plaintiff had given her evidence whilst wearing a baseball cap, which was my distinct recollection.  It is accepted that she wore large sunglasses.  I had allowed her to continue wearing her baseball cap and sunglasses because this is what she wanted and I referred to what she was wearing and that she wished to continue wearing these in assessing her demeanour.  I said that I did not have an opportunity to look at her facial expressions.  Complaint is made, as a ground of appeal, that I should have warned her that I might take this into account in assessing her demeanour and her evidence as a whole.  Whilst this is not the place for the trial judge whose judgment is being appealed to argue over such points, I would have thought that in circumstances where she had been competently represented by counsel and solicitors at the trial that this sort of thing could safely be left to them to advise her on at the time.  As to whether she wore a baseball cap, whilst I harbour no doubt about my recollection, I very much hope that some indication of whether she was or not will emerge from the transcript of the trial.  I very much hope that it will not come to the unedifying situation of myself, as the trial judge, having to swear an affidavit as to this fact to counter the Plaintiff’s own affirmation that she had not worn a baseball cap. At all events, Mr Lau submits that these are matters that serve to undermine my assessment of the Plaintiff’s demeanour which, as I have referred to in my judgment, played its part in my view of her as a witness whose evidence I rejected.  As I also made it clear, demeanour was a subsidiary consideration — principally, I had been guided by the content of the Plaintiff’s evidence and my discussion of it having regard to my assessment of the inherent probabilities which are led me to my factual conclusions.

8.This said, Mr Lau also has other grounds such as, what he says, was my enormous use of hearsay evidence relating to the out of court statements of a Mr Lai who did not give evidence at the trial.  Other grounds relied on specifically relating to the counterclaim, go to whether the judgment has sufficiently discussed all the ingredients of the tort of malicious prosecution and there is also an appeal based on quantum which Mr Lau submits is far too high for an award of compensatory damages. 

9.It is submitted that taken overall, this is an appeal with strong prospects of success.

10.The second limb of this is that if there is no stay the appeal may be rendered nugatory because, if the damages of $675,000 awarded to the Defendant are paid by the Plaintiff, the prospects of getting them back in the event of a successful appeal are extremely slim.  In this regard attention has been drawn to the fact that the Defendant, on his own admission, spent most, if not all, of the Plaintiff’s $17.8 million on profligate living and on the gaming tables of Macau.

11.Judged overall, I take the view that I ought to grant the Plaintiff her stay.  It seems to me that this is a reasonably arguable appeal both as to liability and quantum.  I put it no higher than that, but when this aspect is added to the prospect of the Defendant, if he were to lose the appeal, of not being in a position to repay the damages for the reasons that I have given, then the application becomes a compelling one. For these reasons, there will be as stay until the hearing and disposal of the appeal or further order of the Court of Appeal.

12.The question that I also wish to consider is whether the Plaintiff should be put on terms as to the grant of the stay by being obliged to bring into court the whole or part of the damages on the counterclaim as a condition for the stay.

13.Whilst I have decided that there is merit in the appeal sufficient to persuade me to grant the stay, those merits are not so strong to prevent Mr Chu, on the Defendant’s behalf, from submitting that the Plaintiff should be put on terms.  I have decided that Mr Chu has a valid argument.  I do not think that the Plaintiff should be obliged to bring into court all of the damages awarded against her.  I will say that she should pay into court $250,000 within 28 days, failing which the stay will be discharged. Mr Lau had suggested that the Plaintiff is having financial problems.  If she cannot pay in this relatively modest amount in then she has 28 days to take out a summons and file evidence of her financial circumstances so as to show cause why she should not pay the amount ordered into court.

The Continuation of the Mareva Injunction

14.Mr Chu says that as a matter of jurisdiction, I have no power to extend the injunction.  He submits the order was until the conclusion of the trial.  Mr Lau has relied on a number of authorities which say otherwise.  He starts with the 9^th edition of the textbook “Injunction” by Bean and Parry.  The passage at 6.31 is relevant:

“A judge who refuses an interim injunction may nevertheless grant an injunction pending appeal (Erinford Properties Ltd v Cheshire County Council [1974] Ch. 261). Likewise, a judge who has decided in favour of the defendants at a trial may grant an injunction restraining them from acting on their success (e.g. by disposing of property whose ownership was in question in the action) pending appeal (Orion Property Trust Ltd v Du Cane Court Ltd [1962] 1 W.L.R. 1085). There is no inconsistency in either of these propositions. On an application for an interim prohibitory injunction, the question is whether the applicant has made out a sufficient case to have the respondent restrained pending the trial; at trial, the question is whether the claimant has sufficiently proved this case. However, on application for an injunction pending appeal, the question is whether the judgment that has been given is one upon which the successful party ought to be free to act despite the injunction should be granted where any appeal would be frivolous or where to grant the injunction would inflict greater hardship than it would avoid (per Megarry J. in the Erinford case, above). If a mandatory injunction refused at first instance is to be granted pending appeal, a strong prima facie case must be shown that the appeal will succeed (R v Westminster City Council Ex. P. Augustin [1993] 1 W.L.R. 730).”

Mr Lau has also referred to cases such as Erinford Properties Ltd v Cheshire CC [1974] Ch 261, and Orion Property Trust v Du Cane Court Ltd [1962] 1 WLR 1085.  He has also drawn my attention to Ketchum International Plc v Group Public Relations Holdings Ltd [1996] 4 All ER 374, a decision of the English Court of Appeal in which the two previous cases were considered.  In my judgment there is no doubt that I have jurisdiction to continue the present injunction or, if need be, to grant a fresh one.  It is sufficient for this purpose for me to refer to some passages of the judgment of Stuart Smith LJ to demonstrate that this is so.  I start with the passage at 378J to 379C:

“Does this court have an original jurisdiction to grant an injunction in the terms sought? If so, in what circumstances should it be exercised? Mr Leggatt submits that in principle courts should be able to take steps to ensure that their judgments are not rendered valueless by an unjustifiable disposition of assets. The High Court has power to grant injunctions under s.37 of the Supreme Court Act 1981 in any case in which it appears just and convenient to do so. This jurisdiction is exercisable by the Court of Appeal by reason of s.15 of that Act, and RSC Ord 59, r 10(1), and this court has power to grant injunctions in any proceedings instituted in any cause or matter pending before the Court of Appeal (Ord 59, r 10(9)). There is no reason in principle why the jurisdiction should not be exercised in favour of a plaintiff who has lost in the court below if there is a real risk that as a successful appellant his right of appeal is rendered nugatory. He submits that there is no difference in principle between granting an injunction in such circumstances and granting a stay of execution to an unsuccessful defendant who wishes to appeal. In each case justice requires that a successful party be prevented from reaping the fruits of his success until the Court of Appeal has been able to decide if there is a real likelihood that the appeal might otherwise be rendered nugatory.”

As to the reasoning behind this power Stuart Smith LJ referred to what Cotton LJ said in Wilson v Church [1879] 12 Ch D 438 at 446, set out at page 380C-F:

“I see no difference in principle between staying the distribution of a fund to which the Court has held the plaintiff not to be entitled, and staying the execution of an order by which the Court has decided that a Plaintiff is entitled to a fund. In that case, as in this case, the Court, pending an appeal to the House of Lords, suspends what it has declared to be the right of one of the litigant parties. On what principle does it do so? It does so on this ground, that when thee is an appeal about to be prosecuted the litigation is to be considered as not at an end, and that being so, if there is a reasonable ground of appeal, and if not making the order to stay the execution of the decree or the distribution of the fund would make the appeal nugatory, that is to say, would deprive the Appellant, if successful, of the results of the appeal, then it is the duty of the Court to interfere and suspend the right of the party who, so far as the litigation has gone, has established his rights. That applies, in my opinion, just as much to the case where the action has been dismissed, as to the case where a decree has been made establishing the Plaintiff’s title.”

In order to underline these sentiments, Stuart Smith LJ added this at 380G to 381F:

“In Orion Property Trust Ltd v Du Cane Court Ltd, General London and Urban Properties Ltd v Du Cane Court Ltd (1962) 3 All ER 466, [1962] 1 WLR 1085 Pennycuick followed the judgment of Cotton LJ which I have cited and held that the court of first instance had jurisdiction to make an other restraining the issue of shares pending an appeal, even though the action seeking such relief had failed. And in Erinford Properties Ltd v Cheshire CC [1974] 2 All ER 448 at 454, [1974] Ch 261 at 268 Megarry J applied the same principle to an interlocutory injunction which he had refused, but granted it for a limited time so that application could be made to the Court of Appeal to extend it. He said:

There may, of course, be many cases where it would be wrong to grant an injunction pending appeal, as where any appeal would be frivolous, or to grant the injunction would inflict greater hardship than it would avoid, and so on. But subject to that, the principle is to be found in the leading judgment of Cotton LJ in Wilson v Church (No.2) (1879) 12 Ch D 454 at 458), where, speaking of an appeal from the Court of Appeal to the House of Lords, he said, ‘when a party is appealing, exercising his undoubted right of appeal, this Court ought to see that the appeal, if successful, is not nugatory’. That was the principle which Pennycuick J applied in the Orion case [1962] 3 All ER 466, [1962] 1 WLR 1085); and although the cases had not then been cited to me, it was on that principle, and not because I felt any real doubts about my judgment on the motion, that I granted counsel for the plaintiffs the limited injunction pending appeal that he sought. This is not a case in which damages seem to me to be a suitable alternative … Although the type of injunction that I have granted is not a stay of execution, it achieves for the application or action which fails the same sort of result as a stay of execution achieves for the application or action which succeeds. In each case the successful party is prevented from reaping the fruits of his success until the Court of Appeal has been able to decide the appeal.’

In my judgment, this jurisdiction is not limited, as the judge thought, to cases concerned with the preservation of a fund or property the subject of the action, but is based on the wider principle enunciated by Cotton LJ that justice requires that the court should be able to take steps to ensure that their judgments are not rendered valueless by an unjustifiable disposal of assets. Moreover, I cannot see any reason in principle why the considerations which are applicable when the court is considering the grant of a Mareva injunction should not be applied in favour of a plaintiff, even if he has lost in the court below, though the question will not be ‘does he have a good arguable case?’ but ‘does he have a good arguable appeal?’ This is likely to be a more difficult test to satisfy, and, if the case turns upon questions of fact which the judge has resolved against the plaintiff, may well be insuperable. This threshold must be at least as high as that which has to be satisfied when the court considers whether or not to grant leave to appeal, where that is required.

The analogy with a stay of execution is appropriate.  Where an unsuccessful defendant has to obtain leave to appeal and seeks a stay of execution, for example in a possession action, this court will normally grant a stay if it grants leave to appeal, since otherwise successful appeal will be of no effect.  Where leave is not required to appeal the substantive judgment, as in this case, injunctive relief of the type sought should not be granted unless leave to appeal would be granted, had it been required.  In my opinion, the judge was in error in thinking that he did not have jurisdiction to make the order sought.”

15.On these authorities it seems to me that it goes without saying that, in the appropriate circumstances, the court does have the jurisdiction to extend the Mareva injunction on an occasion such as this.

16.Mr Chu has submitted that I should note that the cases relied on by Mr Lau concerned the preservation of assets pending the outcome of the appeal.  A Mareva injunction, he submits, is a particular species of order which is intended only to run until the conclusion of the trial.  He has referred to 29/1/54, page 640 of Hong Kong Civil Procedure 2011, which he says supports the view that the Mareva will be of limited utility in terms of its duration.  Nevertheless, the answer to his submission appears at 29/1/52, page 639 supra where there is reference to the case of Ketchum International in these terms:

“Where a plaintiff recovers judgment on a claim and the Defendant’s counterclaim is dismissed and the Defendant satisfies the judgment by paying money to the Plaintiff, in the event of the Defendant appealing, a Mareva injunction may be granted by the court or by the Court of Appeal restraining the Plaintiff from dealing with that money pending the outcome of the appeal on that conclusion.”

17.I do not think that there can be any doubt about this matter and that I do have jurisdiction. 

18.I also consider that I should exercise it as part of the balancing exercise that I ought to perform in holding the ring between the parties pending the outcome of the appeal, part of which it seems to me requires me to impose the terms that I have on the Plaintiff in ordering her to bring into court part of the judgment against her on the counterclaim.

The Appeal from Master de Souza

19.Having had the claim dismissed, the Defendant obtained an order from the learned Master removing the lis pendens on his property.  Understandably, the Master acceded to that application.

20.I must now look at this afresh as part of the overall process of considering the application for the stay of execution. Given my view on the merits of the appeal, and the other considerations which impelled me to grant the stay, it strikes me that the lis pendens should remain in place.  Subject to the payment in by the Plaintiff in recognition of the fact that judgment has been entered against her on the counterclaim, it seems entirely appropriate that things should remain as they were until the outcome of the appeal is known.  Accordingly, I will allow the appeal and restore the registration of the lis pendens.  No possible criticism can attach to the Master’s decision in circumstances where he had been presented with only a partial view of things.  On the material before him his decision was undoubtedly the correct one.

Costs

21.I would have thought that the costs of this hearing ought to be costs in the appeal.

22.I will now hear counsel on any consequential matters that may arise from this ruling.

Bruce Lau, instructed by MessrsAnthony Kwan & Co. for the Plaintiff

George Chu, instructed by Messrs Michael Pang & Co. for the Defendant