Ayala International Finance Ltd and Republic National Bank of New York v. Caine Tai Investment Co Ltd and Others

CACV000111/1983

BETWEEN:

Coram: Roberts, C.J., Leonard, V.P. & Jones, J.

Date: 22nd August, 1983

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JUDGMENT

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Roberts, C.J.-

1. This is a motion brought by the defendants for a stay of execution of the summary judgment entered against them on 5th July until the determination by the Court of Appeal of the defendants' appeal.

2. This application was made to us in accordance with Order 59 rule 14(4) which provides that where an application may be made either to the court below or to the Court of Appeal, it should normally be made to the court below unless there are special circumstances which make it impossible or impracticable to apply to the court below.

3. In ordinary circumstances, it would have been proper for the application to have gone before the trial judge. However, he is out of Hong Kong and is not expected back here for another three to four weeks. We, therefore, accept that these are special circumstances which make it impracticable to apply to the court below and that therefore the matter is properly brought before us.

4. It is to be noted that, by virtue of Order 59, rule 15, an appeal is not to operate as a stay of execution or of proceedings under the decision of the court below, except insofar as the court below or the Court of Appeal may otherwise direct.

5. The action arose out of a loan agreement entered into between the plaintiffs and the defendants on 14th January, 1982, as varied by two subsequent supplemental agreements. Under these agreements the loan was made to the first defendant and the second and third defendants were guarantors of the amount lent, which was for a total sum of $23M Hong Kong Dollars. With accrued interest, the total claim amounted to just under $24M.

6. There was, according to the Statement of Claim, a default in the loan agreement by the first defendant towards the end of 1982, as a result of which a writ was filed on 19th March, this year, accompanied by a Statement of Claim.

7. A summons for summary judgment was taken out by the plaintiffs on 19th April, and judgment was given against all the defendants for the sum claimed plus interest on 5th July, by one of the Masters.

8. On 9th July, the defendants appealed against the Master's decision. This appeal was heard by Jackson-Lipkin, J. on 27th July, this year, and the appeal was dismissed.

9. On 10th August, an appeal was lodged by the defendants against Mr. Justice Jackson-Lipkin's decision on the grounds set out in the Notice of Appeal.

10. A writ of fi fa was issued on 15th July, 1983.

11. In an affidavit dated 18th August, 1983, Mr. WOO Wing Fai, the third defendant, who states that he was also authorized to make the affidavit on behalf of the first and second defendants, sets out details of the various properties owned by the three defendants.

12. In the 14th paragraph of his affidavit, he avers that -

"if the execution of the judgment is not stayed pending the determination of the appeal, there is every likelihood hat the Defendants might be forced to dispose of their various major assets set out hereinabove. In the present state of the property market, the Defendants would suffer great loss if the properties were to be disposed of in distress sales and the Defendants might suffer irreparable loss and harm should this Honourable Court set aside the judgment, because even if the Plaintiff could repay the sums paid by the Defendants, the Defendants having sold the properties or interests in them would have lost the opportunity of participating in the various property developments."

13. The leading authority on the subject of the exercise by a court of its discretion to grant a stay of execution pending appeal is Wilson v. Church⁽¹⁾. The head note to this case reads -

"Where an unsuccessful party is exercising an unrestricted right. to appeal, it is the duty of the Court in ordinary cases to make such order for staying proceedings under the judgment appealed from as will prevent the appeal, if successful, from being nugatory. But the Court will not interfere if the appeal appears not to be bona fide, or there are other sufficient exceptional circumstances. And when the Court makes an order to stay proceedings pending an appeal it will put the Appellants on terms to speed the appeal; and it will not interfere with the execution of the order of the Court below respecting costs ...."

14. It is therefore necessary, before the discretion to issue a stay should be exercised, for the defendants to show firstly that the appeal appears to be bona fide; and secondly, that failure to give the stay sought would result. in the appeal, if successful, being nugatory.

15. With regard to the bona fides of the appeal, we are satisfied that there are matters of a substantial nature which could be argued on the appeal. In particular, there are two matters, related to section 22 of the Deposit Taking Companies Ordinance (Cap. 328), which are of some difficulty.

16. The first is the extent to which, if a loan is made by a deposit taking company in contravention of the section, and it is conceded that such a breach occurred in this instance, is enforceable. This matter was considered in 1982 by a division of this court in Ever Finance Limited v. Yuen Wai Piu⁽²⁾. Mr. Justice Cons, delivering the judgment of that court, commented as follows-

17. With this view we concur.

18. We also consider, without forming any view as to its merits, that there is a further point of substance in relation to the validity of the guarantee which is said to have been given to the plaintiff and which was accepted by the Commissioner of Banking as a sufficient compliance with section 22 of the Deposit Taking Companies Ordinance. It is, as we see it, at least arguable that this was a guarantee which was misdirected in the sense that it purported to guarantee the lender against default by the lender, though it is difficult to see how he could have defaulted, whereas the intention of the section would appear to require a guarantee that the company should not suffer losses by reason of failure by the borrowers.

19. The second requirement is that, to use the words of Wilson v. Church⁽¹⁾ , it is the duty of the Court to make an order staying proceedings "so as to prevent the appeal, if successful, from being nugatory."

20. It is clear from the circumstances of Wilson v. Church^(l), where such an order was made, that "nugatory" does not mean that the party seeking the stay should risk the loss of all his property. It was held to be sufficient there, to justify a stay being issued, that there would be some loss of. money paid out to those bond holders who could not subsequently be traced.

21. In the course of argument, it was submitted that it had been the practice of the court to order a stay of execution, pending appeal, if the appellant would be irremediably injured.

22. The affidavit of the third defendant, which has not been contradicted, establishes in our view that the failure to grant a stay of execution might have a seriously deleterious effect or. the defendants, if they were to succeed in the appeal and, subsequently, in the action, for the reasons which are set out in that affidavit, particularly in relation to those properties owned by the defendants which are concerned in the joint ventures listed in the third defendant's affidavit

23. It is made clear by the cases which have been cited to us and particularly by the Attorney General v. Emerson⁽³⁾ that the exercise of the. right to stay an execution is one wholly within the discretion of the court. In so far as Atkins v. Great Western Railway Co.⁽⁴⁾ might be thought to restrict that discretion, we consider that later cases have made. it clear that it is an unfettered discretion, the exercise of which depends on the ' circumstances of each individual case, and that what is described as the general rule in Atkins v. Great Western Railway Co.⁽⁴⁾, namely that there is no reasonable probability of getting damages or costs. back if the appeal succeeds, is not an exclusive statement of the circumstances in which this discretion would be exercised.

24. If further authority is necessary, it can be found in the case of The Ratata⁽⁵⁾. At p.132, Lord Esher, M.R. said -

"The authorities cited do not affect the question, as it is a pure matter of discretion depending on the particular circumstances of. each case."

25. In accordance with those principles, we think that the circumstances of this case are such as to justify us in issuing the stay of execution which is sought and we order accordingly.

(1)     [1879] 12 Ch.D. 454.

(2)    Civil Appeal No.53/82.

(1)     [1879] 12 Ch.D. 454.

(3)     [1890] 24 Q.B.D. 56.

(4)     [1885] 2 T.L.R. 400

(5)     [1897] P. 118.

Representation:

R.E. Mayne (Woo & Woo) for Plaintiff/Respondent

O. Cheung, Q.C., P. Fung &E. Chan (Cheung, Tong & Rosa) for Defendants/Appellants.