Attlee Investments Ltd v. Lee Chuen t/a Lee Chuen Furniture Co and Another

CACV000120/1983

Headnote

(Order of the court below, refusing a stay, reversed on appeal).

Dates of hearing : 6th & 7th September, 1983.

Date of judgment : 7th September, 1983.

IN THE COURT OF APPEAL

BETWEEN

Coram: Hon. Cons, J.A., Kempster & Mantell, JJ.

Date: 7th September, 1983.

__________

JUDGMENT

__________

Cons, J.A.,

1. This is an appeal from the refusal of the Deputy Judge below to stay an execution initiated by the plaintiff to enforce a judgment in the sum of approximately $82,500, being the balance of monies due for work done and materials supplied at various places in Kowloon and in particular at a restaurant in the Harbour City. The defendant company had acknowledged service of the original writ but taken no steps to defend the Order 14 proceedings. That was in July.

2. On the 5th of August the plaintiff took out a writ of fi fa, the bailiff entering into possession thereunder on, we now understand, the 8th August. On the 13th of August the applicant, Attlee Investments Ltd., issued a summons to stay the execution, on the ground that Attlee had, on the previous day, presented a petition to wind up the defendant company based on a debt due to Attlee of just over one million dollars. The same day Attlee obtained ex parte from Garcia J. what we assume to have been a stay until an inter partes summons could be heard, although the formal order is worded slightly differently.

3. The inter partes summons came on on the 22nd of August. It was urged on behalf of Attlee that jurisdiction to grant a stay lay in Sec. 181 of the Companies Ordinance Cap. 32, and that although the jurisdiction was discretionary, the necessity for equal distribution of the funds available amongst the various creditors dictated that the discretion had to be exercised in favour of a stay. The Deputy Judge rejected both contentions and lifted the stay imposed by Garcia J. A few days later he refused an application for a stay pending this appeal, but Attlee obtained one from this Court limited until today.

4. The same issues have been argued before us, although Mr. Bell, who appears for the plaintiff, no longer challenges the existence of jurisdiction. In coming to his decision on this question the Deputy Judge commented that there was no Hong Kong authority in point and the English authorities went both ways; however even if the phrase "action or proceeding" in Sec. 181 did include some processes of jurisdiction, it could not extend to the purely "ministerial execution" of the writ by the bailiff in seizing and then selling the property. The judge was further influenced by the fact that the words "disposition of property" and "distress and execution" are expressly mentioned in the succeeding Sections 182 and 183.

5. With every respect to the Deputy Judge, it does not seem to us that the English authorities are as ambivalent as he thought. Doubt was certainly expressed in what became the first of many authorities on the point: The Great Ship Case ⁽¹⁾. It was argued later, in Re. Roundwood Colliery Co. ⁽²⁾, that those doubts had been removed by subsequent cases, including Re. Perkins Beach Lead Mining Company ⁽³⁾, to which we have been referred, and In Re. Artistic Colour Printing Co. ⁽⁴⁾. Sterling J. was inclined to think the argument correct, but deliberately expressed no final opinion as that was not then necessary. Now it is, and we are satisfied that those doubts have in fact been laid to rest. We note that the same view was taken by Hewson J. in The Constellation⁽⁵⁾ .We do not think any contrary inference is to be drawn from the fact that particular words are expressly mentioned in Secs. 182 and 183 yet omitted in Sec. 181. Nor are we willing to draw any distinction between the actual issue of a writ of fi fa and its "ministerial" enforcement.

6. We turn then to the question of discretion. Mr. Bell has argued, in our view quite correctly, that in all appeals which question the discretion of a judge below it must be assumed to begin with that the discretion has been properly exercised. However where the actual matters that influenced the judge appear from the reasons he has given then it is proper for this Court to consider these matters to see if the judge has either gone wrong in principle, has taken into account matters which were not relevant, or has ignored matters which were.

7. In the present instance the judge has in our opinion given insufficient regard to two matters, i.e. Sec. 269 of the Companies Ordinance and the very definite statement of principle laid down by the Court of Appeal of England in Bowkett v Fullers United Electrical Works Ltd. ⁽⁶⁾ This is perhaps not surprising, as neither was expressly drawn to his attention.

8. The general principle is that where a petition has been presented which might result in a winding up or scheme of arrangement, no creditor should thereafter gain priority over others of his class and that even if the execution has already been commenced, a stay should be granted unless there are very exceptional circumstances. Mr. Bell accepts this to be so, but submits that such circumstances do exist here.

9. Section 269 of the ordinance provides that "where a creditor has issued execution against the goods or lands of a company or has attached any debt due to the company, and the company is subsequently wound up, he shall not be entitled to retain the benefit of the execution or attachment against the liquidator in the winding up of the company unless he has completed the execution or attachment before the commencement of the winding up". The commencement of the winding up, if there is one, is the date at which the petition was originally presented : Sec. 184(2). In Re Bellaglade⁽⁷⁾ Oliver J. remarked, in relation to the English equivalent, that not only would this be a matter which would have to be taken into account, but was one which would crucially affect the question. We agree.

10. The Hong Kong legislation is the more strict in this respect, for we do not have here the provision which enables the company judge in England to set the section aside in any appropriate case. The inevitable result here then will be that if the defendant company be wound up the plaintiff will in any event have to repay to the liquidator whatever He may obtain by way of his execution.

11. Whether the company will be wound up or not should be known when the petition is dealt with this day next week. If no order is made the plaintiff of course will be able to complete his execution immediately. The only possible prejudice that in our view he will suffer by the granting of a stay is to be kept out of his money for only a short while.

12. Mr. Bell suggests that the plaintiff has been further prejudiced by Attlee's delay. Certainly Attlee have been dilatory. They have been owed the money, they say, since the 31st March, and they have stood by and watched the plaintiff proceed. But we do not think this can be said to have substantially affected the plaintiff.

13. Mr. Bell has drawn our attention to several matters which together raise suspicions as to the genuineness of Attlee's conduct. But he has not raised them above the level of suspicion and we are not able therefore to regard them as very special circumstances justifying a stay.

14. For these reasons we allow the appeal and impose a stay until the hearing of the winding up petition presented by Attlee Investments Ltd.

(1) (1863) 4 De G.J.&S. 63

(2) (1897) 1 Ch. 373

(3) (1877) 7 Ch. D. 371

(4) (1880) 14 Ch. D. 502

(5) (1966) 1 W.L.R. 272 at 274

(6) (1923) 1 K.B. 160

(7) (1977) 1 All E.R. 319

Representation:

Daniel Fung (M/S F. Zimmern & Co.) for the applicant.

Adrian Bell (M/S Hampton, Winter & Glynn) for the plaintiff.