Pacific Electric Wire & Cable Co Ltd v. Texan Management Ltd and Others

CACV 94/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 94 OF 2012

(ON APPEAL FROM HCCL 16/2009)

________________________

BETWEEN

________________________

CACV 95/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 95 OF 2012

(ON APPEAL FROM HCCL 17/2009)

________________________

BETWEEN

________________________

CACV 96/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 96 OF 2012

(ON APPEAL FROM HCCL 18/2009)

________________________

BETWEEN

________________________

Before: Hon Cheung JA in Chambers

Date of hearing: 8 January 2013

Date of decision: 8 January 2013

Date of reasons for decision : 15 January 2013

________________________

REASONS FOR DECISION

________________________

Stay of execution

1.Reyes J entered judgment against Hu Hung Chiu (‘Hu’) in HCCL 16/2009, HCCL 17/2009 and HCCL 18/2009.  The Judge found that Hu holds his beneficial interests in the South Horizons and Shouson Hill Properties and PacMOS shares (‘the properties’) on constructive trust for the plaintiff (‘PEWC’).  Hu was further ordered to account to PEWC for all benefits (including loan monies, rents, income, sale proceeds, and proceeds) received by him in connection with the properties within 28 days.  Any amounts found to be due upon the taking of such account are to be paid to PEWC.  Hu was further ordered to bear 70% of PEWC’s costs of proceedings against him.

2.Hu lodged an appeal against the judgment which will be heard in July 2013.  Hu applied for a stay of execution of the judgment pending appeal which was opposed by PEWC.  I refused the application and I now give the reasons.

Principle

3.The principle is that a successful party should not be deprived of the fruit of the judgment and a stay of execution of the judgment will only be granted if the appellant can show that he has such a strong meritorious appeal that justice requires the judgment to be stayed or the appellant can show that he has an arguable appeal and the appeal would be rendered nugatory in the event of him being successful in the appeal.

Position of the parties

4.In this case both sides have taken extreme views of the strength of their case.  Hu contended that there was a serious miscarriage of justice in the Court below which calls for the execution of the judgment to be stayed while PEWC contended that the appeal is totally devoid of merits. 

The Judge’s finding

5.PEWC’s case is that unbeknown to it, Hu had set up a secret network in which funds of PEWC were used to acquire the properties and he transferred the properties to himself in February 1999.  This was denied by Hu who specifically claimed that the transfer of the properties in February 1999 was for value to a person called Willi (‘the take-over arrangement’).

6.The Judge found that PEWC was aware of the acquisition of the properties but not of the February 1999 transfer.  He found that the take-over arrangement was a fabrication and Hu is the beneficial owner of the properties.

Hu’s contentions

7.Without going into details and without referring to all the grounds of appeal, Hu’s case on miscarriage of justice below can be summarised as follows :

1)  PEWC had relied on a false case on the unauthorised acquisition and managed to obtain summary judgment against Hu in these proceedings (which was reversed on appeal). Further, Hu was convicted in Taiwan based on this false case.  (Hu is now on bail pending his appeal against the conviction.)  The Judge having found that PEWC was fully aware of the acquisition, ought to consider its case on unauthorised transfer in the light of this finding.  The Judge had failed to do so. 

2)  The Judge concluded that the take-over arrangement was a fabrication based on the subsequent correspondence between Hu and Willi (‘the Swissfirst letters’) without considering the whole of the evidence.

3)  The Judge had erred in the burden of proof and standard of proof. 

4)  The Judge relied on Hu’s lack of explanation when first questioned by the authorities in Taiwan in finding against him on the take-over arrangement without considering that Hu was exercising his right of silence.  The Judge went so far as to inform Hu’s counsel when he objected to the questioning by PEWC’s counsel on this issue that the latter would not make much mileage on relying on the silence of Hu.

8.Counsel for Hu, Mr. Whitehead S.C. (together with Mr. Steven Kwan and Mr. Vincent Chen) stressed Hu’s appeal is not simply a challenge on finding of fact by the Judge but rather a challenge on the process adopted by the Judge in his finding.  The Judge had failed to consider the inherent improbabilities of PEWC’s case and there was a structural failure to conduct a consolidated evaluation of the evidence.

My view on the merits

9.The view I take is that Hu certainly has shown that he has an arguable appeal but at this stage he has not demonstrated that he has such a strong appeal that I ought to stay the execution of the judgment.  The Judge clearly had considered other evidence in reaching his finding, including the funding of take-over arrangement, Hu’s dealing with the properties after the take-over arrangement, the manner in which the take-over arrangement was carried out and the knowledge of the other key players to the transfer.  He concluded that Hu and Willi were not credible witnesses.

Appeal nugatory?

10.This leaves the crucial issue of whether the appeal would be rendered nugatory if Hu is successful.  Hu has not relied on difficulties in providing the account.  He had originally asked for extension of time to comply with the order.  The Judge had on 4 June 2012 gave him a further 56 days to complete the account.  He also ordered PEWC and the corporate defendants to provide Hu with the books and documents which he may require to prepare the account.  Hu had requested and obtained from the corporate defendants the relevant documents.  Apart from a vague suggestion that PEWC, consistent with its pursuit of a false case, may make use of the information against Hu, Hu was unable to particularise how the information that may be disclosed in the account would be to his prejudice if his appeal is allowed.  Any prejudice in terms of costs may be met by PEWC who had paid up all the costs orders so far and there is fund available from the release of the security for costs placed by PEWC in Court.

Conclusion

11.Accordingly the application was refused with costs to PEWC with a certificate for two counsel.  Hu was granted a further 28 days to comply with the order.

Mr. Anthony Neoh S.C., Ms Barbara Wong and Mr. Jonathan Chang, instructed by Lo & Lo, for the plaintiff in CACV 94-96/2012

Mr. Robert Whitehead S.C., Mr. Steven Kwan and Mr. Vincent Chen, instructed by Haldanes, for the 8^th defendant in CACV 94/2012 and 4^th defendant in CACV 95 & 96/2012