Pony HK World Ltd v. Vand Petro Chemicals (Bvi) Co Ltd and Another

CACV 270/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 270 OF 2011

(ON APPEAL FROM HCA NO. 996 OF 2010)

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BETWEEN

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REASONS FOR JUDGMENT

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Hon Kwan JA (giving the Reasons for Judgment of the Court):

1.There are three applications before us: the defendants’ application for leave to appeal to the Court of Final Appeal; the defendants’ application for stay of execution of the judgment of this court pending the determination of the final appeal; and the plaintiff’s application to lift the stay of execution of the judgment of Reyes J and for payment out of the money paid into court by the defendants in partial satisfaction of the judgment of Reyes J.

2.There is no dispute in respect of the first application.  The plaintiff accepts that the defendants are entitled to appeal to the Court of Final Appeal as of right and does not oppose the application provided that the defendants give security of costs pursuant to section 25 of the Hong Kong Court of Final Appeal Ordinance, Cap 484 in the amount of $400,000.  The defendants are agreeable to this.

3.The remaining applications for lifting the stay of execution of the judgment of Reyes J and for stay of execution of our judgment pending determination of the final appeal are essentially two sides of the same coin.  The judgment entered by Reyes J in favour of the plaintiff and upheld by this court is for the amount of HK$510,708,649.03.

4.Under section 26(1), where a judgment appealed from requires the appellant to pay money, when granting leave to appeal, the Court of Appeal shall have power to direct that the judgment be carried into execution or that it shall be suspended pending the appeal.  If the court directs that the judgment be carried into execution, section 26(2) provides that the person in whose favour judgment was given shall, before execution, enter into “good and sufficient security” to the satisfaction of the court, for the due performance of such order as the Court of Final Appeal shall make in respect of the appeal.  Likewise, if the court directs that the execution of the judgment be suspended pending appeal, the appellant shall enter into “good and sufficient security” to the satisfaction of the court, for the due performance of such order as the Court of Final Appeal shall make in respect of the appeal.

5.It is apparent from the wording of section 26 that this court has discretion to direct whether a judgment to which the section applies is to be carried into execution or suspended pending the appeal.  In either case, by sub-sections (2) and (3) respectively, good and sufficient security must be provided by the party in whose favour the order for execution or suspension is made.

6.We reject the contention in the written submission of Mr Sussex, SC for the plaintiff that if the defendants are unwilling or unable to provide good and sufficient security for stay of execution pending the appeal under section 26(3), the court should allow the plaintiff to execute the judgment without the need to consider whether the plaintiff could provide good and sufficient security for the judgment to be carried into effect under section 26(2).

7.The plaintiff seeks execution of the judgment in its summons, but has not offered any good or sufficient security, despite repeated enquiries of the defendants’ solicitors.  There is no evidence before us to indicate how the plaintiff, a company incorporated in the Cayman Islands, might have repaid HK$510 million odd with interest to the defendants if the appeal should be allowed.  Mr Sussex told us at the hearing that the plaintiff would not be pressing on with its summons.  Instead, he asked us to exercise our power under section 25(1) to order the defendants to make further payment into court of HK$88,429,552.38 (which is the estimated interest on the judgment sum of HK$510 million odd that has accrued since Reyes J’s judgment and will accrue until the determination of the final appeal envisaged to take place in a year’s time from now) as a condition of granting leave to appeal.

8.We do not think that would be a proper exercise of the power to grant leave to appeal on conditions.

9.We have made an order that the defendants do have leave to appeal to the Court of Final Appeal under section 22(1)(a), on condition that the defendants do pay into court within 28 days hereof $400,000 as security for costs.  The plaintiff’s summons is dismissed.

10.In seeking suspension of the judgment pending determination of the final appeal, the defendants have offered the following as security:

(1)  the defendants have paid into court the judgment sum of HK$510 million odd with interest of HK$73,122,284.93 to comply with the condition imposed by Reyes J when he granted a stay pending appeal to this court.  The total sum of HK$583 million odd will remain in court pending the determination of the final appeal; and

(2)  the defendants will give an undertaking to the court in these terms:

(a)  subject to (b) below, the defendants will not sell, pledge, charge or in any other way dispose of or encumber the 2,766,593,980 shares in Hans Energy Co Ltd or any part thereof pending the determination of the final appeal;

(b)  if any part of the said shares is sold, pledged, charged or in any event disposed of or encumbered before the determination of the final appeal, all the proceeds would be deposited with the court within 10 days after receipt thereof to the limit of HK$88,429,552.38.

11.As mentioned earlier, the plaintiff’s stance is that the defendants should pay HK$88 million odd into court so as to provide good and sufficient security for suspension of execution of the judgment.

12.We are satisfied in this instance that the security offered by the defendants would be good and sufficient security and it is not necessary to require them to pay a further sum of HK$88 million into court.  We have taken into account the value of the Hans Energy shares beneficially owned by the 2^nd defendant.  As at the close of the stock market on 24 January 2013 (at HK$0.193 per share), the total value of the 2^nd defendant’s shareholding is in the region of HK$534 million, which greatly exceeds the estimated interest of HK$88 million.  Furthermore, if the defendants’ appeal is not successful, the subject shares – 370 million shares in Hans Energy – would be transferred to the defendants.  By reference to the market price of these shares at the close of the stock market on 24 January 2013, these shares are worth another HK$71.4 million.

13.It is not necessary to go into the merits of the defendants’ appeal in any detail save to say it is reasonably arguable.

14.We have directed that the execution of the judgment be suspended pending the determination of the final appeal, on the security offered by the defendants as mentioned earlier.  We ordered the costs of the defendants’ applications by notice of motion be in the cause of the appeal to the Court of Final Appeal.

Mr Charles Sussex SC and Ms Queenie Lau, instructed by Herbert Smith Freehills, for the plaintiff (respondent)

Mr Warren Chan SC and Mr Liu Man Kin, instructed by Orrick, Herrington & Sutcliffe, for the defendants (appellants)