Yifung Developments Ltd v. Liu Chi Keung Ricky and Others

HCA 1341/2014 &
HCA1359/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO NO 1359 OF 2014

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AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1341 OF 2014

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D E C I S I O N

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1.I shall adopt the same abbreviations as in the decision of 17 November 2014 (“the decision”). By the decision, this court (in the 1359 Action) dismissed the Mortgagors’ application (a) to restrain MSC and Elliott from enforcing the Share Mortgage and the Property Mortgage and to restrain the Receivers from exercising their powers over the mortgaged assets; and (b) to amend the writ to claim under the MLO and Agency Points. This court also granted (in the 1341 Action) YDL’s application for injunctions against the defendants for, amongst others, delivery up of YDL’s assets, including company chops and seals.

2.There are now 3 applications before me: leave to appeal against the order in the 1359 Action and 1341 Action, respectively, and stay of execution of the order in the 1341 Action.

Principles for grant of leave to appeal

3.Section 14AA(4) of the High Court Ordinance applies.  Before granting leave to appeal, the court has to be satisfied that the appeal has a reasonable prospect of success, or there is some other reason in the interests of justice why the appeal should be heard.  Reasonable prospect of success involves the notion that the prospect of succeeding must be reasonable and therefore more than fanciful, without having to be probable: SMSE v KL [2009] 4 HKLRD 125, at §19, per Le Pichon JA.  The applicant does not have to demonstrate that the appeal will probably succeed: Wynn Resorts (Macau) SA v Mong Henry [2009] 5 HKC 515, at §19.

4.In Ho Yuen Ki Winnie & anor v Ho Hung Sun Stanley & anor, HCMP 1009/2009, 24 August 2009, at §16, Le Pichon JA further explained that “merely showing that the appeal is ‘arguable’ and ‘not fanciful’ would not be sufficient” and that reasonable prospects require something more and, in that regard, some assistance may be derived from the test applied when setting aside a default judgment [ie the test of ‘real prospect of success’].”

5.Where an intended appeal is against an exercise of discretion, this would not be entertained unless the appellant can establish that the exercise of discretion was under a mistake of law, or in disregard of principle, or under a misapprehension as to facts, or by taking into account irrelevant matters or that there was a failure to exercise the discretion, or that the conclusion the judge reached was outside the generous ambit within which reasonable disagreement was possible: Hong Kong Civil Procedure 2015, Vol 1, §59/0/54.

The grounds of appeal in the 1359 action

6.The grounds of appeal can be summarized as follows:

(1)  That this court erred in law and was plainly wrong in holding that there was no serious issue to be tried in relation to the plaintiff’s argument on promissory estoppel (§§59-87 of the decision);

(2)  That this court erred in proceeding on the basis that the plaintiffs no longer sought an order restraining the receivers from holding themselves out as directors of YDL and WFOE (§107 of the decision);

(3)  That this court erred in law and was plainly wrong in holding that there was nothing unique in the property and any loss YDL suffered by reason of the sale of the property could clearly be compensated for by way of damages (§111 of the decision);

(4)  That this court erred in refusing leave to the plaintiffs to amend the writ.

Ground (1)

7.It is said that this court erred in determining significant disputes of fact based on hotly disputed affidavit evidence and the plaintiff was deprived of the opportunity to properly explain and adduce evidence in the possession, custody and control of the defendants which they were obliged to discover and to cross-examine the defendants’ witnesses.  It is also said that in deciding whether the assurance was given and relied on this court has failed to take into account certain matters.

8.With respect to Ms Chan SC, the grounds put forth are but a re-run of the arguments before this court at the main hearing which led to the decision (“the main hearing”).  The present complaints that the Mortgagors and his camp have towards the decision are directed at the exercise of discretion of this court in deciding which factors to place more weight on an interlocutory matter.  I am not satisfied that this ground has any prospect of success in view of the principle in paragraph 5 above.

Ground (2)

9.Ms Chan SC submits that I have erred in saying that it was not necessary to seek an order restraining the receivers from holding themselves out as directors (“the holding out order”) of YDL and WFOE.  She clarified that her submission at the main hearing was limited to WFOE but not YDL.

10.My recollection differs.  In fact, in §21.1 of Ms Chan SC’s amended reply submission at the main hearing, she did refer to YDL in the context of the holding out order.

11.In my view, even if I had misunderstood her then submission, the holding out order could not be granted independently without showing a serious issue to be tried.  Since no such serious issue was shown, my misunderstanding alone would not have justified leave to appeal.

Ground (3)

12.Again I see no merit in this ground.  The court was not dealing with a situation of conveyancing.  The principle that land is unique and damages are not an adequate substitute or remedy for the loss of an interest in land (Spry, The Principles of Equitable Remedies (9^th ed)  63) has no application in the present context.  In any case, on the question of adequacy of damages generally, I have held in favour of the Mortgagors (§118 of the decision).

Ground (4)

13.There is dispute as to whether or not leave to appeal is required when a court dismisses an application to amend a writ.  Mr Bartlett relies on Order 59, rule 21(2)(i) which provides that an order “refusing to allow an amendment of a pleading to introduce a new claim or defence or any other new issue” is a type of order for which no leave to appeal is required; but a writ is not a pleading.

14.Without disrespect, once the court disallows an amendment to the writ, the plaintiff will be barred from even pleading the new claim: Order 18, rule 15(2).  In my view, if leave to amend a writ is refused, it is an “order determining in a summary way the substantive rights of a party to an action”  (Order 59, rule 21(1)(a)) and hence no leave is required.

15.In summary, I do not find there to be reasonable prospect of success on any of the draft grounds of appeal put forth in the 1359 action.

Leave to appeal in the 1341 action

16.The grounds relied on are that this court erred in holding that there was no question as to validity of the appointment of receivers and the new directors of the plaintiff, and the validity of the receivers’ act in causing YDL to commence the action against the defendants.

17.The analyses under Ground (1) of the 1359 action apply equally to the 1341 action but there are additional matters.

18.Two affirmations have been filed by Ricky Liu which raised 3 new arguments that:

(i)     There being at least a serious issue to be tried in relation to the MLO Point and Estoppel Point, this court ought to have adjourned YDL’s application for injunction against the defendants pending determination of the plaintiff’s authority to sue.

(ii)    One of the receivers, Mr Fok, has been sued in HCA 92 of 2014 for fraudulent or reckless misrepresentation and breach of duty of care but the action was not drawn to this court’s attention.  In HCA 6 of 2014, Mr Fok was sued for conspiracy to sell mortgaged assets at undervalue although that claim had been dismissed on the ground that the plaintiff’s loss was reflective loss and there was no finding that the claims against Mr Fok disclosed no reasonable cause of action.  In the 1359 action, Mr Fok’s credentials had been “confirmed by his appointment as an independent non executive director of Kaisa Group” but Kaisa has recently announced Mr Fok’s resignation from various committees (raised in the reply affirmation).

(iii)    That the interest charged under the FA was 79% and exceeded the MLO limit (raised in the reply affirmation).

19.Under item (i), this argument has never been raised at the main hearing.

20.Under item (ii), Ms Chan SC submits that the new facts are to illustrate that the receivers do not have the experience to manage the Project in the present case.  She further submits that although the receivers were not appointed by the court, they had the duty to inform this court of the actions against Mr Fok.

21.Mr Bartlett, however, submits that it is part of the life of receivers to be sued.  He also purports to explain at the bar table the reason for Mr Fok’s resignation but I decline to take that into account.

22.In my view, the facts under item (ii) are irrelevant to the issue of leave to appeal.  Those facts should, at best, have formed the bases for variation of my order of 17 November 2014, or for seeking leave to adduce fresh evidence on appeal (if leave to appeal is granted).

23.With regard to item (iii), there was no reason why the interest rate of 79% was not put forth at the main hearing.

24.In summary, I do not find there to be reasonable prospect of success on any of the draft grounds of appeal put forth in the 1341 action.

Principles for stay of execution on appeal

25.The relevant principles are not in dispute.  In short, the court must be satisfied that there is an arguable appeal and that the appeal would be rendered nugatory if stay of execution were refused: Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84.

26.Ricky Liu’s affirmation stated that without a stay, the intended appeal will be rendered nugatory if the appeal is successful.  The purported new directors would be able to take control over the management of YDL, including the appointment and/or removal of the directors of WFOE.  The steps taken by the purported new directors appointed to the board of WFOE will be irreversible.

27.It may be true that the appeal might be rendered nugatory.  However, for failure to show an arguable appeal, the application for stay simply does not get off the ground and ought to be dismissed.

28.In any case, as rightly pointed out by Mr Bartlett, Ricky Liu was an undeserving party.  At the main hearing, it was confirmed by Ms Chan SC, entirely without impropriety on her part, that Ricky Liu was not in possession of YDL’s seals and chops.  (See §64 of her skeleton submission and §26 of her reply submission at the main hearing.)  Paragraph 132 of the decision relied on this piece of evidence.  Following the handing down of the decision, the defendants have substantially complied with the order by delivering up its books and records but Ricky Liu remains in custody of YDL’s chop and seal.  This was quite clearly selective compliance with my order and Ricky Liu has misled the court previously.

29.If I have to exercise my discretion, I would have equally dismissed the summons for stay.

Conclusion

30.Both applications for leave to appeal and application for stay of execution are dismissed.  There shall be costs to the defendants in the 1359 action and YDL in the 1341 action.

Costs

31.The 3 applications have been set down for 30 minutes.  They mainly involve submission by counsel and re-run of arguments at the main hearing.  There is no justification for 2 fee earners.  For $458,646, $181,507 and just under $370,000 to be incurred by D1 and D4, the receivers and YDL respectively were grossly excessive.

32.At least 60% of the 4^th affirmation of Mr Gronow was, without disrespect, unnecessary as it set out the order this court made, the grounds for the applications and some submissions.  It also set out the correspondence in unnecessary detail.  The costs incurred for this affirmation was entirely disproportionate to the issues at stake.

33.In relation to the transcript, only a couple of pages were referred to at this hearing.  That could well have been saved by making reference to previous affirmations and skeleton submissions instead.  I disallow all costs in relation to the transcript.  I summarily assess the costs as follows:

(a)  in the 1359 Action, $200,000 for D1 and D4;

(b)  in the 1359 Action, $80,000 for D2 and D3; and

(c)  in the 1341 Action, for both summonses: $100,000.

34.I thank counsel for their assistance.

Mr Jeremy Bartlett, instructed by Linklaters, for the plaintiff in HCA 1341/2014 and the 2^nd and 3^rd defendants in HCA1359/2014

Ms Linda Chan, SC and Mr David Chen, instructed by Li, Wong, Lam & W I Cheung, for the 1^st to 3^rd defendants in HCA1341/2014 and the 1^st to 3^rd plaintiffs in HCA1359/2014

Mr Johnny Mok, SC and Ms Ann Lui, instructed by Roome Puhar, for the 1^st and 4^th defendants in HCA1359/2014