Penta Investment Advisers Ltd v. Allied Weli Development Ltd (Formerly Known As Hennabun Capital Group Ltd)

HCA 1656/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1656 OF 2012

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DECISION
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INTRODUCTION

1.I have before me an application by the defendant (“Hennabun”) by summons dated 13 February 2015 seeking a stay of execution and suspension of the operative effect of my earlier judgment dated 21 January 2015 (“the Quantum Judgment”) pending the determination of its appeal against that judgment to the Court of Appeal.

History of proceedings

2.The basic facts of this case are set out in my reasoned judgment on the issue of liability handed down on 14 October 2014 (“the Liability Judgment”) and I shall not repeat them here.  In that judgment, I granted a declaration that the deed of guarantee dated 24 June 2011 (“the Deed”) entered into between the plaintiff (“Penta”) and Hennabun was binding on Hennabun and enforceable against it by Penta.  I also directed that the amount due to Penta from Hennabun under the Deed, or by way of damages for repudiatory breach thereof, be assessed at a further hearing.

3.On 7 November 2014, Hennabun filed a notice of appeal against the Liability Judgment (CACV 222/2014).  That appeal has been fixed to be heard on 23 and 24 July 2015.

4.The quantum hearing took place on 12 January 2015.

5.On 21 January 2015, I handed down the Quantum Judgment, in which I assessed Penta’s damages for Hennabun’s repudiatory breach of the Deed at HK$210,336,448, and ordered Hennabun to pay that amount to Penta together with interest thereon and costs.

6.On 12 February 2015, Hennabun filed a notice of appeal against the Quantum Judgment (CACV 35/2015).  The date for the hearing of that appeal has not yet been fixed.

7.As earlier mentioned, on 13 February 2015 Hennabun applied for a stay of execution and suspension of the operative effect of the Quantum Judgment pending the determination of its appeal to the Court of Appeal against the Quantum Judgment.

Applicable principles

8.The principles governing an application for a stay of execution of a judgment pending appeal are well established.  The applicant is required to demonstrate a “good reason” for a stay of execution. Generally speaking, the existence of merely an arguable appeal cannot by itself amount to a sufficient reason to justify a stay.  It is the minimum requirement before a court would even begin to consider granting a stay.  In other words, if the court is not convinced that there exist arguable grounds of appeal, no stay will be granted however exceptional the circumstances may otherwise be justifying a stay of execution.  On the other hand, the existence of a strong appeal or a strong likelihood of success will usually by itself enable a stay to be granted because this would constitute a good reason for a stay.  In most cases, where the court is faced with simply the existence of an arguable appeal, it becomes necessary for the applicant to provide additional reasons as to why a stay is justified.  Commonly, this is done by demonstrating that without a stay the appeal would be rendered nugatory, for example, because of an appreciable risk that the respondent to the appeal would not be able to repay in the event of a successful appeal against a money judgment, or because the failure to grant a stay would have a serious deleterious effect on the applicant.  In considering an application for a stay pending appeal, it would be impractical and even undesirable for the court to go deeply into the merits or strengths of the appeal, although the court must still form a preliminary view of these aspects.  For the above principles, see the judgment of Ma J (as he then was) in Stay Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84.

Discussion

9.In what follows, I shall adopt the expressions and abbreviations as defined in the Liability Judgment and Quantum Judgment.

10.Hennabun has not filed any affidavit in support of the present application.  Mr Adrian Bell SC’s has made it clear in his submissions that Hennabun’s stay application is advanced on the sole basis that it has strong grounds of appeal against the Quantum Judgment and a high likelihood of success in the appeal, and the court is not concerned with the question of whether the appeal may be rendered nugatory should it refuse to grant the stay of execution sought.

11.Hennabun’s grounds of appeal against the Quantum Judgment are set out in its notice of appeal dated 12 February 2015. As stated in paragraph 12 of Mr Bell’s skeleton submissions dated 10 April 2015, Hennabun’s argument is that ultimately Penta has suffered no loss.  Two grounds of appeal have been advanced by Hennabun in support of this contention.

12.First, it is said that Penta was able to and did procure a disposal of the Disposal Shares without the need for any prior instruction from Hennabun.  Accordingly, the absence of any such instruction from Hennabun caused no loss to Penta.

13.Second, it is said that even if it were correct that Penta is entitled to claim damages to reflect any difference between the placement price and the ultimate sale price of any Shares, on the true construction of the Deed, Penta was only entitled to claim the Guarantee Amount (as defined in clause 6 of the Deed) if and to the extent that it had suffered some economic loss as a result of itself acquiring and still holding some Disposal Shares as at the Confirmation Date whose value had fallen below the placement price under the Share Placement.  However, as Penta had not acquired any Shares, it had suffered no loss.

14.As for the first ground of appeal, the short answer, it seems to me, is that the failure of Hennabun to give instruction to Penta to dispose of the Disposal Shares pursuant to clause 5 of the Deed led, directly, to Penta’s inability to recover the Guarantee Amount as calculated under clause 6 of the Deed.  I am unable to see how it can be said that the absence of such instruction from Hennabun caused no loss to Penta.

15.As for the second ground of appeal, which is more substantial, Mr Charles Manzoni SC complains that Hennabun’s argument, in the way in which it is now being put, namely, that Penta has not suffered any economic loss, is a new point, and that had Hennabun properly raised this argument at the trial Penta would have adduced evidence as to the nature of the loss that Penta had suffered.  Whether this ground raises a new point is debatable. In any event, whether Hennabun should be permitted to raise this ground in the appeal is a matter for the Court of Appeal to decide.

16.In so far as the merits of this ground is concerned, Mr Manzoni relies on clauses 1, 4 and 7 of the Deed which seem to me to clearly indicate that, objectively speaking, it was contemplated by the parties that the Shares would, or might, be subscribed by Penta for or on behalf of “funds” that it managed instead of by Penta itself as principal.  Mr Manzoni submits that Hennabun has, at best, an “arguable” appeal, ie one with a reasonable prospect of success as explained in paragraph 9(6) of Ma J’s judgment in Stay Play Development Ltd.  For the purpose of the present application, I am content to proceed on the basis that Hennabun’s appeal is “arguable” in the above sense, but I am unable to accept that Hennabun has strong grounds of appeal against the Quantum Judgment or a high likelihood of success in the appeal.

17.In all, I do not consider that any good reason has been shown for a stay of execution.  Accordingly, I dismiss Hennabun’s summons dated 13 February 2015 with costs to Penta.

Mr Charles Manzoni, SC, instructed by Messrs Linklaters, for the plaintiff

Mr Adrain Bell, SC, & Mr Minju Kim, instructed by Messrs Lam & Company, for the defendant