Case Detail

HCCL 20/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 20 OF 2004

______________________

BETWEEN

	FU SAU KWOK BARRY	Plaintiff
	and
	FOO SAU CHUN RICHARD	Defendant

______________________

Before : Deputy High Court Judge Gill in Chambers

Date of Hearing : 4 October 2007

Date of Ruling : 10 October 2007

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R U L I N G

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1. In the exercise of the court’s discretion as to whether or not to grant a stay of execution pending appeal against judgment after trial, the starting point is that the successful litigant should not be deprived of the fruits of his judgment unless the appellant can justify a stay of execution; that is, that there are good reasons for doing so.

2. Although what amounts to good reasons will be determined by the particular circumstances, commonly those put forward are that the absence of a stay would render the appeal if successful nugatory, and that there are arguable grounds that the appeal will succeed.

3. A useful commentary on how these matters should be assessed was set out by Ma J (as he then was) in the unreported case Wenden Engineering Service Company Limited v Lee Shing Yue Construction Company Limited, HCCT 90/1999.

4. A feature Ma J averted to was that the mere existence of an arguable appeal is generally not by itself considered to be a sufficient reason for a stay; conversely, where there is a strong likelihood that an appeal will succeed, in the normal course this alone will amount to good reason. And he concluded:

“ Ultimately the court embarks on a balancing exercise and uses its common sense but bearing in mind at all times the starting point that the successful party is not to be deprived of the fruits of his success.”

5. The facts of this case are unusual though straightforward.

6. The plaintiff Barry Fu is the younger brother of the defendant Richard Foo.

7. Richard as executor of their late father’s estate had title to shares in the Hong Kong Stock Exchange Limited which he held in trust for Richard, for he was the sole beneficiary in respect of the shares. Without Richard’s permission or knowledge he sold the shares and put the proceeds to his own use.

8. When Barry came to learn of this and confronted his brother, Richard had insufficient resources to buy back the equivalent shares.

9. The parties then entered into what was called the Settlement Agreement, by whose terms Richard was over a passage of time to restore to Barry what he had wrongfully deprived him of.

10. But he defaulted almost immediately. Barry brought this action to recover his entitlement.

11. The issue at trial was not one of liability for there was no defence. After trial I found in favour of Barry to the tune of a bit more than $15.5 million. Judgment was handed down in May 2007.

12. Richard appeals that order upon the grounds that the amount in damages was founded on the wrong premise. It is said of that that the sum should be no more than $5.661 million.

13. The appeal is to be heard in March 2008.

14. In evidence in support of this application, Richard has deposed that Barry is pursuing execution and has a charging order in the amount of the judgment sum over the flat that Richard owns and lives in with his wife. This is worth according to a recent valuation about $14.5 million. There is a mortgage of $5.37 million, leaving an equity of $9.13 million. There is also a charging order over shares worth he says about $70,000.

15. He deposes that there would be serious hardship if Barry were permitted to enforce judgment which would include the loss of the family home, if he were to have to pay the whole of the judgment debt.

16. What he does not record is what his assets and liabilities are, how he proposes to pay the $5.661 million about which there is apparently no dispute, or why he has not taken any steps to pay or reduce this sum.

17. He deposes further that as Barry now lives in Indonesia with no assets in Hong Kong, he will likely take the money out of Hong Kong, which will render a successful appeal nugatory.

18. This is a somewhat ironic stance to adopt given that this action would not have been necessary but for what he did in the first place which amounted to a most serious breach of trust and failure to make good his wrongdoing.

19. And he does not address an open offer made on behalf of Barry that he was prepared upon recovery of such of the judgment debt as was available to pay the balance in excess of the sum of $5.661 million into a holding account pending the outcome of the appeal.

20. Mr Barlow SC leading Mr Soo submitted that on balance Barry’s position is safe and secure given that he has a charging order over Richard’s flat, as well as security over less valuable assets. If the appeal results in a significant reduction of the judgment debt, prospectively to $5 million or a little more, it may be open to Richard to preserve his home by refinancing. He pointed out that Richard had been co-operative in not opposing the imposition of the charging order over the flat.

21. But that said, the burden falls squarely on Richard to give justifiable reasons for a stay to be granted.

22. What he has not done is pay any of the judgment debt or part of it or demonstrate attempts to raise what is due or part of what is due, particularly as to that sum for which on the papers there is apparently no contest. And the security of a 2^nd charge over real estate does not however apparently sound give a judgment creditor payment of his judgment debt.

23. Richard has not stated on oath what he is worth in Hong Kong and abroad.

24. He has not demonstrated that the absence of a stay will render nugatory a successful appeal.

25. He has not demonstrated that there is a strong likelihood that the appeal will succeed, as to warrant a stay based on this ground alone.

26. He has, finally, not demonstrated any other good reason for denying Barry the fruits of his judgment.

27. In all the circumstances I exercise my discretion by refusing the application for a stay and I dismiss the application.

28. Costs are nisi. The plaintiff shall have his costs.

(D M B Gill)
Deputy High Court Judge

Mr D Lam, instructed by Messrs Holman, Fenwick & Willan, for the Plaintiff

Mr B Barlow, SC leading Mr G Soo, instructed by Messrs Albert Dan & Co., for the Defendant

HCCL 20/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.20 OF 2004

-------------------------

BETWEEN
	FU SAU KWOK BARRY	Plaintiff
	and
	FOO SAU CHUN RICHARD	Defendant

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Before : Hon Stone J in Chambers

Dates of Hearing : 15 and 16 September 2004

Date of Judgment : 21 September 2004

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J U D G M E N T

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The application

1. This is an Order 14 application taken out by the plaintiff by summons dated 4 August 2004.

2. Somewhat unusually the summons asks for final judgment “for the amount claimed in the Statement of Claim and Reply and Defence to Counterclaim” together with interest and costs.

The action

3. Sadly, this is a dispute between brothers. Barry Fu, the plaintiff, makes this claim in respect of the failure of the defendant, his brother Richard Foo, to meet his contractual obligations in relation to a Settlement Agreement, dated 28 March 2002, which was entered into between them.

4. The history of the relationship between these parties is set out in the affirmations filed. The essence of the problem is that, upon the death of their father, the defendant, Richard, who was executor of his father’s will, held assets, in particular shares in the Hong Kong Stock Exchange Ltd, on trust for his brother Barry. However, Richard sold some 305,000 these shares without his brother’s authority, and did not account for the proceeds.

5. This led to negotiations, which in turn led to the signing of a Settlement Agreement dated 28 March 2002, a document which was intended to be a global settlement of their outstanding disputes, including the issue of the shares.

6. The defendant is now said to have defaulted under the Agreement, hence this action to enforce it.

7. The prayer in the Statement of Claim requests varied forms of relief. In particular prayer (a) asks for specific performance in accordance with the provisions of the Settlement Agreement regarding the transfer of the 305,000 shares wrongly so sold, alternatively damages are sought “to reflect the value of the shares which should have been so transferred”.

8. This application for summary judgment, which is strenuously contested, has been launched after the completion of the pleadings in this case, the final document in the sequence being the plaintiff’s Reply and Defence to Counterclaim which was served on 5 July 2004.

The argument

9. At the outset of the argument Mr Soo, appearing for the defendant, objected to the late filing of the 2^nd affirmation of Barry Fu, which dealt, inter alia, with share valuations and dividends. He had, he said, had no chance either to deal with or to consider its contents. He suggested an adjournment.

10. In response the court did not grant an adjournment, but ordered that the argument should proceed on the basis of liability only with (if such should be established as appropriate), a corresponding order that damages were to be assessed by a Master. The application thus proceeded upon this basis, and due to time constraints was heard over successive afternoons.

11. Mr Soo also took a further technical point. He said that in its present form the summons was defective in that it sought an amount certain, whereas save for an incidental figure at paragraph (c) of the prayer, there was no such relief on the face of the Statement of Claim.

12. In response, Mr Wilmot on behalf of the plaintiff elected, for the purpose of this summary judgment application only, to pursue the alternative damages remedy, so that if and in so far as the issue of liability could clearly be established, the mathematical calculations of share values and accrued dividends would be suitable for a hearing before a Master upon an assessment of damages.

13. Accordingly, argument proceeded on this basis, absent formal amendment of the summons.

14. It is fair to say that Mr Soo’s address on behalf of the defendant became somewhat more focused as the argument proceeded. He submitted strongly that there were triable issues in this case not susceptible to summary determination.

15. In a nutshell, Mr Soo did not accept that there was any outstanding liability of his client to his brother, in light of payments in the total sum of approximately HK$1.6 million which had been made, together with the transfer of other assets in the form of valuable paintings. He contended that the agreement between the brothers had been varied, and that the monies thus received had been notionally converted into shares, using the market price of the shares as at the date of the receipt of the monies, thereby serving significantly to reduce, or perhaps even to extinguish, the settlement liability to account for the outstanding shares. He did not put it exactly thus, but that, at any rate, was the gist.

16. For his part, Mr Wilmot maintained that the case was clear. The proposition of the defendant deserved to be laughed out of court, he suggested. The Settlement Agreement spoke for itself : see clause 10, which provided that the agreement recited therein may not be amended or varied unless such amendment or variation itself was in writing. And there was no such document.

17. Moreover, he submitted, the idea that what had been received thus far by his client could extinguish the debt created by the conversion of the 305,000 shares was a non-starter, given that the present value of the shares, at that day’s quoted price, was in excess of some HK$5 million. In addition, it was clear on the evidence that the paintings that had been received were simply held as collateral, pursuant to the clear contractual obligation under the Settlement Agreement.

18. Accordingly, he asked that judgment be entered for his client, with damages to be assessed by a Master — which was the approach suggested by this court against the backdrop of the late-served evidence.

Decision

19. This matter is larded with detail, together with allegation and counter-allegation on the face of the affidavit evidence. As may be anticipated, I have no intention of becoming enmeshed in such detail upon a summary judgment application.

20. Within a sea of factual dispute, the one matter which stands proud is the Settlement Agreement itself, a document which undoubtedly has been signed by the parties — indeed, it is not contended otherwise.

21. In light of the terms of this Agreement, and in particular the preclusion therein on amendment/variation absent documentation, it is fair to say that as a matter of first blush this court would not have attached much importance to undocumented claims of a variation in terms of that which now is being canvassed by the defendant, Richard Foo.

22. However, on the second session of this hearing Mr Soo drew my attention to correspondence emanating from the plaintiff’s solicitors, annexing a document in the form of a schedule, purporting to set out a running total in terms of outstanding liabilities. This document contained not only a variation in the number of shares outstanding, which had been reduced to 282,000 — a variation consistent with the contentions as to amendment that have been advanced on behalf of the defendant — but further invoked an interest rate of 30%, a rate said in the letter accompanying this schedule to have been agreed by the defendant in May 2002, two months subsequent to the entry into the Settlement Agreement, the breach of which now forms the plaintiff’s cause of action.

23. I note in passing that the figure of 282,000 shares also has been the subject of the plaintiff’s handwritten amendment to the Settlement Agreement, although this case is being fought on the basis that the full 305,000 shares remains outstanding.

24. Mr Wilmot accepted that, in his words, “there was no getting away” from the fact that his client had “felt that some interim arrangement had been achieved”, but that quite simply this was not binding in light of the terms of clause 10 of the Agreement.

25. I find this difficult to accept at face value, persuasively though it was canvassed. I do not decide this point at this stage. For present purposes, however, it is not easy to understand why the same parties who entered into the ‘head’ Agreement were not at liberty subsequently to agree to vary that Agreement, even if such variation in fact was not written, provided always that such subsequent variation is supported by consideration. Certainly at this stage, on 2 March 2004, demands appear to be being made of the plaintiff precisely on the basis of such varied obligation, and when the matter is raised as a triable issue I do not consider that the point simply can be met by invoking the existence of the prior contractual arrangement. At the very least this begs the question as to what variations indeed were agreed, and upon what basis, and this, it seems to me, is a matter which can only be satisfactorily explored after full discovery, and with the benefit of cross examination.

26. However, Mr Wilmot remained undaunted. Even if, he said, there had been a variation in the contractual obligation concerning these shares, and this variation had been in terms of that which Mr Soo was putting forward on behalf of his client, on the defendant’s best case, and taking the share price of these shares at its lowest over the period in question, there still could be demonstrated to be an outstanding cash entitlement in favour of the plaintiff in the sum of almost HK$650,000. I apprehend that his line of argument in this regard probably was that the court now should be persuaded at the least to award the plaintiff this sum, and that all other matters could be adjourned to a Master in terms of an assessment of damages.

27. I do not accept this approach either. Whilst I do not decide the point at this summary stage, I should be surprised, at least on the basis of the evidence before the court, if in fact the defendant could make good on his contention that no outstanding liability whatever remained towards his brother. Nevertheless, it seems to me that this is not a case wherein liability safely can be determined, without more, thereby leaving a Master to assess damages. What is critical in this case, and in my view that which is the flaw in Mr Wilmot’s alternative approach to the effect that there must at least be owed HK$650,000 to his client, is that any damages assessment must be conducted on the basis of the breach of an established contractual obligation, and until the ambit of such obligation be established — in this case at trial — there can be no possibility of justly proceeding further with this case.

28. Accordingly, the decision of this court on this application is that triable issues exist, as to both liability (and certainly as to quantum, given the dividend claim), and that accordingly leave must be granted to the defendant to defend this action. In my view no appropriate basis has been demonstrated, in light of the present disputed factual situation, to justify imposition of a requirement in terms of conditional leave.

Order

29. In light of the foregoing I make the following order :

(i) There be unconditional leave to the defendant to defend this action;

(ii) There be an order nisi that the costs of this application be reserved to the trial judge.

30. I make a costs order nisi in these terms because it strikes me that this is not a case which should attract the ‘normal’ costs order in instances of the grant of unconditional leave to defend, namely costs in the cause, and that the trial judge should be afforded a degree of flexibility to make such order regarding this application as he thinks just in light of the evidence that is received at trial.

31. Although I presently make no other order, I anticipate that the parties will now proceed to drive this case forward to discovery, and thereafter. Absent agreement, which I should not have thought will be difficult, this court will upon application make appropriate procedural directions.

	(William Stone)
	Judge of the Court of First Instance
	High Court

Mr Richard Wilmot of Messrs Holman, Fenwick & Willan, for the plaintiff/applicant

Mr Gary Soo, instructed by Messrs Albert Dan & Co., for the defendant/respondent

FU SAU KWOK BARRY v. FOO SAU CHUN RICHARD

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