Credit Lyonnais v Sk Global Hong Kong Ltd

Court:Court of Appeal (Hong Kong)
Judgement Number:CACV167/2003
Judgment Date:15 Jul 2003
CACV000167/2003 CREDIT LYONNAIS v. SK GLOBAL HONG KONG LTD

CACV000167/2003

CACV167/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 167 OF 2003

(ON APPEAL FROM HCA NO.1156 OF 2003)

_________________________

BETWEEN
CREDIT LYONNAIS Plaintiff
AND
SK GLOBAL HONG KONG LIMITED Defendant

_________________________

Coram: Hon Ma CJHC, Rogers VP & Cheung JA in Court

Date of Hearing: 15 July 2003

Date of Judgment: 15 July 2003

Date of Handing Down Reasons for Judgment: 30 July 2003

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REASONS FOR JUDGMENT

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Hon Ma CJHC :

1. On 15 July 2003, we allowed the plaintiff's appeal from the orders of Chu J dated 6 June 2003 and Seagroatt J dated 20 June 2003. I have read in draft the judgments of Rogers VP and Cheung JA. I agree with the reasons they give for allowing the appeal. I wish, however, to make the following observations.

2. I have no doubt that the court retains an inherent jurisdiction, in suitable cases, to make orders staying execution quite apart from those situations expressly permitted under the Rules of the High Court (namely, RHC O.45, r.11, O.47, r.1 and O.59, r.13). By the term "suitable cases" are meant those situations in which the inherent jurisdiction of the court is required to be exercised so as to avoid injustice, prevent abuse, preserve the dignity of the court or to facilitate the administration of justice. This is, of course, the rationale for the existence of the jurisdiction in the first place. An inherent jurisdiction exists even in respect of matters regulated by statute or rules of court (see Halsbury's Laws of England Vol.37 (4th edition) at paragraph 14), although I accept the point made by Rogers VP that the inherent jurisdiction must not expressly conflict with Rules of Court.

3. The existence of an inherent jurisdiction to stay execution must not, however, be confused with the exercise of it. The exercise of the discretion whether or not to order a stay of execution must be made in accordance with principle. In various parts of her judgment, Chu J referred to the "balance of convenience". In my view, this was not the appropriate test. While it would not be right to set out an exhaustive list of relevant factors for the exercise of the inherent jurisdiction in this context, it is important to bear in mind that the jurisdiction will only be activated where an injustice would otherwise be caused, to prevent abuse, to preserve the dignity of the court or to facilitate the administration of justice.

4. Where, as in the present case, a party (the judgment creditor) has obtained a judgment against another party (the judgment debtor), the starting (and often, finishing) point is that the judgment creditor should be able to take all legitimate measures to enforce that judgment. That is, after all, his right. The various ways of enforcing a judgment, are of course set out in RHC O.45.

5. Exceptionally, however, the judgment creditor may be prevented from levying execution. I emphasize the exceptional nature of this, for the court is in these circumstances being asked to deprive a successful party of the fruits of the judgment he has obtained. The exercise by the court of its jurisdiction to stay execution under O.45, r.11, O.47, r.1 and O.59, r.13 demonstrates this. Thus, a stay of execution may be granted where :-

(1) New evidence emerges after the relevant judgment, showing that it was not valid : - see Tam Ho Man v Wong Kwok Tai, unreported, 20 October 1986 [1986] HKLY 705. This case dealt with the court's jurisdiction under RHC O.45, r.11.

(2) In certain circumstances, the judgment debtor has a claim against the judgment creditor yet to be determined. This may even include situations in which the corporate veil should be pierced : - see Burnet v Francis Industries Plc [1987] 1 WLR 802 (a case dealing with the UK equivalent of RHC O.47, r.1).

6. I see no good reason why the inherent jurisdiction of the court to stay execution generally should not equally apply to those situations referred to in the previous paragraph.

7. But what if the reason for the application for a stay of execution is the possibility or even reasonable prospect of a compromise being reached between the judgment debtor and its creditors in general, or of a restructuring of the judgment debtor's debts? It will be seen that in the present case, the application for a stay of execution before Chu J was put essentially on the basis that the majority of the defendant's creditors wished to continue settlement or restructuring negotiations with the defendant and its Korean parent.

8. In my view, this does not provide any reason to order a stay of execution : -

(1) The starting point is that a judgment creditor is entitled to enforce the judgment he has secured against the judgment debtor.

(2) In any event, as a matter of principle, it is somewhat difficult to see why the interests of non-parties (such as the defendant's other creditors or even its Korean parent's creditors) should be taken into account by the court in the first place. A civil action between two or more parties is normally one in personam, where the court is required to adjudicate on the rights and liabilities as between those parties alone. Were it otherwise, non-parties would then be able to have locus standi to intervene in that action. This is of course possible under RHC O.15, r.6 but the circumstances in which intervention is permitted under that Rule are somewhat circumscribed. They certainly would not cover intervention by creditors of a defendant unless those creditors had some interest directly related or connected to the subject matter of the action.

(3) Of course, certain proceedings by their nature will require the court to take into account the interests beyond the named parties to the action. Admiralty actions in rem provide a ready example. In winding-up petitions, the court is required to take into account the interests of creditors at all times. As I have said, however, this is not the position in an ordinary action in personam.

(4) The only situation in which the courts have appeared to take into account broader interests when considering question of execution, have been where the judgment debtor was in the process of being wound up or where liquidation or some form of scheme of arrangement was imminent : - see the decision of the House of Lords in Roberts Petroleum Ltd v Bernard Kenny Ltd [1983] 2 AC 192 and the decision of Hunter J at First Instance in Wardley Ltd & Ors v Aik San Realty Ltd & Anor [1985] 2 HKC 695. These cases, and similar cases, deal essentially with the situation where a statutory scheme for the pari passu distribution of the judgment debtors' assets amongst its creditors (whether by winding-up or scheme of arrangement) is either in place or imminent. In these circumstances, it would then be at least unfair and more likely an abuse, for the judgment creditor to gain an unfair advantage over other creditors. It would also seem somewhat pointless for the court to allow a judgment creditor to do so. It is therefore not surprising that the court would in these circumstances step in to prevent an abuse. Here, the court is not so much taking into account the wishes of non-parties as recognizing that it must not allow a situation to occur that would be contrary to statute (viz. the statutory scheme for the orderly and fair distribution of an insolvent company's assets to its creditors) or would usurp the jurisdiction of other courts (such as the Companies Court).

(5) Other than the special situations I have just referred to (i.e. liquidation or some other statutory schemes being either in place or imminent), it would not be a correct exercise of discretion to take into account the interests or wishes of non-parties at the expense of those of the judgment creditor.

(6) In his submissions, Mr Reyes SC argued that the court should order a stay whenever a judgment debtor was or was likely to be insolvent and there was a "reasonable prospect" for a scheme of arrangement. He relied on Rainbow and another v Moorgate Properties Ltd [1975] 1 WLR 788 at 793-4 and Roberts...

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