Subject: moneylenders; stay of execution; litigation
The Easy Fortune litigation is interesting for two reasons. First, it demonstrates judicial endeavour to balance the legitimate commercial interests of moneylenders against the interests of private borrowers. It contains an important reassertion of the general principles governing stay of execution.
Mr Yung, the borrower, was described as an ‘experienced banker’: [2024] HKCFI 615 [4]; [2016] HKCFI 1501 [46]. The borrower obtained a HK$ 5 million loan from the moneylender, and charged his property as security for the loan.
When the borrower defaulted and bankrupted himself, the anxious moneylender sought to strike out his defence, and obtained vacant possession of his property.
In the first legal battle of striking-out, the borrower won: [2019] HKCA 1055. The Court of Appeal set aside the lower court’s order for possession of the property, and granted leave for the borrower to defend (his case up to HK$ 4 million loan). For the Court of Appeal declared (at [67]):
because of the multiple ‘admitted’ or arguable breaches of the money lending legislation. There was a ‘deliberate and sophisticated’ attempt by the moneylender to evade the statutory controls, and so it would be inequitable to allow the moneylender to enforce the security ([2019] HKCA 1055 [67]).
For moneylenders, some comfort could be drawn from the fact that they won at trial ([2024] HKCFI 615). It was held that the moneylender’s breaches were not ‘intentional’ attempts to evade the statutory controls. The borrower appealed and sought to stay the execution.
The Court of Appeal rightly refused to grant a stay: [2024] HKCA 680. Relying on Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84, the Court of Appeal’s judgment encapsulates the proper approach to stay of execution (at [11]). Here we look at the last four points:
(4) …The existence of an arguable appeal (that is, one with reasonable prospects of success) is the minimum requirement; and cannot by itself amount to sufficient reason to justify a stay;
(5) Where there is an arguable appeal, it is necessary for the appellant to provide additional reasons as to why a stay is justified. The demonstration of an appeal being rendered nugatory is one example;
(6) It is important to stress that the Court must not at any stage forget the position of the successful party. It is always relevant to consider the prejudice that would be caused to the successful party in the event a stay is granted, and if necessary, to impose conditions so as to minimise the prejudice caused to him; and
(7) 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.
Applying this to the case at hand, the borrower had failed to convince the Court of Appeal that he had ‘good reasons’ to justify a stay of execution. ‘Arguable grounds of appeal’ was not sufficient (at [15]). Moreover, the moneylender suffered prejudice. Recall that the litigation has dragged since 2016, and the borrower had (successfully) resisted the enforcement of security, and stayed in his property for 7 years.
July 2024
Dr. Anthony Lai and Dr. Rita Cheung
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