CHOY BING WING v. OFFICIAL RECEIVER & TRUSTEE OF NG YAT CHI, DISCHARGED BANKRUPT ANOTHER

CACV 164/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 164 OF 2003

(On Appeal from HCA No. 667 of 2003)

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DECISION

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1. This is an application by the Defendants for security for costs of an appeal by the Plaintiff against an order of Deputy Judge Muttrie made on 11 June 2003 striking out the Plaintiff's Statement of Claim on the grounds that it disclosed no reasonable cause of action, was scandalous, frivolous or vexatious and was otherwise an abuse of the process of the Court, and dismissing the Plaintiff's action.The deputy judge also made a Grepe v Loam order against the Plaintiff and ordered him to pay the costs of the application to the Defendants, to be taxed on the indemnity basis if not agreed.

Background

2. By way of background, the Plaintiff was a creditor of Ng Yat Chi, a bankrupt. The 1st Defendant was appointed Mr Ng's trustee in bankruptcy in HCB 242/1992.

Plaintiff's application against 1st Defendant

3. In 2001, the Plaintiff issued a Notice of Motion against the 1st Defendant under s.84 Bankruptcy Ordinance ("BO"), a provision under which the court exercises control over trustees in bankruptcy. The motion was for an order that he disclose to the Plaintiff documents connected with the sale of the shares of a company called Alljean Investment Ltd which were part of Mr Ng's assets, and for an inquiry into the 1st Defendant's conduct in connection with the sale after the disclosure of documents.

4. I heard the matter on 8 February 2001 and in a written decision handed down on 15 February 2001, held that the evidence before me did not persuade me that the 1st Defendant was guilty of misconduct as alleged by the Plaintiff.

Costs order

5. I dismissed the motion and gave an order nisi that the costs follow the event, i.e. that the Plaintiff pay the 1st Defendant's costs.

6. The Plaintiff asked for a variation of the costs order nisi on the ground that s.84 BO did not give the court jurisdiction to order costs against him.

7. On 26 April 2001, I heard the application for variation. For reasons set out in a written decision handed down on 2 May 2001, I held,after comparing s.84 BO with s.81 Bankruptcy Act ("BA"), that what in England would only have been an administrative complaint had been turned in Hong Kong (by the different wording in s.84 BO) into legal proceedings, so that the court did have jurisdiction to order costs.

Plaintiff's failure to obtain leave to appeal against costs order

8. The Plaintiff sought to appeal the decision on costs, but not the order dismissing the Notice of Motion. At the hearing before me on 22 July 2003, he said he did not appeal the order dismissing the notice of motion because, contrary to the reasoning set out in the decision on costs, he still regarded the Court's decision in the application under s.84 BO as an administrative act only.

9. Be that as it may, he did seek to appeal the order that he pay the 1st Defendant's costs. However he did not apply for leave to appeal,even though the appeal was from an order of costs only.

Proceedings before Master Kwan

10. On 22 May 2001, Master Kwan sitting as Registrar of Civil Appeals held that his Notice of Appeal was invalid for want of leave.

Proceedings before Kwan J

11. The Plaintiff appealed Master Kwan's order and appeared before Kwan J, arguing that no leave was required. The Plaintiff relied on Hellyer v Sheriff of Yorkshire [1975] Ch 16, derived from what in England is known as the Scherer principle. However, his appeal was dismissed by Kwan J on 7 June 2001on the ground that, following Ho Lee Man v Wong Wai Kai [1993] 1 HKC 183, the Scherer principle did not apply to Hong Kong by virtue of s.14(3)(e) High Court Ordinance.

Proceedings before Court of Appeal (CACV 1233/2001)

12. The Plaintiff appealed Kwan J's decision in CACV 1233/2001.This was heard by the Court of Appeal (Woo JA and Chu J) on 24 May 2002.

13. It would appear that it was at this stage that the Plaintiff sought to rely on the decision of the Court of Appeal (Nazareth VP, Mortimer JA and Keith J) in Li Ngan Shui Brumen v Official Receiver [1995]1 HKC 133 in support of his submission that his notice of motion under s.84 BO was only an administrative complaint for which no costs order could be made against him.

14. The Court of Appeal in CACV 1233/2001 dealt with that submission in paragraphs 16-18 of the judgment which I shall not repeat here. The Court of Appeal in CACV 1233/2001 affirmed the decision on costs dated 2 May 2001 that s.84 BO was distinguishable from s.81 BA and gave rise to judicial proceedings with costs implications.

15. Apart from the reasons set out in paragraphs 16-18 of the judgment of the Court of Appeal in CACV 1233/2001, it might also be observed that the Court of Appeal in Li Ngan Shui Brumen was apparently not addressed on the differences in the bankruptcy legislation of England and Hong Kong. It would appear from the law report that there were no arguments on s.84 BO, nor was it drawn to the attention of that court that in England, a complainant could either go to the Court under s.80 BA (which is word for word identical to s.83 BO) or to the Board of Trade under s.81 BA (which is different from s.84 BO - principally in that in s.84 BO, the inquiry is by the Court at an inter-partes hearing, and perhaps more importantly, there has been added s.84(4) BO which refers to "liability under this section", language which is consistent with civil rights and remedies, rather than simply administrative complaints).

Application for leave to appeal to CFA

16. Not content with the decision of the Court of Appeal in CACV 1223/2001, the Plaintiff sought leave to appeal to the Court of Final Appeal. Leave was refused by the Court of Appeal on 19 July 2002 on the basis that the matter did not involve any question of great general or public importance.

17. The Plaintiff applied for leave from the Court of Final Appeal but on 17 September 2002, the Appeal Committee (Chan, Bokhary and Ribeiro PJJ) dismissed the application under the procedure in rule 7(2) of the Court of Final Appeal Rules.

18. Although no reasons were given for the dismissal, the decision of the Court of Appeal in CACV 1223/2001 would have been before the Appeal Committee. If the Appeal Committee had considered that the Court of Appeal had not dealt with the Plaintiff's submission based on Li Ngan Shui Brumen persuasively, so that there remained (as the Plaintiff suggests) two conflicting decisions of the Court of Appeal, it would not have ordered that the application for leave to appeal be dismissed on the ground that it disclosed no reasonable grounds for leave to appeal.

19. It must therefore be taken that the decision of the Court of Appeal in CACV 1223/2001 in respect of s.84 BO is final.

Costs liabilities

20. The costs orders made against the Plaintiff in the series of hearings above have now accumulated to a sizeable amount of more than $400,000 (after taxation), with interest accruing. No payment has been made by him at all.

Charging Order

21. On 24 March 2003, Deputy Judge To made a charging order against a property of the Plaintiff.

22. The Plaintiff lodged a notice of appeal (CACV 78/2003) against the charging order.

23. The 1st Defendant issued a summons for security for the costs of that appeal on the basis that it would be likely to encounter undue delay or be put to undue expense in enforcing any costs order in respect of the appeal, and that the appeal was an abuse of the process of the court and was vexatious.

24. On 30 May 2003, Cheung JA ordered the Plaintiff to provide security for costs by paying $75,000 into court within 14 days, stayed the appeal in CACV 78/2003 until payment in, and made an order that in default of payment in, the appeal be dismissed with costs to the Defendant. There was also an order that the Plaintiff pay the Defendant's costs of the application for security.

25. I was informed at the hearing on 22 July 2003 that no payment in was made. The Plaintiff sought leave to appeal out of time from the order for security for costs but did not appear before the Court of Appeal (Rogers V-P and Le Pichon JA) on 18 July 2003. His application was therefore dismissed with costs.

New action - HCA 667/2003

26. In the meantime, on 21 February 2003, the Plaintiff had issued a writ in HCA 667/2003 against the 1st Defendant and the 2nd Defendants, who were the 1st Defendant's solicitors in the proceedings referred to above.

27. The Statement of Claim pleaded the proceedings set out in paragraphs 3 - 17 above and alleged that "in the premises, the Plaintiff has suffered loss and damage due to the wrongful conduct of the Defendants in conspiring to procure and induce the Courts into making unlawful, fraudulent and unjust Orders against the Law". The particulars pleaded were that (a) there has been a prima facie case of fraud and/or conspiracy of fraud involving the 1st Defendant, the mortgagee bank and the purchaser of the shares in Alljean, that (b) I had failed in my administrative duty to oversee bankruptcies in asking for cogent evidence without proper regard to prima facie evidence properly laid before the court, that (c) I had erred in concluding that the court had jurisdiction to order costs against him, that (d) the Court of Appeal had "not been honest" in refusing leave to appeal to the Court of Final Appeal, that (e) the Appeal Committee had "not been honest" in refusing leave and that (f) "the Courts have acted in a manner to create gross injustice and ruin to the rule of law in Hong Kong".

Strike-out application

28. The Defendants applied to strike out and for a Grepe v Loam order to prohibit further or new proceedings.

Judgment below

29. On 28 May 2003, Deputy Judge Muttrie heard the application and on 11 June 2003, he handed down a written decision granting the orders set out in paragraph 1 above.

30. On 25 June 2003, the Notice of Appeal in CACV 164/2003 was lodged. It is in respect of this appeal that the Defendants lodged this application for security for costs.

Application for security for costs

31. The grounds for the application are that in light of the Plaintiff's attitude and conduct in refusing to pay any part of the costs ordered in favour of the 1st Defendant in the history of the proceedings set out in paragraphs 3-17 above, the Defendants were likely to suffer difficulty or expense in enforcing a costs order against the Plaintiff, and that the prospects of the Plaintiff's success on appeal are so low that an order for security for costs would be proper.

Guidelines

32. It is recognised that the Court of Appeal would order security for costs of an appeal upon proof (or in some cases, even upon a presumption) that the respondent to the appeal would be likely to encounter undue delay or be put to undue expense in enforcing any order for costs in respect of the appeal, such as where the appellant's conduct indicates that he is likely to resist enforcement of any costs order (Hong Kong Civil Procedure 2002, 59/10/30).

Application of guidelines to present case

33. In the present case, the Plaintiff's failure or refusal to pay any part of the costs liabilities in the proceedings in paragraphs 3-17 above over the course of so many years, his resistance of the charging order before Deputy Judge To in March 2003, his intention to appeal (in CACV 78/2003) from the charging order, and his failure or refusal to pay the security for costs ordered by Cheung JA on 30 May 2003 in that appeal provide clear proof that the Plaintiff would be likely to resist enforcement of any costs order that might be made against him in this appeal (CACV 164/2003).

34. No affirmation was filed by the Plaintiff but in the hearing on 22 July 2003, he opposed the application on the ground that he had refused to pay the accumulated costs because he believed that his view that the court had no jurisdiction to order costs under s.84 BO was right, the Court of Appeal in CACV 1223/2001 had been "dishonest" in refusing to accept his view, and the Appeal Committee of the Court of Final Appeal had been "dishonest" in refusing to let him argue the point before the Court of Final Appeal.

35. Whatever the Plaintiff's beliefs, the upshot still is that he has refused to pay any of the costs which have accumulated with interest accruing. Indeed, given those beliefs, the likelihood is that he will continue to refuse to pay the costs. Although the 1st Defendant has obtained a charging order on a property belonging to the Plaintiff, he indicated at the hearing on 22 July 2003 that he was using the property as his office and that if he loses the use of the property, that would affect his livelihood. It is clear from that that the Plaintiff would not easily give up possession of the property for sale under the charging order.

36. In the circumstances, I am satisfied that there is adequate proof that the Defendants would be likely to encounter undue delay or be put to undue expense in enforcing any order for costs in respect of the appeal (Hong Kong Civil Procedure 2002, 59/10/30).

37. Although it may be possible for an intended appellant to resist an order for security for costs by relying on the likelihood of success of his appeal, that is not the case here.

38. The written decision of Deputy Judge Muttrie striking out the claim and making the Grepe v Loam order is thorough and well-reasoned. As far as the Plaintiff's complaints against the 1st Defendant are concerned, the Plaintiff had failed in his motion in February 2001 and had decided not to appeal that decision, which, for the reasons set out in the decision and above, was a judicial decision and not an administrative one as it would have been in England. In seeking to relitigate the matter, the Plaintiff is in effect trying to lodge an appeal out of time under a fresh action.

39. As for the court's jurisdiction to order costs under s.84 Bankruptcy Ordinance, the Appeal Committee of the Court of Final Appeal has refused leave to appeal that decision. However genuine may be the Plaintiff's grievance about not having his day in court before the Court of Final Appeal, in the court structure here, that has to be the end of the matter (Chow Shun- yung v Wei Pih Stella FAMV 2/2003).

40. Although the Plaintiff has made allegations of "fraud" against the Court of Appeal and the Appeal Committee of the Court of Final Appeal, it would appear that this is only an inference that he has made solely from the fact that the Court of Appeal in CACV1223/2001 has not dealt with the decision in Li Ngan Shui Brumen in a manner which he finds persuasive, and that the Appeal Committee of the Court of Final Appeal has denied him the opportunity to present his appeal to the Court of Final Appeal at an oral hearing. Those can hardly be particulars of fraud. Therefore it is difficult to see how the Plaintiff can say that his prospects of success on appeal are so high that he need not provide security for costs.

41. I have noted that the order as filed did not say that the Plaintiff is prohibited from commencing any further new legal proceedings in respect of the same claim or subject matter in HCB 242/1992 or the writ or statement of claim in HCA 667/2003 without the leave of the Court as in Grepe v Loam (1887) 37 Ch D 168, although the following words in the order showed that it was intended that the Plaintiff would be able to commence new proceedings if he could obtain leave from the court ("and if notice of any such proceedings shall be given to the 1st and 2nd Defendants without such leave being obtained ..."). The omission of a reference to leave in the first part of the order is a matter for amendment of the order by the judge under the slip rule, and the Defendants have by their solicitors given an undertaking to apply to the court within 7 days for amendment of the order so that it follows the formulation in Grepe v Loam.

Quantum of security for costs

42. Finally as to quantum, the Defendants have sought security for costs in the sum of $80,000. This was supported by a skeleton bill showing a bill of $84,000 on a party and party basis. The estimated brief for counsel is reasonable. The hourly rates for the partner in charge of the case and the solicitor assisting him are the usual rates accepted by the taxing masters in party and party taxation. The Plaintiff has estimated 3 hours for the hearing of the appeal. However, given that the Defendants' legal representatives are familiar with the history of the matter, some of the time spent by solicitors preparing for the appeal could be saved and I would reduce the estimate to a sum of say, $75,000.

Order

43. In the circumstances, I would order that the Plaintiff do provide security for the Defendants' costs of this appeal by paying a sum of $75,000 into court within 14 days, and that until such security is given the appeal be stayed, and that in default of such security being furnished within the period of 14 days, the appeal do stand dismissed without further order with costs to be taxed and paid by the Plaintiff to the Defendants.

44. There will also be an order nisi that the Plaintiff pay the Defendants' costs of the application for security. Mr Sakhrani asked for costs to be taxed on the indemnity basis. As this application for security for costs is a discrete interlocutory matter where the Plaintiff was in effect in the position of a respondent, I do not see any grounds for a higher basis of costs save for the time referred to in the following paragraph.

45. I would make an order nisi that the Plaintiff pay the Defendants' costs of their lawyers' attendance on an indemnity basis from 10:00 am (when the hearing was scheduled to start) to 10:25 am (when the Plaintiff eventually arrived). The Plaintiff's excuse for arriving late was that he had thought that the application would be heard by Cheung JA and he did not wish to attend the hearing because of his dissatisfaction with the judge as a result of the hearing on 30 May 2003. Whatever excuse the Plaintiff may have for his late arrival, that had nothing to do with the Defendants. As it was, the time was lost and there was no reason why the 1st Defendant (who is publicly funded) would have to pay the difference in costs between the indemnity basis and the party and party basis.