LEE MING CHEUNG v. MOK KA PO

CACV 511/2019

[2020] HKCA 680

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 511 OF 2019

(ON APPEAL FROM HCSD NO. 11 OF 2019)

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D E C I S I O N

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Hon Cheung JA (giving the decision of the Court) :

I.   Application for security for costs

1.1  On 25 October 2019, Deputy High Court Judge William Wong SC dismissed the applicant’s application to set aside statutory demand issued by the respondent dated 15 March 2019 (‘Decision of October 2019’). 

1.2  On 4 November 2019, the applicant filed his notice of appeal appealing against the Decision of October 2019.

1.3  A bankruptcy petition was presented by the respondent against the applicant.  On 8 November 2019, the applicant made an application for an order that the bankruptcy petition against him be stayed or adjourned pending the determination of his appeal (‘Stay Summons’).

1.4  On 5 March 2020, Deputy High Court Judge Le Pichon made a decision that the applicant’s Stay Summons is dismissed (‘Decision of March 2020’).

1.5  On 10 March 2020, the respondent filed a summons with supporting affidavit for security for costs of the applicant’s appeal (‘Security Summons’).

1.6  On 6 May 2020, the applicant filed a summons with supporting affirmation to this Court for the bankruptcy petition to be stayed or adjourned pending resolution of his appeal (‘Renewed Stay Summons’).

1.7  Upon perusal of the documents provided, we will adopt the usual practice of dealing with the Security Summons and the Renewed Stay Summons applications on paper.

II.   Factual background

2.1   The statutory demand was presented against the applicant by the respondent for certain investment monies that have been entrusted to him and which have been invested and resulted in a gain.  Partial payment has been paid by the applicant and received by the respondent.  The respondent seeks for the balance.  The applicant has not paid.

2.2  The applicant relied on four grounds seeking to set aside the statutory demand :

1)  Improper service of the statutory demand;

2)  The debt is not a liquidated sum;

3)  The debt is time-barred; and

4)  The debt is disputed bona fide on substantial grounds.

2.3  In his Decision of October 2019, Deputy High Court Judge William Wong SC held that, on the evidence presented, he was satisfied that while personal service was unsuccessful, the respondent had done all that was reasonable for the purpose of bringing the statutory demand to the applicant’s attention (paragraph 11). He found that the applicant knew of the existence of the statutory demand against him but refused to accept service despite repeated requests (paragraph 19). He held that it was academic to consider what should have been done by the respondent to effect service given that the applicant had evaded service (paragraph 21). He referred to authority and held that the fact that there are disputes of facts does not mean that there are genuine triable issues (paragraph 38). He rejected the argument that there was no liquidated sum of debt because the applicant himself admitted the existence of it and had made part payments which he expressly stated to be part payments (paragraphs 41 to 42).  He further held that the sum is capable of being ascertained by a simple arithmetic process, hence being a liquidated sum under the bankruptcy provisions (paragraph 48). He held that the claim was not time‑barred and it also has been revived (paragraphs 51 to 55).  He was of the clear view that there is no bona fide dispute of the petitioning debt on substantial grounds (paragraph 56).  He held that there is no proper basis to extend time for the application to set aside the statutory demand.

2.4  On the applicant’s summons to stay the bankruptcy petition pending resolution of his notice of appeal, Deputy High Court Judge Le Pichon in her Decision of March 2020 held that no evidence was offered by the applicant other than denying that he has received calls for service from the respondent.  Given the contemporaneous evidence adduced by the respondent on service, this point was not remotely arguable (paragraphs 17 and 25).  She held that the applicant counsel’s effort to distinguish the authorities cited in the Decision of Deputy High Court Judge William Wong SC was incorrect, as it overlooked the Judge’s reasoning that the applicant himself made the admission and acknowledgment that the sum was due and owing, and that such sum was capable of being ascertained by a simple process of arithmetic (paragraph 36).

III.   Legal principles

3.  The Court of Appeal may in special circumstances order an appellant to furnish security for costs of its appeal.  An example is where the appellant is impecunious.  The reason why security is to be ordered in such a situation is to ensure that the respondent to the appeal would not be prejudiced by not being able to recover its costs despite being successful in the appeal.  But even where impecuniosity is shown, the Court still has a discretion not to order security where the appellant is able to show countervailing factors such as he has a high prospect of success in the appeal.

IV.   Grounds of the application

4.  The respondent relied on the following evidence to support her case that the applicant is impecunious :

1)  The applicant persistently failed to pay the debt despite repeated demands and evaded service.

2)  The applicant has never disclosed any of his assets or otherwise proved that he has the ability to settle the debt, except for disclosing limited information that he runs a design and decoration company.

3)  The applicant has never disclosed any financial statement of his company nor any particulars of profit and loss of it.

4)  The applicant has never disclosed whether he or his company is not insolvent.  On the contrary, the applicant in his affirmation stated that he has other business creditors who would take part in the distribution of his assets once a bankruptcy order is granted.  This casts doubt on his financial ability.

5)  There is no evidence that the applicant has any assets.  A land search on the correspondence address of the applicant revealed that the owner of the property is not the applicant.

V.   Our view

5.1  On the evidence, the respondent clearly has established the impecuniosity of the applicant.  The respondent would likely encounter undue delay and expense to enforce a cost order against the applicant: Wong Chung Chi v Yuilley Building Materials Company Limited [2019] HKCA 949 at paragraph 20.

5.2  The applicant has not disclosed any of his assets.  In his 1^st Affirmation, the applicant stated that the respondent should be the one proving his impecuniosity and he has substantial business but without giving details.  He stated that the various documents he has exhibited can show he was not impecunious.  We are of the view that the documents exhibited at LMC‑4 do not even begin to show that he has financial ability to pay the respondent in the event he lost his appeal.  None of the documents exhibited, whether they are business registration documents or tax demand forms from the government, is able to show that he has any valuable assets that can be used to satisfy the costs order on appeal.  The applicant stated that according to his tax returns from 2015 to 2019, he had taxable incomes ranging from a high of $716,937 (2017‑2018) to a low of $303,259 (2018/2019).  However, what he had failed to show is how much is these incomes currently available to satisfy the debt and the costs that he may be held liable to pay. He has not filed any bank statements showing the availability of funds.

5.3  On the merits of the appeal, all that the applicant has done is to repeat basically the same arguments that he had advanced below.  It has not been shown that his appeal has such a high prospect of success that we should decline to order security. 

5.4  In the circumstances, the Court will order security for costs of the appeal.  The respondent seeks HK$426,785 as security.  We are of the view that HK$400,000 is appropriate for security which will include the costs of the present application for security at HK$70,000.

5.5  We will make the following order :

1)  The applicant is required to pay into Court HK$400,000 as security for the respondent’scosts of thisappeal within 21 days from the date of this order.

2)  Pending payment into Court, the appeal is stayed.

3)  In default of payment, the appeal shall stand dismissed without further order together with the costs of the appeal to the respondent to be taxed if not agreed.

4)  The costs of the Security Summons be paid by the applicant to the respondent summarily assessed at $70,000.

5.6  There are no merits in the applicant’s Renewed Stay summonses.  The summons is dismissed with costs to the respondent to be taxed if not agreed.