WING FAI CONSTRUCTION CO LTD (In Liquidation) v. CHENG KIT YIN KELLY AND OTHERS

CACV 249/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 249 OF 2010

(ON APPEAL FROM HCA NO. 833 OF 2004)

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Hon Yuen JA:

1.  HCA833/2004 is an action by a company in liquidation (“the Company”) against various persons, including the 1^st Defendant, and the 4^th and 5^th Defendants which are companies.

2.  In December 2005, Poon J (then Deputy Judge Poon) ordered the Company to provide security for costs of that action within 14 days (“the 2005 Security order”).  The Company failed to do so and the action was accordingly stayed.

3.  It would appear that by 2007 the Company had funds to satisfy the Security order (by then out of time) but the liquidators decided not to pursue the matter.

4.  It was not until 2010 that the Company sought an extension of time to comply with the 2005 Security order. However Poon J refused to grant the extension in a judgment given on 19 October 2010 (“the 2010 Non-extension order”).

5.  On 15 November 2010, the Company filed a Notice of Appeal against the 2010 Non-extension order (“the Appeal”). The 1^st Defendant filed a Respondent’s notice within 2 weeks thereafter.

6.  On 14 December 2010, the hearing date of the Appeal was fixed for 1 April 2011.

7.  On 6 January 2011, the 1^st Defendant’s solicitors wrote to the Company’s solicitors asking for security for costs.

8.  On 13 January 2011, the Company’s solicitors declined to provide security.

9.  On 16 February 2011, the 4^th and 5^th Defendants issued a summons that the Company provide security for costs of the Appeal.  The 1^st Defendant was made aware of this in a fax from the 4^th and 5^th Defendants’ solicitors on 21 February 2011.  The date of hearing was fixed for 2 March 2011, some 9 days after the fax.  

10.  The 4^th and 5^th Defendants’ summons for security for costs of the Appeal was heard by Le Pichon JA.  In an oral decision given on the morning of 2 March 2011, her ladyship granted the 4^th and 5^th Defendants’ application for security for costs in the sum of $200,000 to be paid within 21 days (i.e. by 23 March 2011).

11.  In the afternoon of Le Pichon JA’s order, the 1^st Defendant also issued a summons that the Company provide security for costs of the Appeal.  She is seeking security in the sum of $295,000 odd to be paid within 14 days (although para. 2 refers to 28 days for payment).  This is the summons before me now.

12.  The Company is resisting security for costs primarily on the ground that the 1^st Defendant has deliberately delayed making this application until after Le Pichon JA made the order for security for costs in favour of the 4^th and 5^th Defendants.

13.  I agree there has been a deliberate decision to delay the application, it has been made too late and I dismiss it in the exercise of my discretion.  It is well-established that an application for security for costs should be made promptly after the Appeal is set down (see the authorities discussed in para. 59/10/37 of Hong Kong Civil Procedure 2011).   The Appeal was set down on 14 December last year.  Mr Barlow for the 1^st Defendant concedes fairly that the application is late.  The 1^st Defendant’s solicitors had asked for security for costs in correspondence after the Appeal was set down for hearing.  That request was resisted by the Company on 13 January (2½ months before the hearing of the Appeal).  However the 1^st Defendant chose not to issue an application to court in the 1½ months thereafter.  Even when she was informed by the 4^th and 5^th Defendants on 21 February 2011 that they had issued a summons, the 1^st Defendant did not issue her own summons which, if done promptly, could well have been heard together with the 4^th and 5^th Defendants’ summons on 2 March.  There is nothing in the 1^st Defendant’s affirmation in support of her application which indicates that its preparation was a particularly difficult or time-consuming exercise.  The main evidence of the Company’s impecuniosity came from an affidavit of Mr Hill the liquidator filed in May last year.  In other words, I am not persuaded that there is any good reason for the lateness of the application. 

14.  The lateness of this application would prejudice the Company.  As the 1^st Defendant is aware (see the affirmation of her solicitor Miss Melissa Chim para. 31) the liquidators have to undergo a “cumbersome” process involving an application to the Official Receiver’s Office before funds can be released from the liquidation account. From past experience that process took approximately a month.  To order the Company to provide security for costs within the requested period of 14 days would not provide adequate time for processing the request for funds, a matter which is outside the liquidators’ control.  Even to order the Company to provide security within the same period as that ordered by Le Pichon JA (21 days, already 7 days short of the usual period of 28 days) would be meaningless as that would take us to the very day of the hearing of the Appeal.

15.  In the circumstances, I would dismiss the 1^st Defendant’s summons for security for costs with costs to the Company.