SUNIL KHEMANEY AND ANOTHER v. VIJAY KHEMANEY

HCAP 4/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PROBATE ACTION NO. 4 OF 2005

_________________________

_________________________

_________________________

______________________

D E C I S I O N

______________________

Application

1. This is an application by the Defendant against the 1st Plaintiff for security for costs pursuant to Order 23 rule 1 of the Rules of the High Court (“RHC”).

Background

2. Mr. Govind Rupchand Khemaney (“the Deceased”) died on 17 May 2000, leaving the following issue:

(a)	Kamini Shahani (“the Daughter”)
(b)	Vijay Khemaney (“the Defendant”)
(c)	Sunil Khemaney (“the 1st Plaintiff”)

3. On 20 October 2003, the 1st Plaintiff applied under HCAG 010027/2003 to the Probate Registry for the letters of administration in respect of the estate of the Deceased (“the Estate”).  However, the application could not be processed as the Defendant had on 26 July 2003 filed a Caveat (HCCA 001583/03) against the sealing of any grant to the Estate.

4. The 1st Plaintiff then on 17 March 2005 commenced the present proceedings against the Defendant to resolve their disputes.  The Daughter was named the 2nd Plaintiff because she had assigned her interest in a company Apex Rich Limited in the Estate to the 1st Plaintiff by an assignment dated 16 January 2001.

5. The Defendant defended for the proceedings and counterclaimed against the Plaintiffs.  In short, the Plaintiffs’ case is that the Deceased died intestate and as such, each of the parties hereto is entitled to 1/3 of the Estate.  On the other hand, the Defendant submitted that the Deceased died testate and left a Will dated 15 September 1999.

6. The pleadings stage herein has been deemed closed.  On 13 July 2005, this Court gave usual directions as to discovery and exchange of evidence, including a specific one:

“

5.

each party shall be at liberty to call one expert witness on handwriting and that upon prior agreement between the parties and prior appointment made with the Probate Registry, the parties’ experts do attend a joint examination to take place at the same time at the Probate Registry of the original of a Will dated 15 September 1999 (‘Will’) annexed to the Defendant’s application for Letters of Administration filed on 20 November 2003 under HCAG 011208/03;”

So far, apart from the filing and serving of the lists of document, both parties have not complied with the directions.

7. On 12 December 2005, the Defendant took out the present application against the 1st Plaintiff.  The substantive argument of the matter was heard before me on 26 July 2006.  Ms. Teresa Wu of Counsel acted for the Defendant while Mr. Lee of Messrs. Hobson & Ma represented for the 1st Plaintiff.  Having heard from the parties, I reserved my decision to be delivered.  I now do so.

Ruling

8. Upon consideration of the evidence authorities and submission from the parties, I have come to the conclusion that the Defendant’s application is to be allowed in the sum of HK$500,000.00.  My reasons appear as follows.

The principles

9. Both Ms. Wu and Mr. Lee submitted a number of authorities on the applicable principles under application for security of costs.  I do not consider them differ much from each other.  For our purpose, I set out the followings:

(a)	Paragraphs 23/3/3 from page 407 to page 408 of the Hong Kong Civil Procedures 2006 (“HKCP 2006”) contain useful guidance.
(b)	A good summary can be extracted from page 539 to page 542 of Keary Developments v Tarmac Construction Ltd [1995] 3 All ER –
	“	1.	……the court has a complete discretion whether to order security, and accordingly it will act in the light of all the relevant circumstances.
		2.	The possibility or probability that the plaintiff company will be deterred from pursuing its claim by an order for security is not without more a sufficient reason for not ordering security ……
		3.	The court must carry out a balancing exercise.  On the one hand it must weigh the injustice to the plaintiff if prevented from pursuing a proper claim by an order for security.  Against that, it must weigh the injustice to the defendant if no security is ordered and at the trial the plaintiff’s claim fails and the defendant finds himself unable to recover from the plaintiff the costs which have been incurred by him in his defence of the claim ……
		4.	In considering all the circumstances, the court will have regard to the plaintiff company’s prospects of success.  But it should not go into the merits in details unless it can clearly be demonstrated that there is a high degree of probability of success of failure ……
		5.	The court in considering the amount of security that might be ordered will bear in mind that it can order any amount up to the full amount claimed by way of security, provided that it is more than a simply nominal amount; it is not bound to make an order of a substantial amount ……
		6.	Before the court refuses to order security on the ground that it would unfairly stifle a valid claim, the court must be satisfied that, in all the circumstances, it is probable that the claim would be stifled.  There may be cases where this can properly be inferred without direct evidence ……
			However, the court should consider not only whether the plaintiff company can provide security out of its own resources to continue the litigation, but also whether it can raise the amount needed from its directors, shareholders or other backers or interested persons.  As this is likely to be peculiarly within the knowledge of the plaintiff company, it is for the plaintiff to satisfy the court that it would be prevented by an order for security from continuing the litigation ……
		7.	The lateness of the application for security is a circumstance which can properly be taken into account (see The Supreme Court Practice 1993 vol 1, para 23/1-3/28).  But what weight, if any, this factor should have and in which direction it should weigh must depend upon matters such as whether blame for the lateness of the application is to be placed at the door of the defendant or at that of the plaintiff.  It is proper to take into account that fact that costs have already been incurred by the plaintiff without there being an order for security.  Nevertheless it is appropriate for the court to have regard to what costs may yet be incurred.”
(c)	For application regarding plaintiff resident abroad, paragraph 23/3/4 at page 409 HKCP 2006 states, inter alia, that:
	“	There is no inflexible rule or practice that a plaintiff resident abroad will be ordered to give security for costs; the power to make such order is entirely discretionary under r.1(1) (see Re Greater Beijing Begion Expressways Ltd (No. 3) [2000] 3 H.K.C. 608; Aeronave S.P.A. v. Westland Charters Ltd [1971] 1 W.L.R. 1445; [1971] 3 All E.R. 531, CA, and reversing Crozat v. Brogden [1894] 2 Q.B. 30); Re Pretoria Pietersburg Ry (No. 2) [1904] 2 Ch. 359 and see Corfu Navigation Co. v. Mobil Shipping Co. Ltd [1991] 2 Lloyd’s Rep. 52.  On the other hand, as a matter of discretion, it is the usual ordinary or general rule of practice of the court to require the foreign plaintiff to give security for costs, because it is ordinarily just to do, and this is so, even though by the contract between the parties, the foreign plaintiff is required to bring the action in the jurisdiction (Mount Top Management Ltd v. Charter General Holdings Ltd, unreported, DCCJ No. 16001 of 2000, January 23, 2001, citing Porzelack K.G. v. Porzelack (U.K.) Ltd [1987] 1 W.L.R. 420; Aeronave S.P.A. v. Westland Charters Ltd [1971] 1 W.L.R. 1445; [1971] 3 All E.R. 531, CA).”

Application of the principles

10. Mr. Lee conceded that the 1st Plaintiff was ordinarily resident outside the jurisdiction in USA.  He asked this Court to exercise the discretion in favour of the 1st Plaintiff on 3 matters, namely (1) merits, (2) lack of financial means and (3) unavailability of financial assistance.

Merits

11. Both parties argued that merits lie on their own side.  Mr. Lee said that:

“	10.	It is the 1st Plaintiff’s case that the will purportedly made by the Deceased in India dated 15/09/1999 is a forged document.  It is unlikely that the writer of the signature appearing on the Alleged Will and purporting to be that of the Deceased was written in original form by the Deceased.
	11.	The 1st Plaintiff’s plea is not a bare allegation, but based on a preliminary expert opinion conducted on the copy of the Alleged Will.  In order to obtain a more accurate finding, the parties have obtained court direction dated 13/07/2005 for joint examination of the original of the Alleged Will.
	12.	It is submitted that an order for security for costs against the 1st Plaintiff will prevent him from continuing the joint examination of the Alleged Will, hence stifling his genuine claim.”
		(skeleton of Mr. Lee)

12. Ms. Wu argued otherwise and I agree with her.

“	13.	If the 1st Plaintiff, in resisting the Defendant’s application for security for costs, were to rely on his merits, he must be able to show that he is likely to succeed in the sense that there is a very high probability of success or that his case is so obviously strong at this stage that it should become a factor to be weighed in the exercise of discretion.
		……
	14.	The Defendant submits that, by reason of the following, the 1st Plaintiff clearly cannot discharge such onerous burden or threshold:-
		(1)	The Will was executed in accordance with sections 5 and 25 of the Wills Ordinance, Cap. 30 ……
			(a)	The Will was in writing, and was duly signed by the Deceased in India on 15 September 1999.
			(b)	The Deceased intended, by his signature, to give effect to the Will.
			(c)	The Deceased’s signature was made or acknowledged by the Deceased in the presence of 2 witnesses, namely, Trivedi and Mr. Ashok Mudaliar present at the same time.
			(d)	Both Trivedi and Mr. Ashok Mudaliar attested and signed the Will or acknowledged their signatures in the presence of the Deceased.
			(e)	The Will was duly notarized by Mr. JV Subramanian on 15 September 1999.
			(f)	The Will contained a proper attestation clause.
			(g)	At the time of execution of the Will, the Deceased was domiciled in Hong Kong and/or had his habitual residence in Hong Kong.
			(h)	In the premises, the execution of the Will complied with the laws of Hong Kong, and is valid.
		(2)	……
		(3)	The burden and standard of proof in a dispute of the validity of a will has now been settled by the Court of Final Appeal in Nina Kung v. Wong Din Shin (2005) 8 HKCFAR 387:-
			176.	If someone wishes to dispute the validity of a will on the grounds that there is want of due execution, or of testamentary capacity, or of the requisite knowledge and approval, that person bears an evidential burden of putting the relevant ground of challenge in issue.  If the evidence adduced by him or otherwise arising in the case is of a sufficient cogency to raise such an issue, the court, when assessing the evidence as a whole at the end of the case, decides whether the proponent of the will has discharged the persuasive burden in relation to the relevant fact in issue on the balance of probabilities …
		(4)	The Defendant has discharged his legal or persuasive burden of proving on the balance or probabilities that the Will was executed by the Deceased (see the Will …… Trivedi’s letter dated 8 February 2002 …… Trivedi’s Affidavit, stating the circumstances in which the instructions to prepare the Will were given by the Deceased and the manner in which the Will was executed ……).
		(5)	The 1st Plaintiff on the other hand has failed (at least at this stage) to adduce evidence, sufficient and is commensurate with the seriousness of the allegations raised, to prove this case.
	15.	Accordingly, the 1st Plaintiff’s challenge of the validity of the Will is no more than a bare allegation.”

13. On top of the above persuasive legal submission by Ms. Wu, I should also add that the 1st Plaintiff fails this Court because:

(a)	He relies on the “preliminary expert opinion” to prove that the Will is forged.  However, such opinion has not been disclosed and is not put before this Court for the reason of privilege.
(b)	On 13 July 2005, this Court directed a joint examination to verify the authenticity of the Will. However, up to the hearing before me, such examination has not been carried out.

Lack of financial means

14. Mr. Lee told me that the 1st Plaintiff had made a full and frank disclosure of his financial position.  He did not have sufficient means to put up the security.  Any order for security would stifle his genuine claim.

15. With respect, I do not agree.  As pointed out by Ms. Wu,

“	18	(1)	……
		(4)	Payment in the sum of about $500,000.00 to $600,000.00 had been made by Mrs. Anita Shivdasani and Mr. Moti Michandani to the 1st Plaintiff (out of which US$20,000.00 was received by the 1st Plaintiff in or about January 2001).
		(6)	The 1st Plaintiff is definitely not an ‘administrative’ of humble means as he portrays:-
			(a)	He has been actively involved in television and video production.  He runs a business under the name of Gold Moon Productions in the United States ……
			(b)	He has since 31 December 2000 been one of the three directors of ‘Healthy’s Inc’.  Healthy’s Inc operates retail sales of natural foods.  ‘Down to Earth’, being the largest natural foods chain in Hawaii and the largest all-vegetarian natural foods chain in the United States, belongs to Healthy’s Inc ……
			(c)	He is the executive director of a company known as Wai Lana Yoga operated by his ex-wife ……
		(7)	The 1st Plaintiff maintains bank accounts with American Express Bank and Merrill Lynch, both of which impose savings level requirement on their clients ……”
				[skeleton of Ms. Wu]

16. On balance, I agree that the 1st Plaintiff has not made known to this Court his true and up-to-date financial position.  Further or in the alterative, if he indeed has limited means, it is only one of the factors that I should take into account to balance the protection sought by the Defendant.

Unavailability of financial assistance

17. The 1st Plaintiff deposed that he could not locate any financial assistance.  In this respect, it suffices for me to say that: by answering the Defendant’s queries that he should have sought assistance from the 2nd Plaintiff and Hindu religions organization does not advance the 1st Plaintiff’s case as it is for the 1st Plaintiff to satisfy this Court that he has tried his best endeavours to look for assistance from other backers or interested parties within his knowledge.  The 1st Plaintiff has not discharged his burden in this respect.

Quantum

18. I now move to quantum.  Having regard to the circumstances, the proper amount of sufficient security, in my view, ought to be calculated up to the stage of discovery, but not further, for the time being.  If the matter will go further, I see no reason why the Defendant cannot make a second application after the discovery.  The Court can then certainly revisit the parties’ position and have the matter adjudicated further.

19. For the present purpose, I will adopt a broad-brush approach in the followings:

			HK$	HK$
(a)	Costs already incurred
	(item nos. 1 to 23 on the draft bill)			100,000.00
(b)	Application for security
	(HK$40,000.00 costs + HK$50,000.00 counsel fee)			90,000.00
(c)	Further costs up to the completion of discovery
	(i)	costs in witnesses’ statements
		(HK$80,000.00 costs + HK$50,000.00 counsel fee)		130,000.00
	(ii)	costs in joint expert report
		(HK$30,000.00 costs + HK$50,000.00 expert fee)		80,000.00
	(iii)	advice in evidence, inspection and others
		(HK$50,000.00 costs + HK$50,000.00 counsel fee)	100,000.00	310,000.00
				500,000.00

Order

20. In the circumstances, I order that:

(a)	The 1st Plaintiff shall within 21 days from the date of this order provide security for the Defendant’s costs of this action up to the stage of discovery by payment into court in the sum of $500,000.00, failing which all further proceedings herein will be stayed.
(b)	Liberty to apply for further directions.
(c)	There be a costs order nisi that costs of the application be to the Defendant and borne by the 1st Plaintiff, including costs reserved on 21 December 2005 and Certificate for Counsel for hearing on 24 July 2006, to be taxed if not agreed, in any event.