RE WONG SEE YIN

CACV 78/2019

[2020] HKCA 174

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 78 OF 2019

(ON APPEAL FROM HCB 5289/2016)

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JUDGMENT

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Hon Lam VP (giving the Judgment of the Court):

Introduction

1.  On 21 January 2019, Ng J made an order of bankruptcy against the Debtor, Mr Wong See Yin.  By a Notice of Appeal of 18 February 2019, he appealed against that order.

2.  Before this Court are two summonses respectively taken out by Mr Wong See Yin (“Mr Wong”) and Mr Tin Wan Tung (“Mr Tin”), who are the debtor and the petitioner in the proceedings below (HCB 5289/2016).

3.  The first summons was taken out by Mr Wong on 25 June 2019 for leave to adduce fresh evidence.  In addition, Mr Wong also sought leave to oppose the petition in HCB 5289/2016 on the ground that all orders and judgments leading to the petition were obtained by fraud.  Mr Wong also sought leave from this Court to return the draft appeal bundle upon the determination of the summons.

4.  In support of the first summons, Mr Wong filed two affirmations on 25 June 2019 and 23 July 2019 and lodged two sets of written submissions on 5 August 2019 and 27 August 2019.  In opposition to the application, an affirmation of Maria F C da Luz on 12 July 2019 was filed on behalf of Mr Tin, and a set of written submission was lodged on 21 August 2019. 

5.  The second summons was taken out by Mr Tin on 25 July 2019 requesting Mr Wong to provide security for costs in the sum of $647,500, and in default of such security Mr Wong’s appeal against his bankruptcy order should stand dismissed without further order.

6.  In support of the second summons, two affirmations (namely the 2^nd and 3^rd affirmations of Maria F C da Luz dated 24 July 2019 and 26 August 2019) were filed, two sets of written submissions were lodged on 9 September 2019 and 2 October 2019 respectively.  Mr Wong in turn filed an affirmation on 15 August 2019 and lodged his skeleton submissions on 23 September 2019 in opposition to the application for security for costs.

7.  Having considered the documents and the submissions placed before us, we are of the view that these two applications can be disposed of on the papers without an oral hearing. 

8.  This is our decisions on both summonses.

Background

9.  Mr Wong and two companies controlled by him were the defendants in HCA 1801/2010 and HCA 167/2011.  A company controlled by a third party was the plaintiff in HCA 1801/2010; and Mr Tin was the plaintiff in HCA 167/2011.  In these two actions, the parties had disputes over a business venture in which they had participated.  The plaintiffs alleged that Mr Wong made false representations regarding the business venture.  Mr Wong denied that he had ever made the representations as alleged.  Furthermore, based on the written agreements entered between the parties, the defendants counterclaimed for the arrears of rents and for the overdue mortgage payments.

10.  The detailed factual backgrounds were set out in L Chan J’s decision dated 26 April 2013 at [13] – [43], Wilson Chan J’s judgment of 25 May 2018, [2018] HKCFI 1143 at [3] – [16], and the Court of Appeal’s judgment in CACV 160/2016 [2018] HKCA 799 at [4] – [16]. 

11.  The two companies associated with Mr Wong were wound up by the court on 11 August 2017[1]. The winding up orders were subject to appeal under CACV 219/2017 and CACV 220/2017.

12.  After a 16-day trial, on 25 May 2018, Wilson Chan J granted relief in favour of the plaintiffs in both actions and dismissed the defendants’ counterclaims: see [2018] HKCFI 1143.

13.  On 19 June 2018, Mr Wong filed a notice of appeal under CACV 238/2018 against the said judgment of Wilson Chan J. 

CACV 160/2016

14.  The petition in HCB 5289/2016 was based on a costs order made against Mr Wong by L Chan J dated 26 April 2013.  In the applications before the judge, both the plaintiffs and the defendants in HCA 1801/2010 and HCA 167/2011 applied for further and better particulars of the pleadings against each other.  The plaintiffs also applied for striking out parts of the re-amended defence and counterclaim.  Having heard the parties, the judge ruled in favour of the plaintiffs and disallowed the defendants’ requests.  The judge ordered that the defendants should pay the costs of the plaintiffs in the applications. 

15.  The defendants did not appeal against the said decision of L Chan J.

16.  Bills of costs were taxed before a Taxing Master.  Mr Wong’s application for review was refused[2]. Allocaturs were issued on 2 March 2016. His summons for stay of execution and for appeal against the Taxing Master’s decisions was also dismissed by Wilson Chan J[3].

17.  In the meantime, on 4 March 2016, Mr Tin issued a statutory demand against Mr Wong based on the Allocatur issued against him.  Mr Wong applied to the court to set aside the statutory demand.  The application was summarily dismissed by Anthony Chan J on 29 June 2016.  Mr Wong appealed to the Court of Appeal against the decision under CACV 160/2016. 

18.  The Court of Appeal (Yuen, Kwan JJA, and Au J, as he then was) heard the appeal in CACV 160/2016 on 31 October 2018 and dismissed it by a judgment given on 7 November 2018 [2018] HKCA 799.  On 4 December 2018, Mr Wong filed a notice of motion for leave to appeal against the Court’s decision to the Court of Final Appeal.

19.  By a judgment dated 13 March 2019 [2019] HKCA 301, the Court of Appeal refused to grant leave to Mr Wong to appeal to the Court of Final Appeal.

HCB 5289/2016

20.  After the dismissal of Mr Wong’s application to set aside the statutory demand, on 22 July 2016, Mr Tin presented a bankruptcy petition against Mr Wong under HCB 5289/2016.  After several adjournments, Ng J ordered on 20 March 2017 that the petition should be adjourned until the final determination by the Court of Appeal in CACV 160/2016[4].

21.  After the dismissal of the appeal in CACV 160/2016, the hearing for the bankruptcy petition against Mr Wong was restored.  At conclusion of the restored hearing on 21 January 2019, Ng J gave the following ex tempore ruling[5]:

“ COURT: This is the court’s ruling, I am satisfied with the petitioner’s proof of the debt and the service of the petition. I am not satisfied on the evidence that Mr Wong has a valid counter-claim against the petitioner or he has other grounds to dispute the debt stated in the statutory demand which was based on a costs order and allocator (sic) in respect of petitioner’s bill of costs.

Right, in this circumstances, I grant the usual bankruptcy order with costs.”

22.  Mr Wong brought the present appeal against the said decision of Ng J on 18 February 2019.

Mr Wong’s Application to adduce fresh evidence

23.  In the summons for leave to adduce fresh evidence, Mr Wong enumerated a list of 16 items, comprising documents of over 320 pages[6], which he sought leave to adduce in the appeal.  For the sake of convenience, we categorize the items into 4 groups:

(1)  Documents that had been before the Court of First Instance in HCB 5289/2016, (items 1, 10 and 12);

(2)  Court documents that had been filed in, or were otherwise derived from, other related court proceedings, namely HCA 1801/2010, HCA 167/2011, CACV 160/2016, CACV 219/2017, and CACV 220/2017 (items 2, 4 – 6, 9, 11, 14, and 15);

(3)  Evidences that were presented or adduced in HCA 1801/2010 and HCA 167/2011 (items 3, 7, 8, and 13); and

(4)  Court documents filed in this appeal (item 16) in the context of the summonses.

24.  In his affirmations[7] and written submissions, Mr Wong contended that:

(a)   He did not anticipate that Ng J would make a bankruptcy order against him because the hearing was fixed as a 30-minute call-over hearing.  He said that was an irregularity in the procedure and he was deprived of the chance to adduce evidence to oppose the bankruptcy petition;

(b)  As of the time of the hearing before Ng J, the matter had not been finally and conclusively determined because there were pending appeals in CACV 219/2017, CACV 220/2017 and CACV 238/2018, and there was a pending application for leave to appeal to the Court of Final Appeal in CACV 160/2016;

(c)   It was his intention to request leave from the court at the hearing on 21 January 2019 to file further affirmation to resist the bankruptcy order;

(d)  Ng J failed to consider that he had a genuine counterclaim against Mr Tin and the amount of the counterclaim exceeded the amount stated in the statutory demand; and

(e)   The orders leading to the issuance of the statutory demand were obtained by fraud and should be set aside.

25.  In order to adduce fresh evidence, the applicant must satisfy the conditions laid down in Ladd v Marshall [1954] 1 WLR 1489 at 1491 (see also King Policy Development Ltd v Wan Kin Shing [2019] HKCA 1094 at [5]) by showing that:

(a)   the evidence could not have been obtained with reasonable diligence for use at the trial;

(b)  the evidence would, or might, if believed, have an important influence on the outcome, though not necessarily decisive, and

(c)   the evidence would probably be accepted as truthful.

26.  We note at the outset that the documents contained in Group (1) are not fresh evidence.  Mr Wong can refer to them on appeal (insofar as they are relevant for the appeal) without leave and there is no need to apply for such leave by summons. 

27.  Similarly, documents in Group (4) do not constitute fresh evidence.  However, those documents are only admissible for the summonses.  Once the summonses had been disposed of by our decisions herein, they should not be admissible for the appeal proper. 

28.  All the documents in Groups (2) and (3) (except item 15, which is the notice of handing down judgment dated 7 March 2019 in CACV 160/2016) existed prior to the hearing before Ng J on 21 January 2019.  Mr Wong did not file such evidence nor make any application to adduce such documents at the hearing before Ng J.  According to the transcript, Mr Wong did not indicate to Ng J that he wished to file such evidence.  There is no explanation why Mr Wong did not do so given the long lapse of time between the issue of petition and the actual hearing of the same.  The fact that the hearing was only listed for 30 minutes is not an excuse for Mr Wong’s omission in these regards.

29.  There is no basis for Mr Wong to assume that a bankruptcy order would not be made against him at the hearing of 21 January 2019.  It is usual for bankruptcy order to be made summarily when a debtor did not show any arguable ground for resisting the petition.

30.  The first condition in Ladd v Marshall (supra) has not been satisfied.

31.  Nor do we accept that documents in Groups (2) and (3) would have any influence on the outcome of the appeal.  An application for leave to appeal to the Court of Final Appeal does not operate as a stay of execution.  In light of the judgment in CACV 160/2016, Ng J was fully entitled to proceed with the bankruptcy petition without further adjournment.   

32.  Mr Wong appears to suggest that, because Mr Tin’s pleadings contained false allegation, the costs order leading to the statutory demand was obtained by fraud and should be set said.  In our judgment, this ground is ill-conceived.  The statutory demand was based on the costs order made by L Chan J as a result of Mr Wong’s unsuccessful interlocutory applications in HCA 1801/2010 and HCA 167/2011.  The outcome of the applications had nothing to do with the truthfulness of the pleadings. Hence, even assuming that Mr Tin’s pleadings did contain false allegations, it would not have any effect on the validity of L Chan J’s costs order. 

33.  In any event, having considered the materials relied upon by Mr Wong, we are far from satisfied that he had made out a case of fraud. Even assuming there are discrepancies between the testimonies of the witnesses and the allegations in pleadings, it does not mean that fraud is established.  If the discrepancies did have such serious implications, it is unbelievable that Mr Wong failed to bring them to the attention to Wilson Chan J.  The judge did not find any fraud against Mr Tin or Mr Pong. Instead, he found them to be credible witnesses.

34.  The allegation of Mr Wong about his counterclaim was not a valid ground for resisting the bankruptcy order after such counterclaim had been dismissed by the court after a full trial.  This Court (differently constituted) has clearly explained the legal position at [27] of the judgment in CACV 160/2016 [2018] HKCA 799.  In our view, the complaint that Ng J had failed to consider Mr Wong’s genuine counterclaim against Mr Tin has no merits whatsoever.

35.  In this connection we note that the application in CACV 160/2016 for appeal to the Court of Final Appeal has been dismissed by the Court on 13 March 2019.  Mr Wong is therefore conclusively bound by the judgment in CACV 160/2017 and it is not viable for him to contend that he could still rely on a counterclaim in resisting the bankruptcy order or in the context of an appeal against such bankruptcy order.   

36.  Accordingly, the second condition in Ladd v Marshall (supra) has not been satisfied. 

37.  For these reasons, we refuse to grant leave to Mr Wong to adduce fresh evidence.  Nor do we see any basis to grant the other reliefs as stated in his summons.  We therefore dismiss Mr Wong’s summons filed on 25 June 2019. 

38.  Costs of the summons should follow the event.  We order Mr Wong to pay Mr Tin’s costs of the summons.  According to Mr Tin’s Statement of Costs dated 21 August 2019, his costs of the summons amounted to $92,033.30.  Having considered the statement, we see some rooms for reduction in items B2, D1 – D4, and F1.  By summary assessment, we fix Mr Tin’s costs at the sum of $75,000.

Mr Tin’s Application for Security for costs

39.  Order 59, rule 10(5) of the Rules of the High Court (Cap 4A) provides that the Court of Appeal may, in special circumstances, order that such security shall be given for the costs of an appeal as may be just. Impecuniosity is one of the special circumstances.  The legal principles governing the court’s exercise of discretion to make an order for security for costs are well established and should not be controversial: see Chung Kau v Hong Kong Housing Authority [2004] 2 HKLRD 650 at [14]; see also Re Lau Willaim John (劉錫昌), ex parte Wan Yuk Lin, Alison & Ors CACV 62/2016, 25 April 2017, at [23].  It is not necessary for us to repeat them here.

40.  As held by this Court (differently constituted) in Re Au Wai Ming Ex p Lo Chun Cheong CACV 167/2015, 29 October 2015, an order for security for costs can be made in the context an appeal against a bankruptcy order brought by a bankrupt.

41.  In the 2^nd Affirmation of Maria F C da Luz filed on 25 July 2019[8], it was deposed that Mr Wong was impecunious because:

(a)   He was adjudicated bankrupt by Ng J;

(b)  The costs orders assessed against Mr Wong in favour of Mr Tin and the plaintiff in HCA 1801/2010 were summarily assessed in the total amount of over $1.2 million plus interests, and Mr Wong did not pay any of such costs;

(c)   The costs order made by Wilson Chan J in the substantive judgment was substantial.  Although the costs are yet to be taxed, they likely exceed $10 million; and

(d)   Mr Wong’s properties were repossessed by the bank and the companies associated with him were wound up by the court.

42.  It was further contended that Mr Wong’s appeal had no merits at all.

43.  In his 3^rd affirmation[9], Mr Wong contended that:

(a)   Mr Tin’s application for security for costs should be dismissed because of the lack of leave for him to proceed with the application;

(b)  Mr Tin’s legal aid had been discharged, which indicated that his appeals were “highly possible to be successful”;

(c)   The orders and decisions leading to the costs order against him should be set aside because of Mr Tin’s false allegations made in the pleadings, and the statutory demand was therefore obtained by fraud;

(d)  He had a genuine and substantial counterclaim against Mr Tin; and

(e)   Ng J should not have made the bankruptcy order because of the pending appeals in (among others) CACV 219/2017, CACV 220/2017, and CACV 238/2018.

44.  First of all, Mr Wong’s contention that Mr Tin’s application should be dismissed because of the lack of leave under Section 12(1) of the Bankruptcy Ordinance (Cap 6) to proceed is misconceived.  In taking out the application, Mr Tin did not commence any action or legal proceedings. Instead, he is making an application as a respondent in the context of the appeal brought by Mr Wong.  It is an incidence of the appeal brought by Mr Wong that the other party may seek security for costs to safeguard his financial position on costs in the appeal.  Hence, Section 12(1) of the Bankruptcy Ordinance (Cap 6) cannot be of any avail to Mr Wong. 

45.  Mr Wong put forth no evidence disputing that he was impecunious.  Nor did he dispute the allegation that he had not paid any existing costs orders made against him.  In such circumstances, we are satisfied that he would not be able to pay the costs of the appeal if the appeal failed and that Mr Tin would encounter undue delay or be put undue expense in enforcing any order for costs in respect of the appeal.

46.  Accordingly, Mr Wong must demonstrate there is countervailing factor militating against an order being made.

47.  Having considered Mr Wong’s affirmation and submissions, we can detect no countervailing factor.  Mr Tin’s legal aid was refused because the Director of Legal Aid considered that the costs incurred in the matter had exceeded or would exceed the benefit to be obtained.  Accordingly, the refusal of Mr Tin’s legal aid had nothing to do with the merit of Mr Wong’s appeal.

48.  We have explained why the allegations of fraud and genuine counterclaim could not avail Mr Wong in this appeal.  We cannot see any reasonable prospect of success in the appeal, let alone an appeal with such merit to counter-balance against the potential injustice to Mr Tin if no security is granted.

49.  As regards the quantum of security, the bill of costs exhibited as MDL-11 to the 2^nd Affirmation of Maria F C da Luz lumped up the costs for the security for costs application with the estimated costs for the appeal.  The total sought was $647,500.

50.  Having considered the complexity, the nature of the appeal, and the previous conduct of Mr Wong, we find the amounts sought on behalf of Mr Tin to be excessive.  As we make separate costs orders for the two summonses, the security should only be confined to the costs of the appeal other than those summonses.  We consider that it would be just to fix the amount of such security at $300,000.

51.  Again, the costs of Mr Tin’s summons should follow the event.  We order that Mr Wong is to pay the costs incurred by Mr Tin in the application for the security for costs.  Having considered the Statement of Costs lodged on 2 October 2019, we summarily assessed the amount at $100,000.

Disposition

52.  In summary, as regards Mr Wong’s summons filed on 25 June 2019, we order that:

(1)  The summons be dismissed; and

(2)  Mr Wong is to pay Mr Tin’s costs of the summons summarily assessed at $75,000.

53.  In respect of Mr Tin’s summons filed on 25 July 2019, we order that:

(1)  Mr Wong shall within 28 days pay into court a sum of $300,000 being the security for Mr Tin’s costs of the appeal;

(2)  Pending the aforesaid payment of the security, the proceedings of the appeal be stayed;

(3)  In default of the aforesaid payment of the security, the appeal shall stand dismissed without further order with costs to be taxed and paid by Mr Wong; and

(4)  Mr Wong is to pay Mr Tin the costs of the summons summarily assessed at $100,000.