ANZ COMMODITY TRADING PTY LTD v. EXCELLENCE RAISE OVERSEAS LTD AND OTHERS

CACV 48/2023, [2024]HKCA 805

On appeal from [2023] HKCFI 179

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 48 OF 2023

(ON APPEAL FROM HCCL NO 4 OF 2017)

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D E C I S I O N

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Applications

1.  We have two applications before us. The first is an application by the 1^st, 9^th and 10^th Defendants (“Defendants”) for an extension of time for filing the Notice of Setting Down out of time. The second application is made by the Plaintiff for security for costs if the appeal is to proceed.

Leave to file the Notice of Setting Down out of time

2.  Judgement was entered after trial in the Plaintiff’s favour by Mimmie Chan J on 20 January 2023. On 16 February 2023 the Defendants’ served a Notice of Appeal in time. On 9 March 2023 the Plaintiff served a Respondent’s Notice. However, the Defendants failed to comply with O59 r5 of the Rules of High Court (“RHC”), which requires an appellant to lodge with the Registrar the documents specified in Rule 5(1) within seven days after the date on which service of the Notice of Appeal was effected.

3.  The circumstances in which they did not comply are explained by Chui James Jie in his two affirmations in support of the Defendants’ application. Mr Chui is a director and shareholder of the 1^st Defendant. Mr Chui explains that it has always been the intention of the Defendants to proceed with the Appeal. In late August 2023 they replaced their original solicitors, MK Lam & Co, with Myra Li & Co. The Defendants were then informed of the failure to comply with RHC O59 r5. The application to extend time was issued on 1 November 2023 following the Plaintiff’s failure to agree to an extension when requested to do so by a letter of 25 October 2023. The application was made eight and a half months after the Appeal should have been set-down.

4.  The Court of Appeal considered how an application of this sort should be determined in Keen Lloyd Holdings Ltd v Commissioner of Customs and Excise[1]. In Keen Lloyd the Notice of Appeal was served on 20 January 2015. The applicants could not comply with RHC O59 r5, because the order had not been sealed and they issued a summons to extend time on 27 January 2015. The Court considered whether an extension should be granted in [28]–[32] of the judgment. In [31]–[32] Lam VP says this:

“31. In respect of the merits of the appeal, we must emphasise that this application should not be turned into a platform for the pre-running of substantive arguments in the appeal. It suffices to say that as far as we can see, the appeal is not so devoid of merits that this Court should summarily pre-empt the same by refusing to grant an extension in the present circumstances.

32. As we see it, this is an application for extension of time under O.3 r.5 and the overriding consideration is the interests of justice. It is essentially a matter of case management and for the reasons canvassed above, we have come to a very clear conclusion that justice demands that the respondents should be given an extension to comply with O.59 r.5(1)(a) until 7 days after our decision.”

5.  The import of this is that determination of an application for an extension of time is largely a matter of applied common sense. The length of the delay and the reasons for the delay are likely to be the primary considerations. The longer the delay and the weaker the explanation for it the more likely it is that prejudice to the respondent and the merits of the appeal will be relevant. We would emphasise that generally the merits should not be considered unless the delay is considerable and the explanation weak and, only then, if it can readily be shown that the appeal is without merit as maybe the case where the issue is narrow and the case is otherwise factually and legally straightforward[2]. The Plaintiff has referred us to a 1983 decision of the English Court of Appeal, which the Plaintiff argues establishes that all relevant factors need to be taken into account, namely, (1) the length of the delay, (2) the reasons for the delay, (3) whether there is an arguable case on the appeal, and (4) prejudice to the Defendant[3]. In our view it does not. It states in the relevant passages that the Registrar, whose decision was appealed, had considered all the relevant factors and that, consequently, his discretion could not be interfered with. It does not suggest an approach, which is different to the one we have described earlier in this paragraph.

6.  In the present case, there is an explanation for the delay, which the Plaintiff does not suggest is false. Although, the delay is not small neither is it extraordinary. The judgment runs to 101 pages and followed a 12-day trial. This is not a case in which it is necessary or practical to conduct a review of the merits; at least not without allowing the application to escalate into a sizable interlocutory application, which is undesirable and is to be discouraged.

7.  The Plaintiff has argued that if we are minded to extend time, it should be on terms that we order that the substantial judgment[4] against the Defendants is paid wholly or in part into court. We do not consider the facts of this case justify so ordering, although as we explain in [10] the delay has some relevance to the Plaintiff’s application for security for costs.

8.  We will make an order that leave be granted to the Defendants to file and serve the Notice of Setting Down within seven days of this Order notwithstanding that the time for doing so has expired and that the costs of the application be paid by the Defendants forthwith such costs to be taxed if not agreed.

Security for Costs

9.  By its summons dated 13 December 2023 the Plaintiff seeks security for costs in the sum of HK$2,706,419.67. It does so on the grounds that the 1^st and 9^th Defendants are incorporated in the British Virgin Islands and have no presence in Hong Kong and, although the 10^th Defendant is registered in Hong Kong, it is an investment holding company owned by the 9^th Defendant and its sole director is a Shanghai resident.

10.  The application is opposed. The first ground on which the Defendants do so is that it is made late. Given that the application was made shortly after the Defendants applied to serve the Notice of Setting Down out of time, we see no merit in this point.

11.  The principles, which guide the Court in determining applications for security are uncontroversial[5].

“1. It is the settled practice to require security for costs to be given by an appellant who would be unable through impecuniosity to pay the costs of the appeal, although there is no absolute rule.

2. Once impecuniosity is demonstrated, it is up to the party resisting the application to demonstrate countervailing factors.

3. In considering the merits of an appeal, a detailed examination is neither required nor desirable—the court should form some sort of preliminary, even instinctive view.

4. There is no rule or practice to the effect that security will not be awarded where the appeal raises a novel or important point of law.

5. The Court will order security where the respondent will 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 only asset(s) available to meet the costs is such that enforcement may be expensive or protracted (e.g. shares in a private company).

6. It has long been the practice of the Court to order provision of security where the appellant is resident out of the jurisdiction, on the basis of the presumption that enforcement will be difficult.”

12.  In broad terms the issue is whether or not the Court of Appeal is satisfied that it is probable that the respondent to an appeal will face material difficulties in enforcing a costs order. It will normally be assumed that if the appellant is resident outside Hong Kong and has no assets here then it is probable that that the appellant will face such difficulties.

13.  The Defendants advance a number of different grounds for opposing the application in addition to its timing. First, the Defendants argue that the Plaintiff has failed to show that the Defendants are impecunious on the basis that it has been the Plaintiff’s own evidence that the persons in control of the Defendants have substantial assets. This seems to miss the point. It cannot be assumed that a costs order will be satisfied because a company’s shareholders are believed to have the financial resources to do so. Secondly, that the de facto controller of the 9^th and 10^th Defendants is resident in Hong Kong. It does not follow that the Plaintiff will have no difficulty enforcing a costs order against those two companies. Thirdly, the Plaintiff has been able to enforce previous judgments. The fact that the Plaintiff had had to enforce judgments, because the Defendants did not pay them supports the application; it does not militate against it. Fourthly, the Defendants argue that the Plaintiff’s position is adequately protected because the 9^th and 10^th Defendants shares in United Biohparma (Holdings) Co Ltd are subject to a proprietary injunction. We disagree with the Defendants’ submission that the absence of a valuation of these shares and the fact that it is not known whether they would be required to satisfy the substantive judgement is not relevant. It plainly is. Clearly there is reason to doubt whether these shares would be available to meet a costs order. Fifthly, that the Plaintiff has been able to enforce judgments overseas. Similarly to the second ground, we think this supports the application. The reason why security is commonly ordered against a foreign incorporated company is precisely because a respondent should not have to look overseas to enforce a costs order with the likely attendant difficulties and additional expense.

14.  Finally, the Defendants invite us to consider the merits of the appeal and contend that it has a substantial prospect of success. It may be that in the kind of straightforward case we have referred to in [5]–[6] the merits will be relevant, but this is not such a case. Assessing the merits in the present case would involve a rehearsal of a relatively complicated appeal on the factual findings after trial.

15.  We are satisfied that there is a material risk that the Plaintiff will encounter difficulties in enforcing a costs order and we will order that the Defendants provide security.

Quantum

16.  It is the normal practice of the court to award security in an amount that will cover the respondent’s costs of the appeal estimated applying the standard basis. In other words, the amount of security will be the court’s estimation of the costs that would be allowed on a taxation on a party-and-party basis[6].

17.  The Defendants submit that the amount sought by the Plaintiff is excessive, because it involves duplication of fee earners, the unnecessary instruction of leading counsel and inflated counsel’s briefs of HK$1,300,000 and HK$650,000 for leading and junior counsel respectively. The breakdown of the costs produced by the Plaintiff includes the costs of the present applications. These we will exclude. They will be dealt with by our costs order.

18.  There appears to be a certain amount of duplication. We also agree that counsel’s fees are excessive. However, we disagree that leading counsel’s fee should be excluded in its entirety, because the Plaintiff did not instruct leading counsel for the trial, which was conducted successfully by Mr Chan. We think it reasonable to assume that if leading counsel had been instructed at trial the Judge would have ordered a certificate for two counsel.

19.  We will order that:

(1)  the Defendants provide security for the Plaintiff’s costs of the appeal in the sum of HK$1,650,000 within 28 days by payment into court or by such form as the parties agree or the court orders;

(2)  There be liberty to apply in writing;

(3)  A costs order nisi that the Defendants pay the Plaintiff’s costs of the summons dated 13 December 2023 on a party-and-party basis such costs to be taxed if not agreed.