LIN MAN YUAN v. KIN MING HOLDINGS INTERNATIONAL LTD AND ANOTHER

HCA 216/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 216 OF 2008

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D E C I S I O N

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1.  The plaintiff (“Lin”) commenced the present action in 2008 against Kin Ming Holdings International Limited (“Kin Ming”) in connection with certain land development in Xiamen, the Mainland.  In 2012, Jose Kho (“Kho”) came to be joined as a party.  Trial of the action has been fixed to be held in September 2014.

2.  This is the application by Kin Ming and Kho against Lin for security for costs of the main action.  Having heard the application, the Registrar refused the application.  This is the appeal.

BACKGROUND

3.  Lin and Kin Ming entered into an agreement in respect of the development of certain land in Xiamen known as Strait City (“the Written Agreement”).  Pursuant to that, deposits in the sum of RMB 130 million had been paid by Lin to Kin Ming.  The Written Agreement provides that if Kin Ming fails to obtain notification of land fee payment from the municipal government by 30 June 2004, the Written Agreement would come to an end.  In that event, the deposit paid would have to be returned to Lin.  However, if approval to lawful development is obtained within 2 years thereafter, the parties’ co-operation should continue.

4.  Kin Ming was unable to obtain the abovementioned notification.  Further, due to changes in the land planning of the Xiamen government, Kin Ming did not obtain the development rights to the lot envisaged under the Written Agreement but was granted rights over a new lot within the boundary of the original site.

5.  Kin Ming took the view that the Written Agreement was terminated; and sought to return the deposit to Lin.  In 2005, Kin Ming commenced HCA 2350/2005, seeking declaration that the Written Agreement was duly terminated.  After hearing, DHCJ L Chan (as he then was) gave default judgment against Lin on 27 January 2006 (“the 2006 Judgment”).

6.  Whilst Lin still complains that she had not been served with the proceedings, the 2006 Judgment was never set aside; and the case proceeded to taxation of costs, in which Lin was legally represented.

7.  By the 2006 Judgment, it was declared that the Written Agreement had been terminated. However, the learned Judge refused Kin Ming’s request to declare that the same had been frustrated, in view of the provisions providing for the revival of the same as mentioned above.  The declaration was therefore granted without prejudice to such possible revival pursuant to the agreement (See the written decision at §§14-17).

8.  Lin then filed a claim against Kin Ming in the Mainland; but was dismissed on the ground that it should have been litigated in Hong Kong.  On 6 February 2008, Lin commenced the present action.

9.  In the present action, Lin alleges that the agreement between the parties was partly oral and partly reduced into or evidenced by the Written Agreement.  The agreement between the parties has allegedly revived, now in respect of the development of the new lot, notwithstanding the earlier termination.

10.  Kin Ming has attempted to strike out the claim.  It was dismissed; and remained so after the appellate court refused to give leave to appeal in May 2010.  The proceedings in the present case continued.

11.  The allegations about the oral terms and the revival of the agreement are denied by Kin Ming.  Further Kin Ming filed its counterclaim in October 2010.  It complains about harassment and threat made by the agent appointed by Lin and her husband on behalf of their company, Xiamen Fu Man Holdings Limited (“Fu Man”). It is alleged that Lin negotiated and concluded the co-operation agreement for the benefit of Fu Man.  Kin Ming claims for injunction and damages.

12.  In line with the contentions in the counterclaim, Kin Ming has at one stage obtained an ex parte injunction; but the same has since been discharged by consent.

13.  In 2012, Kin Ming sought to add Kho, director of Kin Ming, as a party; and to amend the counterclaim.  The applications were eventually heard before DHCJ M Chan (as she then was), who gave leave to Kin Ming on 6 June 2012 (see [2012] 3 HKLRD 550).  Hence, the joinder of Kho not only as the 2^nd plaintiff by counterclaim but also as the 2^nd defendant by original action. The scope of the claim for damages was also expanded.

14.  During the following 6 months, the parties were engaged in other applications, including committal proceedings against Lin and her husband.  Kin Ming and Kho took out the present application for security for costs by summons filed on 16 November 2012.

15.  After some debate as to whether there should be split trial, leave to set the case down for trial was eventually given in March 2013.  As mentioned, trial has been fixed to commence in September 2014, which is estimated to last for 17 days.

16.  The application for security for costs was heard by the Registrar on 18 June 2013. On the same day, he dismissed the application (see his written decision of the same date).

17.  By notice filed on 24 June 2013, Kin Ming and Kho appeal.  Hence this hearing.

18.  Notwithstanding the parties’ different views and emphases, I think the above summary of the background of the action suffices for the purpose of this hearing.

THE PRINCIPLES

19.  Though counsel referred to and made submission on the Registrar’s reasons for decision, this is a re-hearing of the application for security for costs.  I am neither prevented from nor obliged to consider the Registrar’s reasons for his decision for the purpose of my decision.

20.  O.23, r.1 of the Rules of the High Court provides that:

“(1) Where, on the application of a defendant to an action orother proceeding in the Court of First Instance, it appears to the Court -

(a) that the plaintiff is ordinarily resident out of the jurisdiction, or

(b) that the plaintiff (not being a plaintiff who is suing in a representative capacity) is a nominal plaintiff who is suing for the benefit of some other person and that there is reason to believe that he will be unable to pay the costs of the defendant if ordered to do so, or

(c) subject to paragraph (2), that the plaintiff's address is not stated in the writ or other originating process or is incorrectly stated therein, or

(d) that the plaintiff has changed his address during the course of the proceedings with a view to evading the consequences of the litigation, then if, having regard to all the circumstances of the case, the Court thinks it just to do so, it may order the plaintiff to give such security for the defendant's costs of the action or other proceeding as it thinks just.

(2) The Court shall not require a plaintiff to give security by reason only of paragraph (1)(c) if he satisfies the Court that the failure to state his address or the misstatement thereof was made innocently and without intention to deceive.

(3) The references in the foregoing paragraphs to a plaintiff and a defendant shall be construed as references to the person (howsoever described on the record) who is in the position of plaintiff or defendant, as the case may be, in the proceeding in question, including a proceeding on a counterclaim.”

21.  It is the burden of the applying party to satisfy the court that the case belongs to one of the limbs under O.23, r.1(1); and that the opponent will be unable to meet an adverse costs order if made.  The court has discretion as to whether to order security; and will do so if it is just in the circumstances of the case.

22.  In the case of a plaintiff who is ordinarily resident outside Hong Kong, it is ordinary or general practice to order security, as it is ordinarily just to do so: see Hong Kong Civil Procedure 2013 (“HKCP”) at 23/3/4.

WHETHER JUST TO ORDER SECURITY

23.  There is no dispute that Lin is a Hong Kong Identity Card holder.  However, she is a Mainland business woman residing in Xiamen.  Much was said about the reliability of the addresses that Lin has so far provided.  Irrespective of that, her last address in Hong Kong provided is that of her friend’s.

24.  Mr Fung SC (appearing with Ms Lok) for Lin did not dispute, and I think rightly, that Lin is ordinarily resident outside Hong Kong for the purpose of O.23.

25.  Mr Neoh SC (appearing with Ms Wong) for Kin Ming and Kho no longer took the point that Lin was a mere nominal plaintiff.

26.  Points about delay on the part of Kin Ming and Kho in taking out the application as well as enforcement of costs order in the Mainland, Mr Fung SC confirmed, were no longer pursued during this appeal.

27.  Mr Fung SC submitted that entering into the merits of the case would not be suitable for the present purpose either.  This must be right, particularly in view of the background summarised above and dispute that could only be resolved after the long trial ahead.

28.  The remaining difference between the parties really is whether Lin will be unable to meet an adverse costs order, if eventually made.

29.  Mr Fung SC submitted that Kin Ming and Kho fail to discharge their burden of establishing his client’s inability; and that it would not be just to order security.  Mr Fung SC asked me to consider the following circumstances:

(1)   Lin has satisfied previous costs order in HCA 2350/2005.

(2)   Lin has cash deposit in the bank in Hong Kong in the sum of about HK$3 million.

(3)   The bill of costs put forward by Kin Ming and Kho is excessive.

30.  That Lin has satisfied previous costs order in HCA 2350/2005 may suggest her lack of intention to default in meeting an adverse order.  However, in question is not whether her opponents can look to her with confidence that she would likely pay the costs.  The question is whether Lin has in the jurisdiction assets that her opponents can look to for the purpose of enforcing the costs order against her.

31.  Mr Neoh SC pointed out that the previous costs order in HCA 2350/2005 consequential upon the default judgment amounted to about HK$455,000.  The likely costs of her opponents in the present action, even according to the case of Lin in this appeal, would amount to millions.  The substantial difference in the quantum of costs may well affect how one consider the likelihood that Kin Ming and Kho, if successful after trial, would be able to pay such costs.

32.  Then Mr Fung SC argued that excessiveness and exaggeration discounted, the costs of Kin Ming and Kho should come down to an amount well covered by his client’s HK$3 million cash deposit in the bank.  He emphasized that the cash deposit is undisputed affidavit evidence and thus fact.

33.  In her affirmation, Lin stated in one sentence that she has such cash deposit in a bank account in Hong Kong without any details.  I do not understand Mr Neoh SC to be arguing that such statement is untrue.  Instead he argued that such deposit, even if true, does not suffice for the present purpose.

34.  Mr Neoh SC referred to Hoogland Hendricus Antonius v Gino L Lin & Anor, HCA 657/2007 (29 May 2008); and submitted that Lin as a foreign plaintiff needs to show that she has substantial asset within the jurisdiction, namely: the property must of a fixed and permanent nature, which can certainly be available for costs.  In the case cited, cash deposit in bank accounts in Hong Kong would not suffice.  Nor would residential properties.  See also HKCP 2013 at 23/3/6.

35.  I may not necessarily take the view that residential properties within the jurisdiction would not suffice as assets of fixed and permanent nature for the purpose of enforcement of costs order.  But cash deposit in bank certainly would not suffice, because of the ease in operating the account as and when the account holder desires in a place like Hong Kong.  There is just nothing in place that would ensure that the amount would still be there when the adverse order is enforced.

36.  Mr Fung SC emphasized that it is for the applying party to prove the foreign plaintiff’s inability to pay costs.  No doubt this is right.  But the applying party would not necessarily have knowledge about the financial and asset position of the foreign plaintiff within the jurisdiction.  In the ordinary course of events, the applying party should be entitled to security, if the foreign plaintiff adduces no or insufficient evidence of substantial assets within the jurisdiction to counter the contention that he or she does not appear to have the necessary means in Hong Kong.

37.  Mr Fung SC submitted that had Kin Ming and Kho requested, his client would have been prepared to give an undertaking not to remove the amount from the bank account.  Such indication, it appears to me, works against Lin.  That she would have no difficulty in either undertaking to maintain the amount in the bank account or coming up with cash as and when it is necessary to meet an adverse costs order suggests that it would not be unjust or prejudicial to order security. If the amount could be maintained, there is no reason why the same could not be paid into court, which will be normally maintained as bank deposit in the normal course of events.  As to whether the security will stifle her claim because of lack of financial resources or being too close to trial, there is simply no allegation or evidence of that sort.

38.  Considering all the circumstances, I find that this is a case where it is just to order security.

QUANTUM

39.  The bill of costs presented by Kin Ming and Kho is divided into the following parts:

(1) Part I (costs incurred for work done from January 2008 to November 2012 exceeding HK$8,100,000) comprising:

(a) Solicitors’ costs exceeding HK$3,800,000;

(b) Counsel fee exceeding HK$4,300,000;

(2) Part I (costs incurred from November 2012 and to be incurred up to trial in September 2014 exceeding HK$9,800,000) comprising:

(a) Solicitors’ costs exceeding HK$2,100,000;

(b) Counsel fee exceeding HK$7,700,000.

40.  The bill adds up to a total sum in excess of HK$17,900,000.

41.  According to the affirmation in support, the costs ordered in favour of Lin in previous proceedings were not included in the bill; and the same have been paid by Kin Ming.  After making provision for overlap between the action and the counterclaim as well as party and party taxation, it was suggested that security in the sum of HK$13,000,000 would be reasonable.  In court, Mr Neoh SC submitted that it should be no less than HK$8,000,000.

42.  Mr Fung SC asked the court to discount various items of the bill of costs that he described as excessive and illusory.  In this respect, he suggested that the assessment by the Registrar, who is of course experienced in taxation matters, may have reference value.

43.  Mr Neoh SC submitted that this is not a taxation exercise; and that the court should adopt a broad brush approach to decide the amount of security as it is just in the case.  He acknowledged that full security is never ordered.

44.  Both sides acknowledge the relevance of the overlap between the main action and the counterclaim but differ insofar as the extent is concerned.  Reference was made to the decision on the joinder of Kho mentioned above.  As I understand, DHCJ M Chan acknowledged that the counterclaim (for harassment causing general damage and economic loss) is not directly related to the issues in dispute in the main action.  Kho was nevertheless joined because firstly, the facts and the allegations in the counterclaim would be relevant to credibility (see §§17; 19); and secondly, whether Lin should be entitled to specific performance depends on, I believe the learned judge to be saying, the issue of ‘clean hands’ (see §20).

45.  Precision as to the extent of the overlap between the main action and the counterclaim, particularly in the light of how the overlap will manifest in terms of the work involved, and thus the incidental costs is simply impossible.  It is not called for, for the present purpose.

46.  Considering the bill, I can well understand why that, particularly the part regarding solicitors’ costs, raised the eyebrows of those acting and appearing for Lin.

47.  Bearing in mind all the features of the present case, and taking a broad brush approach, I would, with respect, differ from the conclusion of the Registrar in respect of quantum of the security.  I say an amount of HK$6,000,000 should be reasonable security for the costs of Kin Ming and Kho of the main action, including the 17-day trial.

ORDER

48.  I allow the appeal; and set aside the Order.  I make the following order instead:

(1) Lin do provide security for the costs of Kin Ming and Kho of the main action by payment into court of the sum of HK$6,000,000 within 21 days from the date hereof;

(2) Until the above security is provided, all further proceedings be stayed save and except that in default of compliance with (1) above, the main action do stand dismissed with costs without further application or order.

49.  As to costs, I make a nisi order that Lin shall pay to Kin Ming and Kho their costs of and occasioned by the application as well as this appeal.  In the absence of application to vary within 14 days, this costs order shall become absolute. Upon that, unless the parties agree otherwise, costs shall be summarily assessed by the court on paper; and for such purpose, Kin Ming and Kho shall then submit and serve their statement of costs within 7 days; and to which Lin shall submit her written comment within 7 days thereafter.