SONG LIHUA v. LEE CHEE HON (Former Name: QUE WENBIN) AND ANOTHER

HCA 1747/2022

[2024] HKCFI 1111

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1747 OF 2022

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REASONS FOR DECISION

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1.  On 19 September 2023, this Court ordered, among others, (a)  an interim stay of proceedings pending and until the determination of the Plaintiff’s intended appeal in HCCT 111/2022 and (b)  an adjournment of the pending applications sine die with liberty to restore after the expiry of the interim stay, and that the stay and adjournment be conditional upon the Plaintiff paying into Court on or before 10 October 2023 security for the costs of the 1^st and 2^nd  Defendants at HK$200,000 each, and further that in default of such payment in, the Plaintiff’s application for summary judgment by her summons dated 24 March 2023 be dismissed automatically with costs.

2.  The relevant background of this action (and the reasons for my said orders)  was set out in the Reasons for Decision dated 25 September 2023 [2023] HKCFI 2429, which I will not repeat here.  I will also adopt the same abbreviations used in that Reasons for Decision.

3.  Since then, P failed to comply with the condition of paying into court the said amounts in time or at all.  The interim stay therefore did not take effect and P’s application for summary judgment was dismissed with costs without further order.

4.  Moreover, on 14 November 2023, Madam Justice Mimmie Chan dismissed P’s application in HCCT 111/2022 for leave to appeal against her Ladyship’s Order dated 24 August 2023 setting aside the Leave to enforce the Award in Hong Kong.  P has not renewed her application for leave to appeal to the Court of Appeal within time, nor was there any indication from her that she has applied or would be applying for such leave out of time.

5.  The following 3 applications therefore were restored for substantive hearing or disposal before me together with another recent application by D2:

a.  D2’s summons taken out on 15 February 2023 applying for security for costs up to the Case Management Conference to be provided by P;

b.  D1’s summons taken out on 4 September 2023 for leave to file his 2^nd affirmation in opposition to P’s application for summary judgment (“D1’s Evidence Summons”);

c.  D1’s summons taken out on 18 September 2023 applying for security for costs up to the Case Management Conference to be provided by P; and

d.  D2’s summons taken out on 6 February 2024 for the following 2 further consequential orders be provided upon the default of P in giving the security for costs in case such security is ordered (“the Consequential Orders” and “D2’s Consequential Order Application”):

  i.  The sum of HK$4,240,000 paid in Court by D2 on 23 December 2022 under the terms of the Mareva Injunction Order granted herein by Deputy High Court Judge Winnie Tsui on 16 December 2022 be paid out to D2 forthwith; and

  ii.  The registration in the Land Registry of the Writ in this action by memorial number 23010401890074 as against the Property be vacated forthwith.

6.  At the hearing, D1 and D2 were respectively represented by Mr David Chen and Ms Kinsey Kang, both of counsel. P’s solicitors attended but informed the Court that they have no instructions to act for P and that indeed they have applied for, but not yet been granted, an order to cease to act.

7.  At the conclusion of the hearing, I made no order on D1’s Evidence Summons and acceded to the applications of D1 and D2 for security for costs and to D2’s Consequential Order Application and ordered P to provide security for the costs of D1 and D2 in the respective amounts of HK$1,000,000 and HK$1,500,000 on or before 4pm on 22 May 2024, and in default of giving the security this action be dismissed with costs, and in respect of the dismissal as against D2, also with the Consequential Orders, and that the costs of all 4 applications be paid by P to be taxed if not agreed.

8.  These are my reasons.

D1’s Evidence Summons

9.  As this application has been overtaken by the fact that P’s application for summary judgment has been dismissed in the circumstances set out above, I accept Mr Chen’s proposal to make no order on D1’s Evidence Summons.

10.  Regarding costs, the draft 2^nd affirmation of D1 was intended to be filed in answer to P’s 3^rd affirmation filed on 3 August 2023 (“P’s 3^rd”).  P’s 3^rd was supposed to be filed in reply to D1’s 1^st affirmation and D2’s affirmation both filed on 24 May 2023.  However, the whole of P’s 3^rd essentially deposed further about the “Insolvency of the 1^st Defendant” and therein P further produced by exhibit “SLH-14” 29 judgments and decisions in relation to D1 issued by various Mainland Courts totalling 351 pages.  However, this topic of “Insolvency of the 1^st Defendant” was already extensively covered in §§20 to 30 of P’s 2^nd affirmation filed earlier on 11 April 2023 (“P’s 2^nd”). 

11.  In the circumstances, I take the view that D1 should be allowed to file affirmation in reply to these further and new matters raised in P’s 3^rd.  The draft 2^nd affirmation of D1 intended to do precisely that and further deposed to certain new developments in HCCT 111/2022 that have since occurred.

12.  Therefore, D1’s Evidence Summons would have been granted had it been necessary to hear it substantively.  Thus, I ordered costs of D1’s Evidence Summons be paid by P.

The Security for Costs Applications by D1 and D2

13.  The principles governing the exercise of discretion in granting security for costs are well settled.  In respect of a plaintiff who is resident out of the jurisdiction with no assets within, the court would usually exercise its discretion to order security, as it is ordinarily just to do so, and would refuse to so order if there are circumstances making it unjust to do so.  One such circumstance would be that the foreign plaintiff has strong merits, in which case, the foreign plaintiff need to show, without embarking upon a detailed analysis of the merits, that he has a high probability of success.  (see for instance: PT Graha Multimulia Cemerlang v Silver Tech Enterprise Limited HCCW 883/2004, unrep., 1 March 2005, Kwan J (as she then was); The National Trust Limited v Tahoe Investment Group Co., Limited and Others HCMP 2301/2023, unrep., 30 August 2021, K Yeung J).

14.  In the present case, there is no dispute that P is ordinarily resident out of the jurisdiction.  Her respective address given in the Writ herein, in P’s 2^nd, P’s 3^rd and her 2^nd affirmation filed in HCCT 111/2022 was the same one, which was an address in the Liaoning Province (遼寧省)  in the Mainland.

15.  Moreover, as pointed out by Mr Chen, which I accept, P in her affirmations never even said that she has any asset in Hong Kong, not to mention having identified any.

16.  I accept and find that P is still in default of payment of the costs of her summary judgment application that this Court has summarily assessed by its Order dated 15 November 2023 - HK$320,000 to D1 and HK$800,000 to D2.  Moreover, P refused or was unable to pay the total sum of HK$400,000 into Court as a condition for the said interim stay and adjournment.  I am also informed by D1 and D2 that P has not responded at all to various letters sent by their solicitors to P’s solicitors since late November 2023 in relation to various arrangements concerning the restoration of the applications for substantive hearing[1].

17.  On the aforementioned matters, I am satisfied that there is a real risk that P would refuse or be unable to pay the costs of D1 and D2 should such be later awarded to them.

18.  Though P in P’s 2^nd contended that she has a strong case and Ms Kang in her written submissions engaged P in some rather detailed contentions against P’s such stance, I do not see the need, nor think it appropriate, to delve into them by way of a detail analysis.

19.  I accept as Mr Chen submitted and am satisfied that considering the following matter alone, it can be readily shown that P does not have strong merits in her present claim.

20.  In this action, P’s only claim is to set aside the Transaction as void pursuant to section 60 of the Conveyancing and Property Ordinance Cap 219, which provides:

“60. Voidability of dispositions to defraud creditors

(1)  Subject to subsections (2)  and (3), every disposition of property made, whether before or after the commencement of this section, with intent to defraud creditors, shall be voidable, at the instance of any person thereby prejudiced.

(2)  This section does not affect the law of bankruptcy for the time being in force.

(3)  This section does not extend to any estate or interest in property disposed of for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of the disposition, notice of the intent to defraud creditors. (Amended 31 of 1988 s. 22)”.

21.  The section provides that such dispositions to defraud creditors shall be voidable at the instance of any person thereby prejudiced.

22.  P’s pleaded averment making her a “person thereby prejudiced” within the meaning of section 60 and therefore giving her the locus to engage the section is that she is a creditor of D1 pursuant to the Award which remains unsatisfied.  As the Leave has now been set aside as aforesaid, and that has become final as there is no pending appeal, P’s such averment, which is the essential foundation of her claim, has crumpled.

23.  In the premises, the discretion ought to be exercised in favour of ordering the security to be provided by P.

24.  I turn next to consider quantum, on which the parties do not dispute the Court has an unfettered discretion.

25.  D1, by his skeleton bill, estimated that the costs up to the Case Management Conference and including costs already awarded, would amount to some HK$2.1 million.  D2, on his part, estimated his such costs would be some HK$3.1 million.

26.  As is trite, such security ordered to be provided is not meant to be a complete security fully covering all the costs of the opposing party and that the skeleton bills submitted, if need be, would be critically evaluated from the perspective of how likely the receiving party would successfully tax such level of costs on party and party basis.

27.  On the particular facts of this case, I also consider this following matter pertinent.  As accepted by Mr Chen and Ms Kang at the hearing, there are no potential or actual conflict of interest between D1 and D2 (who are father and son)  in their defence against P’s claim, therefore there is no strict need for them to be separately represented.  Such being the case and for the purpose of exercising this discretion, I take the view that I should lower the total costs estimates of D1 and D2 such as to bring the amount of total costs closer to the amount that would have been estimated had they both been represented by the same team of lawyers.

28.  I take note that even though this action is still in an early stage, there have been quite a number of applications, including a rather substantial application for Mareva Injunction.  Moreover, P has been pursuing this action aggressively including countering D2’s application for security for costs by an application for summary judgment (even though serious allegations of fraud and dishonest conducts are involved)  and, as mentioned, P has filed extensive evidence and voluminous exhibits in an attempt, it seems to me, to show that D1 is a man of low commercial probity and credit worthiness, which attracted, if not necessitated, Ds’ vigorous response.

29.  Considering the contents of the skeleton bills and the above matters in the round, I fixed the amount of security to be provided by P in respect of D1’s such costs at HK$1 million and in respect of D2’s costs at HK$1.5 million.

D2’s Consequential Order Application

30.  Evidently, if P’s action as against D2 were to be dismissed upon P’s default in providing the ordered security, the action would no longer be pending, and the Writ herein registered in the Land Registry as lis pendens against the Property, which is registered in D2’s name, should be vacated forthwith in that event.  Likewise, the HK$4,240,000 paid into Court by D2 in place of, and to discharge, the Mareva Injunction granted herein against him should be paid out to him forthwith should P default in providing the security and the action against D2 be dismissed thereby.

31.  Accordingly, I acceded to D2’s application and make provision for the Consequential Orders in the event that this action against D2 were to be so dismissed as aforesaid.

Costs

32.  There is no reason why costs should not follow the event, I therefore ordered the costs of the security for costs applications by D1 and D2 and the costs of D2’s Consequential Order Application be paid by P.  The costs of D1’s Evidence Summons were ordered to be paid by P for the reasons already expressed above.

33.  Lastly, this Court thanks Mr Chen and Ms Kang for their assistance.