WING HANG BANK LTD. v. CRYSTAL JET INTERNATIONAL LTD. AND OTHERS

CACV255/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 255 OF 2002

(ON APPEAL FROM HCMP 5014 OF 1999)

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J U D G M E N T

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1. The 1st defendant executed a legal charge in favour of the plaintiff to secure a loan by the plaintiff to him and the 2nd defendant. The subject matter of the legal charge is the property at 65-69 Mount Kellett Road Hong Kong. The 1st defendant failed to repay the loan and the plaintiff commenced proceedings to recover possession of the property subject to the legal charge and repayment of the loan.

2. On 30 April 2002, the plaintiff obtained judgment against the 1st defendant. The plaintiff obtained a declaration that the plaintiff is entitled to possession of the property subject to the legal charge and to exercise the power of sale under the legal charge. In addition the 1st defendant together with the other defendants was ordered to pay a sum of over $175 million with interest.

3. The 1st defendant appeals against the order.

4. The plaintiff now seeks an order that the 1st defendant pay into court a sum of $482,322 as security for the costs of the 1st defendant's appeal. The main ground stated in the affirmation of Lee Shun Wah, assistant manager of the plaintiff, in support of this application is the 1st defendant's impecuniosity.

5. It is stated in the affirmation of Lee Shun Wah that the 1st defendant is a corporation with two shareholders, Mr Ko and his wife, who are also the corporation's sole directors. The corporation was formed solely for the purpose of holding properties which are the investments of Mr Ko and his wife. It carries on no trading or business operation and has no revenue or income.

6. Other properties held by the 1st defendant have been sold by their respective mortgagees in exercise of their power of sale, presumably because the 1st defendant had failed to repay the mortgage loans. The 1st defendant is also facing several actions claiming substantial sums from the 1st defendant, the biggest sum being over $78 million.

7. Counsel for the plaintiff Mr Yuen submits that the 1st defendant, the shareholders, Mr Ko and his wife, are in financial difficulties and it is likely that the 1st defendant would not be able to pay the costs of the appeal if not successful. He submits a bill of the costs likely to be incurred in the appeal and this amounts to $482,322. This is based on a two-day hearing. However Mr Yuen now agrees that one day would be sufficient for the hearing of the appeal and the estimated costs should accordingly be adjusted to $350,000.

8. It is quite clear from the evidence which is not challenged, that the 1st defendant is in financial difficulties. The 1st defendant has no assets or income and is facing substantial claims. The 1st defendant was formed to hold the property investments of the shareholders and these properties have now been sold. The shareholders are unlikely to be able to contribute financially to the 1st defendant to improve the situation. Mr Ko admitted in his affirmation that because he and his wife had contributed $48 million to the purchase of the Mount Kellet Road property, they had exhausted almost all their savings. It would appear to me that the 1st defendant would not be able to pay the costs of the appeal if the appeal is unsuccessful.

9. The practice is that, unless there are special circumstances, the appellant's impecuniosity is a ground to order security for the costs of the appeal. It is not a bar to such an order that the 1st defendant, because he is unable to furnish the security ordered, is prevented to pursue his appeal. This is a matter of the court's discretion. Further more, the appeal is on a point of fact and the defence which the 1st defendant wishes to argue on appeal is one which had not been pleaded and dealt with at the trial. In addition, at the trial, counsel for the 1st defendant had unequivocally indicated that this line of defence would not be relied upon. In my view, it would be difficult for the 1st defendant to argue this new point of law or line of defence on appeal. The 1st defendant, it would appear to me, is unlikely to have a good chance of success on appeal. There are no special circumstances to prevent me from making an order for security for costs against the 1st defendant.

10. Mr Ko in his affirmation stated that the 1st defendant is able to put up $100,000 as security. Mr Wong, counsel for the 1st defendant, submits that the estimated costs is too high since the appeal is going to last for one day and the costs asked for would be excessive.

11. Estimated costs will end up with one-third reduction is not unusual as costs on taxation will normally result in some deduction. In my view, because the appeal is set down for one day, the estimation even on the basis of $350,000 is too high. Having regard to all the circumstances. $200,000 would be a reasonable amount to secure the costs in the 1st defendant's appeal. Accordingly, I order that the 1st defendant to furnish in court the amount of $200,000 as security for the costs of the appeal within 28 days hereof failing which the appeal shall stand dismissed without further order. The costs of this application shall be to the plaintiff.