JEANNY HELENA FRANSLAY v. FUNG ARIEL MEI SHAN

HCMP 1614/2019

[2020] HKCFI 1301

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1614 OF 2019

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BETWEEN

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D E C I S I O N

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This Application

1.  The Defendant (“Ms Fung”) applies under RHC Order 24 rule 1(1)(a) for security for costs from the Plaintiff (“Ms Fransley”) for these proceedings, where Ms Fransley is seeking an order for committal against Ms Fung for contempt of court.

2.  It is common ground that Ms Fransley is ordinarily resident in Singapore and has no assets in Hong Kong except for a judgement debt of US$4,000,000 and S$20,000 plus interest and costs (the “Judgment Debt”).

Background

3.  The relevant background is largely not in dispute and can be summarized as follows.

4.  On 23 April 2018, Ms Fransley obtained an arbitral award in Singapore against Ms Fung’s husband (“Sunny Sy”), his father, his mother, his sister, and their company Bel Trade Investment Limited (“Bel Trade”).

5.  Ms Fransley then applied in Hong Kong to enforce the award.  On 2 October 2018, judgment was entered in HCCT No 38 of 2018 for US$4,000,000 and S$20,000 plus interest and costs.  The judgment has not been satisfied.  The Judgment Debt remains outstanding.

6.  Ms Fung was a director of Bel Trade until 19 October 2018.  The other director was Noble Regal Limited (“Noble Regal”).  Ms Fung was a director and the sole shareholder of Noble Regal.  She was also the sole director and the sole shareholder of Noble Regal’s company secretary, Global Landmark Limited (“Global Landmark”).

7.  On 23 April 2019, Ms Fransley obtained an order under RHC Order 28 rule 1 requiring Ms Fung to attend court on 20 May 2019 for oral examination and to produce books and records relating to Bel Trade’s assets and liabilities.  Attempts were made to serve the papers on Ms Fung at her home address and at Bel Trade’s, Noble Regal’s, and Global Landmark’s common office address.

8.  At one point, Ms Fransley’s solicitors also left a message with the receptionist at the office address for Ms Fung.  On around 2 May 2019, Ms Fung returned call.  (There is a minor dispute as to what was said during the call.)

9.  Ms Fung did not attend the hearing on 20 May 2019. The Court adjourned the hearing to 10 June 2019.  On 3 June 2019, the Court granted an order for substituted service on Ms Fung by post to and leaving a set of the papers at the office address, by leaving a set of the papers in the mailbox at her home address, and by advertisement in 2 newspapers.  Such service was duly made.

10.  Ms Fung still did not attend the hearing on 10 June 2019.  On 16 September 2019, the Court granted leave for Ms Fransley to commence contempt proceedings against Ms Fung.

The Defence

11.  Ms Fung in affidavit evidence and in her Counsel Mr John Hui and Mr Tommy Cheung’s submissions raised a simple defence:

(a) Since her marriage in 2008, she has been a fulltime housewife.

(b) Her husband Sunny Sy has been responsible for dealing with all correspondence, including those addressed to her and sent to their home address.

(c) She was a director of Bel Trade and Noble Regal in name only.  She never handled any business or any correspondence.  (It is not clear whether she takes the same stance in relation to her being sole director and sole shareholder of Global Landmark.)

(d) She did not deal with and was not aware of the papers which Ms Fransley’s solicitors served at her home address and at the companies’ office address.

(e) Her husband saw the relevant envelopes addressed to her and sent to their home address and knew of the envelopes sent to the office address, but thought them unimportant, did not open them and instructed the office staff not to open them, and did not inform her.  (This is even though he knew the envelopes were from Ms Fransley’s solicitors and must be related to the legal dispute with Ms Fransley.)

(f) It was only on 30 November 2019 when a process server tried to serve papers on her in person, and after she told her husband, that her husband investigated and discovered the importance of the papers and informed her.

(g) She and her husband both “realised that [they] had committed serious mistakes”.  She “deeply regret[s] and [is] remorseful for [her] absence” at the hearings on 20 May and 10 June 2019.

12.  Mr Hui stresses that Ms Fung’s story is not incapable of belief and, since the criminal standard of proof applies in contempt proceedings, Ms Fransley’s case is not certain to succeed.

The Law

13.  Both Mr Hui and Mr Lin acting for Ms Fransley submit that the principles governing applications for security for costs in other usual civil matters also apply in contempt cases.

14.  The principles are well known, including that:

(a) The court has a real discretion whether to order security.

(b) It is a usual rule of practice to require a plaintiff resident broad to give security, because it is ordinarily just to do so.  But this is not an inflexible rule.

(c) If the plaintiff has sufficient assets without jurisdiction which common sense says would be available to satisfy his potential liability for costs, security will not be required.

(d) The relative merits of the parties’ cases are important.  But the court will assess this only a broad-brush approach.  A plaintiff would avoid otherwise needing to provide security only if he can clearly show his case to be genuine and strong with a high probability of success.

     See: Hong Kong Civil Procedure 2020, at 23/3/3 to 23/3/6.

15.  Mr Lin adds 2 spins on how these principles should apply in contempt cases.  First, he reasons that because leave is necessary before a plaintiff can commence proceedings, and the court has the power to impose conditions including the provision of security for costs when granting leave, the fact that the court has granted leave but not imposed such a condition should weigh against a subsequent application for security.

16.  This cannot be correct in general.  There is no requirement that the court must consider all possible conditions when granting leave.  In fact, it would not in a position to do so, not least because it would not know the defendant’s defence.

17.  Second, Mr Lin cites Fabirque Ebel Societe Anonyme v MBO Far East (HK) Ltd [1985] 1 HKC 166, where Hunter J granted retroactive leave for the commencement of contempt proceedings but declined to order security.  He remarked that it would have to be a “fairly glaring or obvious case” in favour of granting security for the court to make an order.

18.  That remark, however, goes to the court’s power under Order 52 rule 2(7) to impose as a condition provision of security when granting leave.  For reasons which I have explained, different considerations apply at the later stage when a defendant applies for security under Order 23 rule 1(1)(a).  What Hunter J said does not change the principles governing such applications.

The Present Case

19.  Applying those principles to the present case, Mr Hui counts in favour of Ms Fung’s application for security the fact that Ms Fransley is resident abroad and does not have substantial assets in Hong Kong except for the Judgment Debt.

20.  Mr Hui further urges that Ms Fung’s story is capable of belief and Ms Fransley’s case is not certain to succeed.  Mr Lin counterargues that his client’s case does have a high probability of success.

21.  I confess that I am not at all impressed by Ms Fung’s defence.  But since the matter will have to be decided at trial, I better not go into the details.  For present purposes, I would not place any weight on the relative merits of the parties’ cases.

22.  At least 5 matters appear to me as tending against Ms Fung’s application for security.  First, these proceedings are the result of her own action and inaction. She agreed to be a director but effectively ignored her responsibilities and potential liability, including by not checking or looking out for any correspondence.

23.  Second, this case is not complex and Ms Fung’s costs should not be substantial.  Any prejudice to her even if ultimately she is awarded but unable to recover costs would not be great.

24.  Third, Ms Fung asks for security in the sum of HK$1,865,550.  This is excessive, especially given the straightforward nature of her defence.

25.  Fourth, the Judgment Debt is an asset of Ms Fransley in Hong Kong which is available to satisfy any liability her may ultimately have for Ms Fung’s costs.  Mr Hui points out that the Judgment Debt is not against Ms Fung.  He also notes that the debt “[has] remained unsatisfied” – which is a skillful way to refer to the judgment debtors’ flouting the arbitral award and the judgment.

26.  The judgment debtors are Ms Fung’s husband and in-laws and their company (Bel Trade), of which she was its 2 directors, in person and through her being a director and the sole shareholder of its other corporate director (Noble Regal).  The debt against these persons is readily available to cover Ms Fung’s costs.

27.  Fifth, on Ms Fung’s own case, she has been a housewife since her marriage 12 years ago, when she was 26.  Given this and given that the present proceedings arose from a dispute with her husband, it is reasonable to expect that her costs in these proceedings are in fact or will be paid by her husband and/or out of the couple’s assets.  It would be rather unfair to Ms Fransley to have to pay security in effect to cover her judgment debtor, and in proceedings which follow from the debtor not paying the judgment.

28.  Considering all the circumstances, especially the first, fourth, and fifth matters mentioned above, and exercising my discretion, I do not think it just to order Ms Fransley to pay security for Ms Fung’s costs.

Conclusion and Costs

29.  The application is dismissed.

30.  I also make an order nisi that costs of this application be to the Plaintiff, to be taxed if not agreed, with certificate for counsel.

31.  I thank counsel for their well written submissions.