CHAN MAN SHUN v. SZE CHING LOK

CACV 47/2019

[2020] HKCA 458

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 47 OF 2019

(ON APPEAL FROM HCA NO. 1170 OF 2014)

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JUDGMENT

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Hon Chu JA giving the judgment of the Court:

Introduction

1.  This is the plaintiff’s application that the defendant provides security for his costs in this appeal in the sum of $300,000 or such other sum as the Court shall deem fit.  The defendant opposes the application.  Both parties have filed affirmations and lodged written submissions.

2.  Having considered the papers, we are of the view that it is appropriate to deal with the application based on the written submissions only without an oral hearing, pursuant to Order 59 rule 14A(1) of the Rules of the High Court, Cap. 4A.

The application for security for costs

3.  On 31 January 2019, the defendant filed the Notice of Appeal to appeal against the judgment of Deputy High Court Judge Joseph Kwan given in HCA 1170 of 2014 on 4 January 2019, ordering the defendant to pay the plaintiff $3,600,000 together with interest and costs of the action.  The appeal has yet to be listed for hearing. 

4.  On 7 August 2019, the plaintiff’s solicitors wrote to the defendant requesting him to provide security for the costs of the appeal in the sum of $300,000.  The letter did not enclose any skeleton bill of costs.  Nor did it provide the quantification or basis for the requested amount.  The letter asked the defendant to make a counter-proposal if the quantum was not agreeable to him.  The defendant did not respond to the letter.  On 2 September 2019, the plaintiff took out the present summons.

5.  The principal ground on which the plaintiff makes the present application is that the defendant is impecunious and that it will be difficult and expensive to enforce a costs order against him if his appeal was unsuccessful.  The plaintiff also contends that the appeal lacks merit.

Relevant legal principles

6.  Under Order 59 rule 10(5) of the Rules of the High Court, the Court of Appeal may, in special circumstances, order that security be given for the costs of an appeal as may be just.  It is 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, if unsuccessful, or where the respondent would encounter difficulties or delay in recovering his costs from the appellant in the event the appeal was unsuccessful. The court, however, has a discretion and is entitled to consider other relevant factors such as the strength of the appeal to determine whether or not it would be just to order that security for costs be provided.  Once a case of impecuniosity is demonstrated, it is generally up to the appellant to demonstrate countervailing factors militating against an order being made: See Chung Kau v. Hong Kong Housing Authority & Others [2004] 2 HKLRD 650 and Hong Kong Civil Procedure 2020 Vol.1 paras.59/10/26 and 59/10/27.

Impecuniosity of the defendant

7.  In contending that the defendant is impecunious, the plaintiff relies on the following matters:

(1)  The defendant had applied for legal aid in HCA1170/2014;

(2)  The defendant was unrepresented throughout;

(3)  The defendant failed to pay the costs previously ordered against him (not the costs of the action), even though it was only a small sum of $5,750; and

(4)  At the trial, the defendant had repeatedly told the Judge that he had financial difficulties.  In particular, the defendant said he had borrowed money from Mr Lui on several occasions in order to sustain his hostel business.  

8.  In his affidavit opposing the application, the defendant said nothing about his financial position.  He did not deny the plaintiff’s contention that he was impecunious. Nor did he dispute the matters relied on by the plaintiff (see [7] above).  In fact, he complained in [3] of the affidavit that the present application was a strategic move by the plaintiff to deprive him of his right to appeal at a time when his financial situation was at a low point.  The defendant also stated in [12] that he had applied for legal aid in this appeal on 8 October 2019.    

9.  In the written submission lodged on 22 November 2019, the defendant said that he was not 100% sure he was liable to pay the plaintiff $5,750 as he did not recall seeing an order or any document to this effect and the plaintiff’s solicitors had not made a demand for it.  It was further said that the plaintiff was wrong to speculate that he was insolvent. 

10.  On the materials before the court, we are satisfied that the plaintiff has demonstrated that the defendant is impecunious, and/or he will encounter difficulties or delay in recovering his costs of the appeal from the defendant if the appeal were to be dismissed.  We are satisfied that the plaintiff has made out a case of special circumstances for requiring security for costs to be provided.

Merits of the appeal

11.  It is evident from the Judgment that the crucial issue underlying the disputes and the main issues is the credibility of the parties and their witnesses, and also the veracity of the oral and documentary evidence.  The Judge had the benefit of seeing and hearing the witnesses and examining the evidence.  The Judge accepted the plaintiff’s evidence and case as credible, and doubted the evidence of the defendant and his witness and the evidence he adduced.  He rejected the defendant’s case as inherently improbable.  On this basis, he found against the defendant on the three issues to be tried and entered judgment for the plaintiff.

12.  The notice of appeal contained a total of 13 grounds of appeal, which are primarily challenges against the factual findings made by the Judge and the adverse inferences he drew against the defendant.  It did not, however, set out the basis of the challenges.  On 18 February 2019, the Registrar of Civil Appeals directed the defendant to provide a succinct and focused summary in table form setting out the specific parts of the Judgment that the defendant sought to challenge.  On 25 March 2019, the defendant filed a 15-page table that challenged almost all of the Judge’s finding of facts as well as the Judge’s assessment of the credibility of the witnesses and the veracity of their evidence.

13.  We are not satisfied that the defendant has demonstrated that his appeal has a high chance of success that we should not order security against him.

Security to be ordered

14.  We next consider the amount of security to be ordered.  Both in the pre-application letter to the defendant and in the plaintiff’s affirmation in support of the application, there was no itemised estimate of the anticipated costs of the appeal.  Despite an amount of $300,000 was sought, no breakdown was given for it.  At the direction of the Court, the plaintiff’s solicitors made an affirmation on 31 December 2019 exhibiting a skeleton bill of costs.     

15.  The skeleton bill came to a total of $299,700.  It has included the costs of the present application for security for costs. The solicitors’ costs for the application (Part 1) is $45,950. The amount of counsel fee for the application cannot be ascertained because there is no breakdown for counsel fee (Part 6, item (a)).

16.  We have considered the items in the bill of costs.  We note that while the defendant had filed lengthy documents in the appeal and in the present application which will require time to peruse and consider, the present application and the appeal are not complex and do not raise difficult points of law.  The papers involved in the appeal would have all been considered in the trial below. Likewise, a fair amount of the arguments advanced by the defendant had been canvassed at the trial.  Taking the matter in the round, we are of the view that the appropriate amount of security to be ordered is $150,000. 

Costs of this application

17.  The usual rule is that costs will follow the event so that the successful party will usually be awarded the costs of the application. In this application, however, we will make no order as to the costs of the application.  Our reasons are twofold.  First, when the plaintiff wrote to the defendant to request for security for costs, an itemised estimate of the costs was not supplied to the defendant.  A such, the defendant had not been afforded a proper opportunity to consider the request before an application was made to the court.  Second, when the plaintiff filed the present application, his supporting affirmation also did not exhibit an itemised estimate.  Had it not been for the subsequent affirmation of the solicitor exhibiting the skeleton bill of costs, the Court would have been reluctant to consider and grant the application: see Hong Kong Civil Procedure 2020 Vol.1 para.59/10/35.           

Disposition

18.  The orders we make are as follows:

(1)  The defendant shall within 30 days from the date of handing down of this judgment give security for the plaintiff’s costs of this appeal in the sum of HK$150,000, by making payment into court of the said sum;

(2)  Until the defendant has given the security ordered in (1) above and notice thereof is given to the solicitors for the plaintiff (such notice to be given on the same day as the lodgement is made), all proceedings in this appeal are to be stayed;

(3)  In default of the defendant giving security as ordered in (1) above, this appeal do (upon the solicitors for the plaintiff certifying such default to the Registrar of High Court) stand dismissed out of this court without further order;

(4)  In the event that the appeal is dismissed in the circumstances provided for in (3) above, the defendant shall pay the plaintiff the costs of this appeal, such costs to be taxed if not agreed; and

(5)  There is no order as to the costs of the plaintiff’s application for security for costs.