SZETO KWOK HUNG ROQUE v. SZETO KWOK KWONG BERNARD AND OTHERS

HCMP 2596/2017

[2021] HKCFI 808

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2596 OF 2017

______________

______________

______________

DECISION

______________

1.  I refer to my previous Decisions (in particular that of 18 April 2018[1]) for the background of the matter.

2.  This is the hearing of the application by the defendants (“Ds”) for security of costs against the plaintiff (“P”).

3.  The main basis of Ds’ application is that P is not ordinarily resident in Hong Kong.  The onus is on Ds to establish that.

4.  The question of ordinary residence is one of fact and degree.  It does not depend upon the duration of the residence, but upon the way a man’s life is usually ordered, and it contrasts with occasional or temporary residence.

5.  In the Originating Summons and a number of documents P filed, he gave an address at the University of Hong Kong as his address.  It turned out that he has not been employed by the University.

6.  In his affirmation in opposition, P asserts that the mistake is due to his unfamiliarity with the procedural rules.  In my view, that could have nothing to do with the mistake.

7.  In the course of these proceedings, P has twice filed Notices of Change of Address for Service.

8.  During the guardianship application in respect the Mother, in a document sent by P’s solicitors to the Guardian Board, it was said that P left Hong Kong at 17, went to UK for studies, then to the US and obtained ultimately a doctorate degree.  It was said that after graduation, he devoted all his time on research and did not spend much time in Hong Kong.  It was further said, in respect of P’s care for the Mother, that even though he was not in Hong Kong, he had been using various means such as emails and telephone calls to regularly monitor her condition.

9.  In his affirmation in opposition, P asserts that he is an ordinarily resident in Hong Kong.  He says that he has a HK Identity Card.  He says that the fact that he has a US passport does not mean that he is not resident in Hong Kong.  He says that he splits his time between the US and Hong Kong, but that does not mean that he intends to reside outside Hong Kong.  Beyond that, no material information has been provided.  He accepts on the other hand that his current address in Hong Kong is that of a service apartment. 

10.  On the evidence, I am of the view that P is not ordinarily resident in Hong Kong.

11.  However, the fact that P is not ordinarily resident in Hong Kong does not mean that security will have to be ordered.  I need to consider P’s financial position.

12.  P holds 12% shareholding in a family company called Worth Enterprises Company Limited (“Worth Enterprises”).  P is not a director.  Ds are. 

13.  According to D2’s 4^th affirmation, the net asset positon of Worth Enterprises is about HK$93 million and HK$92 million respectively for the year ended 31 December 2018 and 2019.  She also says that Worth Enterprises has over the past few months sold off all of its non‑current assets, leaving cash and cash equivalents as the main form of assets.  Though she asserts that its latest net asset position is currently unknown pending finalization of its financial statements (expected to be available in July/ August 2021), the net asset position of Worth Enterprises would not on the evidence be materially worse off that what it used to be.

14.  Mr Remedios submits that shares in a Hong Kong private company do not amount to substantial assets within the jurisdiction, because the value of such shares is difficult to ascertain and it is uncertain whether a buyer can readily be found for them.

15.  Whilst that is generally correct, the position here is that Ds are the directors and also shareholders of Worth Enterprises.  They are in the position to control Worth Enterprises.  They know the value of the shares.

16.  Mr Remedios submits that whilst the values of the shares of Worth Enterprises may be ascertained, there remains no market for them.  He further says that Ds may not want to buy them as they do not want to, as they do not want to fund P’s action.  Mr Remedios submits further that they could not be forced or directed to do so, or may not even have the funds to do so.

17.  I am not seeking to force or direct Ds to buy P’s shares out.  What I am considering is, should there be an adverse costs order against P, and should an order for sale be obtained on execution, whether the shares could be readily available to satisfy the costs order.

18.  The consideration of an application for security involves balancing between what would be too oppressive to the plaintiff by requiring him to pay security and what would give the defendant a measure of security.

19.  The reality in the present case is that Ds as directors are controlling Worth Enterprises.  P has a share of family assets in Hong Kong which happens to be in the form of shareholding in that company that is worth upwards of HK$10,000,000.  Ds know their value.  Ds say they do not want to buy them even if they could upon execution.  They want an order for security now instead.

20.  On balance, given P’s assets in the form of his shareholding in Worth Enterprises, and given Ds’ attitude, I form the view that it would be too oppressive to P by requiring him to pay security.  The 12% shares in Worth Enterprises which company Ds control in my view already offers them a measure of security.

21.  I have considered other factors, like the merits of the case.  But in the end, on balance, I refuse the application.

22.  I will hear parties on costs.

23.  Having heard parties, and upon P indicating that he is not seeking any, I make no order as to costs.