SUCCESS TOP (ASIA) LTD v. SZE KIN YU

DCCJ 1858/2022

[2023] HKDC 1451

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1858 OF 2022

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DECISION

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1.  This is the plaintiff’s appeal from the Order of Master Matthew Ho dated 28 February 2023, ordering, inter alia, that:-

(1)  The plaintiff is to pay into Court the amount of HK$386,733 as security of the defendant’s costs within 21 days as per the defendant’s summons dated 16 September 2022 (for security for costs);

(2)  Costs of the defendant’s summons dated 5 September 2022 (for striking out) and the defendant’s summons dated 16 September 2022 (for security for costs) be paid by the plaintiff to the defendant, summarily assessed at HK$110,000; and

(3)  The plaintiff’s summons filed on 27 February 2023 to expunge the defendant’s affirmations in reply and the defendant’s skeleton submissions and list of authorities (the Expunge Summons) be dismissed with no order as to costs.

2.  The plaintiff applies to dismiss (1) and (2) and to allow (3).

3.  Mr Yeung Hon Keung Larry (“Mr Yeung”) is the director of the plaintiff and is authorized by the plaintiff to appear in this hearing. The defendant is represented by Mr Siu of counsel.

The parties’ cases

4.  Mr Yeung is the registered owner of Flat G, 19^th Floor, Block 6, Laguna City, Kwun Tong, Kowloon, Hong Kong (“Flat 19G”). The plaintiff is a company registered in Hong Kong with a paid-up capital of HK$100 and is a sub-tenant of Flat 19G.

5.  The defendant is the registered owner of the unit immediately above, namely Flat G, 20^th Floor, Block 6, Laguna City, Kwun Tong, Kowloon, Hong Kong (“Flat 20G”). The defendant is also the registered owner of Flat 20H, which was constructed as a combined/connected unit with Flat 20G.

6.  Laguna City (麗港城) is a widely known private housing estate in the area, with a building age of approximately 30 years.

7.  The plaintiff claims that the defendant has been in breach of the DMC and caused nuisance, annoyance, and disturbance to the plaintiff by obstructing the common area and corridor on the 20^th floor (the floor one level above the plaintiff’s premises) with “bicycles, toys, skateboards, cushions, large boxes, chains, umbrellas, shoes, meal boxes containing waste food and residue, rubbish, things and other articles” near the 20^th floor lift lobby outside Flat 20G.

8.  The photos (currently available) provided by the plaintiff showed that, on divers dates, there were 2 to 3 bicycles, a scooter, a skateboard (all were for children’s use), shoes, and sometimes a small bag of finished meal boxes being left in front of the entrance of Flat 20G.

9.  The defendant denies any obstruction or nuisance caused by those articles. The defendant said that those items were only placed outside his door and that area was a recessed area, which would not cause any obstruction to other neighbours as he owned both units of Flat 20G and Flat 20H. He also emphasized that Flat 19G and Flat 20G&H were located on different floors, and he did not understand how those items could cause any nuisance or disturbance to the plaintiff.

10.  In any event, the plaintiff claims that those items placed outside Flat 20G would cause fire hazards, hygiene, rat and mouse, and cockroach problems. Mr Yeung (the director of the plaintiff) said that he had to go up to the 20^th floor to walk down to the 19^th floor whenever the lift was out of service or under maintenance. He said that the articles placed by the defendant would cause him inconvenience and annoyance day and night from time to time.

11.  The plaintiff said it had complained to the Fire Department, the police, and the management office of the estate, but none of them had taken any action.

12.  On 24 May 2022, the plaintiff issued the Writ and commenced the proceedings against the defendant.

13.  Although Mr Yeung said he was the one (also as an occupier of the plaintiff’s premises) who suffered from the nuisance, he did not sue in his own personal capacity as the registered owner of Flat 19G. Instead, the plaintiff obtained its locus to sue for nuisance under the occurrence of the following events:-

(1)  On the same day as the Writ was issued (ie 24 May 2022), the plaintiff submitted to the Stamp Office a tenancy agreement dated 17 May 2022 made between the plaintiff (“Success Top”) as tenant and one First Develop Limited (“First Develop”) as landlord for a portion of Flat 19G at a rent of HK$3,000 per month for 3 years (“Success Top Tenancy”). Clause 2 of the Success Top Tenancy stated that the landlord and the tenant had ratified the term of the tenancy commenced from 21 October 2020 until 20 October 2023 (ie effective approximately two years ago). Clause 11 stated that the plaintiff had paid the full 3-year rent of HK$72,000 in one go at the date of the agreement;

(2)  According to Mr Yeung, First Develop (owned by one Mr Leung Kin Hang) is a company registered in Hong Kong and carries on the telecommunication business. Mr Yeung said he had no relationship with Mr Leung or First Develop. He only leased a portion of Flat 19G to First Develop for storage of mobile phone parts in 2020, and therefore, First Develop is a tenant of Flat 19G (“First Develop Tenancy”). He said as such, First Develop was able to sub-let one part of its portion of Flat 19G to the plaintiff as a sub-tenant. However, Mr Yeung did not provide any document in support of the First Develop Tenancy; and

(3)  Mr Yeung said that the current action was taken out by the plaintiff when his business partner, Madam Cheung Wing Yam, replaced the said Mr Leung (who is also a director of First Develop) as director of the plaintiff on 16 May 2022 (one week before the issuance of the Writ). Mr Yeung said that he only became involved on 14 July 2022 when he became a director of the plaintiff and carried on the litigation. He said the issuance of the Writ was Madam Cheung’s idea for and on behalf of the plaintiff, not his.

14.  Mr Yeung said that all these steps were mere coincidences. He said that they were not planned or premeditated for using the plaintiff as a vehicle to bring litigation.

15.  The plaintiff seeks injunctive relief and damages at HK$3,000 per month for the loss of use in respect of the part of the portion of Flat 19G as a sub-tenant where the plaintiff could not enjoy the premises because of the defendant’s nuisance.

16.  The defendant then applied to strike out the plaintiff’s claim and alternatively, for an order for security for costs.

17.  At the hearing before Master Matthew Ho on 28 February 2023, the learned Master dismissed the striking out summons on the ground that the plaintiff’s case was “not entirely unarguable” but found in favour of the defendant for granting an order for security for costs against the plaintiff.

18.  The plaintiff appeals against (mainly, according to Mr Yeung) the order for security for costs. However, he also added the appeal against the costs order and the Expunge Summons.

Applicable principles for appeal against master’s decision

19.  It is trite that an appeal from a master to a judge in chambers under RDC Order 58 rule 1 is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge will treat the matter as though it came before him for the first time (Hong Kong Civil Procedure 2023, note 58/1/2).

20.  The judge will of course give the weight it deserves to the previous decision of the master; but he is in no way bound by it. Further, the judge is entitled, if he thinks fit, to adopt the master’s reasoning in his own judgment without setting out the reasoning himself (supra).

21.  However, an appeal against a costs order made by the master is not a rehearing of the matter. The appeal will not be allowed unless the costs order made was unreasonable or the master had erred in law (Wealth Growth (HK) Investment Ltd v Si Bun Bun Carmen Co Ltd and Anor [2021] HKDC 1363; Hong Kong Civil Procedure 2023, note 58/1/6).  

Applicable principles for granting security for costs

22.  The law on security for costs under RHC (or RDC) Order 23 rule 1 or section 905 of the Companies Ordinance (Cap 622) are similar and are well settled. It has been succinctly summarised by Coleman J in Sun Hing Ginza Ltd v Chan Kai Yan [2022] 4 HKLRD 890:-

“17. … Both [O 23 r 1 and s 905] empower the Court to order a plaintiff to give such security for the defendant’s costs of the action or other proceedings as it thinks just, when there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so.

18. The approach involves two stages. First, the defendant has to show that there is reason to believe that the plaintiff will be unable to pay an adverse costs order. The defendant is not expected to produce conclusive evidence of the plaintiff’s lack of means; it is sufficient to point to some credible evidence about the surrounding circumstances and then it is up to the plaintiff to adduce evidence to the contrary. The Court shall decide whether a reasonable person with ordinary experience of daily life would consider the plaintiff unable to pay: see, for example, Buildtech Enterprise International Ltd v OK Construction Materials (Supply) Co Ltd [2021] HKCFI 1837.

…

20. In the second stage, the Court should consider whether, in all the circumstances, it is fair to grant security for costs. The Court can take into account a wide range of different factors, including whether the plaintiff is using its impecuniosity to put pressure on the defendant, the plaintiff’s prospects of success, whether the security for costs order will stifle the plaintiff’s claim, and delay in making the application: see Golden Tech (Asia) Ltd v Po Yuen (To’s) Machine Factory Ltd (HCA 4517/2001, unreported, 27 May 2004).”

23.  In order to determine whether the plaintiff’s claim would be stifled, the court should consider not only whether the plaintiff company can provide security out of its own resources to continue the litigation, but also whether it can raise the amount needed from its directors, or shareholders, or other backers or interested parties. It is for the plaintiff to satisfy the court that it would be prevented by an order for security from continuing the litigation (Wing Hing Provision, Wine & Spirits Trading Co Ltd v Hanjin Shipping Co Ltd [1998] 4 HKC 461).

24.  Above all, the court has a complete discretion whether to order security, and accordingly it will act in the light of all the relevant circumstances (supra).

The Master’s decision

25.  Both Mr Yeung (on behalf of the plaintiff) and Mr Siu (appearing for the defendant in this appeal) attended the hearing before Master Matthew Ho on 28 February 2023. The learned Master gave his reasons for ordering security for costs at the hearing.

26.  At this hearing before me, Mr Siu referred to and read out the Master’s reasoning as part of his submissions. I would summarize the Master’s reasoning as follows.

27.  First, the Master considered that there was credible testimony that there was reason to believe that the plaintiff would not be able to pay the defendant’s costs if the defendant succeeded in the defence:-

(1)  The plaintiff is a limited company with nominal share capital;

(2)  Despite the defendant’s request, the plaintiff has been unable to provide evidence showing that it was financially viable to pay the defendant’s costs. The plaintiff’s claim that it has good and sound business is a bare assertion without any proof; and

(3)  There is no evidence that the plaintiff holds any valuable asset. Worst still, when asked whether it had any assets, the plaintiff claimed it had a ‘landed interest’ in a piece of land in the New Territories. It turned out that such land was merely a rented land for which the plaintiff paid a monthly rent of HK$1,000/month. An inference can thus be drawn that it has no valuable asset.

28.  Second, the Master found that the evidence suggested the fact that the plaintiff might refuse to satisfy any costs order in favour of the defendant:-

(1)  When the plaintiff claimed it had a land interest in a piece of New Territories land when asked about its means to satisfy costs order, it was later found out that the land interest was a rented land. It takes little common sense to tell that a rented land is not an asset. There is no reason for the plaintiff to give such an answer other than with the view to mislead the defendant. The plaintiff’s conduct showing no hesitation to proffer inaccurate evidence to avoid a security for costs order, shed light on its tendency to avoid any costs order against it; and

(2)  The defendant had shown a track record of failing to satisfy the HK$800 costs order made by Master B Mak on 10 January 2023 despite repeated demands.

29.  The Master had not lost sight of the fact that an imposition of a security might deter the plaintiff from pursuing a genuine claim. In that regard, the Master considered the following factors:-

(1)  The plaintiff has not provided any particulars as to how it would stifle its claim. For instance, the plaintiff has not provided any evidence as to what amount of security would create a financial burden on it and thus prevent it from pursuing its claim;

(2)  Under the Wing Hing Provision case, the court is entitled to take into account the fact that the plaintiff can raise funds from its directors. Mr Yeung, who confirmed himself as a director of the plaintiff, is the owner of Flat 19G and thus has a real property in Hong Kong and would be able to raise funds. Provided that the security is in a reasonable amount, it should not stifle the plaintiff’s claim; and

(3)  On balance, an order for security for costs against the plaintiff should be made.

Appeal against security for costs

30.  First of all, I find that the learned Master’s reasoning is entirely correct, and I would gratefully adopt the same for the purposes of this appeal.

31.  Next, I would consider whether the plaintiff has raised any fresh points in this appeal. But there is none. Perhaps, however, a couple of questions have emerged during the hearing, and I shall address them in turn.

32.  Before me, Mr Yeung conceded that since he had only leased a portion of Flat 19G to First Develop, he was still an occupier as the registered owner or a co-occupier sharing the flat with First Develop and the plaintiff, with First Develop leasing back a part of its portion to the plaintiff. In the circumstances, it seems to me that the alleged nuisance would affect Mr Yeung personally more than the plaintiff company. For instance, it would be very remote to suggest that the company would suffer from any obstruction on the upper floor, other than the cockroaches (as suggested by Mr Yeung) running into Flat 19G from Flat 20G. It seems illogical that Mr Yeung, as the owner and landlord of the property, did nothing but leave the second-tier sub-tenant to take legal action. Mr Yeung could not give any explanation other than saying that it was part of a ‘business deal’ for the plaintiff to become a sub-tenant. (In the course of his answering to the court, Mr Yeung initially sought to distance himself from the plaintiff by saying he was not related to the plaintiff before being appointed as director (see Cheung 4 §§11-18), but then admitted that the plaintiff was a limited company he used for convenience in doing business with First Develop, instead of using his personal name). He could not provide further details of the so-called business deal. It raised doubt as to whether the plaintiff’s claim is bona fide.

33.  Further, Mr Yeung has accepted that it would be difficult to prove any cockroaches going from Flat 20G to Flat 19G while he preferred to leave it to trial. Without going into the details of the merits of the plaintiff’s case, I consider that the prospects of success of the plaintiff’s case is not so high that it could deter the defendant’s application for security.

34.  Another matter worth noting is that, during the plaintiff’s submissions in reply, Mr Yeung at one point suggested that as he is the director of the plaintiff and he is also the owner of Flat 19G, the plaintiff would have sufficient means to pay for any legal costs consequence.

35.  It seems to me that an interesting question has arisen: if there is proof that the plaintiff’s director has assets (so that the proceedings would not be stifled), would that defeat the defendant’s claim that the plaintiff is unable to pay its costs? I do not think so. I think there is a significant difference between the two matters. The fact that the plaintiff's director has funds to assist the plaintiff in pursuing its litigation against the defendant does not necessarily mean that the plaintiff company itself would have sufficient funds to pay its costs where there is no guarantee that the director would be willing to pay for the plaintiff's liabilities or the costs consequences. After all, the plaintiff company remains as a separate entity, the nature of which propounds limited liability.

36.  Worst of all, in the course of responding to the court’s enquiries, the plaintiff has made further admission that “the court is correct that, at this stage, there is no asset to support the plaintiff company to pay for any costs consequence.”

37.  Therefore, I consider that an order for security for costs against the plaintiff should be made.

38.  It is not necessary for me to deal with the dispute between the parties as to the plaintiff’s delay in serving the Notice of Appeal and the validity of the service of the Statutory Demand by the defendant, as I had accepted the parties’ explanation in the last hearing on 4 July 2023 that there were mismatches of time in the service of documents due to both parties’ change of address.

Quantum

39.  Mr Yeung did not make any submissions on the 50% deduction made by the learned Master, other than to complain that the defendant’s Bill of Costs was filed late and he had not had sufficient time to consider.

40.  Actually, the Master had taken into account the fact that the Bill of Costs was only provided in the last round of affirmation filed on 21 February 2023 and that the plaintiff might not have ample opportunity to scrutinize the items. The Master therefore took a more vigilant approach and gave a 50% discount to the Bill.

41.  I have no disagreement with the Master’s approach. I also find that the security in the sum of HK$386,733 is appropriate.

The costs order of HK$110,000

42.  The plaintiff has not made any submissions under this head.

43.  This part of the appeal is not a rehearing de novo. The learned Master had considered that although the summons for striking out was dismissed, the summons for striking out and the summons for security for costs were in fact seeking an alternative remedy against the plaintiff. Therefore, the defendant was the substantial winner of the application, and the learned Master ordered the plaintiff to bear the costs of both summonses and summarily assessed at HK$110,000.

44.  I would not disturb the learned Master’s decision on costs. The appeal under this head should be dismissed.

The Expunge Summons

45.  As stated in the Plaintiff’s summons to expunge, the defendant’s 2^nd Affirmation in reply, the Affirmation of Wong Pui Yan Cecilia for the defendant, the defendant’s skeleton submissions and list of authorities were all dated 20 February 2023 and filed on 21 February 2023. As such they were all filed within time pursuant to Master B Mak’s order dated 10 January 2023. In fact, the plaintiff only complained that it did not receive those documents until 24 or 26 February 2023.

46.  I agree with Mr Siu’ submissions that the tight time schedule was caused by the plaintiff itself, and that the plaintiff was given sufficient time to respond to the defendant’s skeleton submissions at the hearing. Mr Siu pointed out that Mr Yeung was from time to time asked by the court, and positively confirmed that he could follow the submissions. There was no evidence to show that the plaintiff suffered any prejudice in the hearing before the learned Master.

47.  I find no error in the learned Master’s dismissal of the summons.

Conclusion

48.  Accordingly, the appeal should be dismissed with costs.

49.  I make an order that:-

(1)  The plaintiff’s appeal is dismissed; and

(2)  On a nisi basis, the plaintiff pays the defendant the costs of the appeal, with certificate for counsel, and such costs to be taxed if not agreed.

50.  The costs order nisi shall become absolute in 14 days from the handing down of this Decision.