TSANG KIN CHUNG TERRY v. WONG CHUNG MANG JONAH AND ANOTHER

CACV 250/2021

[2022] HKCA 377

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 250 OF 2021

(ON APPEAL FROM HCA NO. 2381 OF 2019)

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D E C I S I O N

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Hon Cheung JA (giving the decision of the Court) :

I.    Application for security for costs

1.  This is an application by the plaintiff for the defendants to provide security of costs of their appeal against the decision of Mr. Recorder Stewart Wong SC.  The Recorder dismissed the 1^st defendant’s appeal against the decision of Master Jonathan Wong who dismissed the application of the 1^st defendant to set aside a final judgment entered on 13 March 2020, for want of a notice of intention to defend, for $8,000,000 plus interest and costs against both defendants (‘the Judgment’).  He also dismissed the 2^nd defendant’s summons to set aside the Judgment.

2.  The plaintiff relies on two matters to support his application, namely, the defendants’ impecuniosity and there will be undue delay and expense in enforcing costs order of the appeal.

3.  Having considered the papers, we are of the view that it is appropriate to deal with the application on paper, pursuant to Order 59, rule 14A(1) of the Rules of the High Court, Cap. 4A.

II.   Our view

1)   Principle

4.  The Court may in special circumstances order an appellant to pay security for the costs of his appeal.  The special circumstances include the impecuniosity of the appellant and the difficulty of enforcing order for costs against him in the event he fails in his appeal.  However, even if these grounds are satisfied, the Court still retains a discretion not to order security if the appellant has a meritorious appeal so as not to stifle a genuine appeal.

2)   Impecuniosity of the defendants

5.  We are satisfied that the defendants are impecunious.  The 1^st defendant had failed to settle an outstanding costs order of $175,000 awarded by Master Wong.  The defendants had further failed to repay the plaintiff or his wife $6,422,025 under an agreement (not the subject of this appeal).  There were statements made by the 1^st defendant admitting he was impecunious.

6.  The defendants argued that the mere failure of the appellant to pay the costs ordered against him in the Court below is not of itself a sufficient ground for ordering security, inability to pay must be shown.  But inability to pay may be established by inference and an outstanding costs order against an appellant is relevant in determining if there is a risk that a respondent will, if successful, be unable to recover his costs (Hong Kong Civil Practice 2021, para 59/10/26).

7.  In respect of the sums of $8 million and $6,422,025, there was a proposal by the 1^st defendant to repay these sums by certain dates.  There were also admissions made by the 1^st defendant of his inability to pay.  The defendants submitted that the proposal was part of the without prejudice negotiations between the parties and is not admissible.  As pointed out by the House of Lords in Bradford & Bingley [2006] 1 WLR 2066 at [73] the without prejudice rule has no application to apparently open communications designed only to discuss the repayment of an admitted liability rather than to negotiate and compromise a disputed liability.  There was no indication from the contemporaneous documents that the liability for the $8 million and $6,422,025 was disputed.  In our view, the Court is entitled to look at the proposal to see whether the defendants are impecunious.

8.  On 21 February 2020, the 1^st defendant informed the plaintiff’s in‑house lawyer that he was unable to sell his shares in a private company to repay the plaintiff.  He said he was ‘trying to look for ways to obtain cash but it is difficult at such situation.’  The 1^st defendant by an email dated 28 February 2020 admitted that his business was operating at a deficit and had ‘a huge cash flow problem’ and he did not ‘have any buffer to repay in cash’.

9.  The defendants then submitted that even if the discussions were admissible, impecuniosity is not shown because the defendants possess various assets including expensive wines, a dragon robe from the Qing dynasty and artworks that have significant value to pay for their indebtedness.  We are not satisfied how readily these items can be realized.  In other words, there is a real risk that the plaintiff may encounter difficulty and incurred expenses in enforcing the costs order of the appeal.

3)   Merits of the appeal

10.  The defendants contend that :

(i)  The Judge did not consider business efficacy of implying a term; and

(ii)  The Judge erred when he ruled that the defendants’ implied term was inconsistent with the express term in clause 12.3 of the Agreement, because the mere fact that an express term covers a particular subject does not exclude the possibility of an implied term also on the same subject.

11.  We are not satisfied that the merits of these grounds are such that we should exercise our discretion against the granting of security.

4)   Quantum

12.  The defendants propose that they are agreeable for security for cost to be charged on certain personal assets which are said to be ‘valuable’.  In view of what we have already held above, we will not consider this proposal.

13.  According to the plaintiff’s skeleton bill of costs, the estimated costs are $435,205.33 which include $265,423 for the intended appeal and $169,782.33 for the present application for security.  Of the $265,423 for the intended appeal, $100,000 is for counsel fee.  The plaintiff then refines the amount of $169,782.33 by submitting a statement of costs for summary assessment in the amount of $117,392.

14.  We consider the appropriate amount for security on a party‑and‑party basis to be $300,000 of which $200,000 is for the appeal and $100,000 for the present application.

III.   Conclusion

15.  We will make the following orders :

1)  The defendants are to pay into Court $300,000 as security for the plaintiff’s costs of this appeal within 21 days from the date of this order;

2)  Pending payment into Court, the appeal is stayed;

3)  In default of payment and upon the certification by the plaintiff’s solicitors of the default, the appeal will be dismissed without further order together with the costs of the appeal to the plaintiff; and

4)  The plaintiff is to have the costs of the application for security, summarily assessed at $100,000.