VIDHYA NATIVIVAT AND OTHERS v. VITOON NATIVIVAT

CACV 23/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 23 OF 2013

(ON APPEAL FROM HCA NO. 1376 OF 2011)

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BETWEEN

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JUDGMENT

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Hon Lam VP:

1.  This is an application for payment out to the Plaintiffs the sum of $500,000 paid into court by the Defendant as security for costs pursuant to a Consent Order made on 6 March 2013. Paragraph 1 of the Consent Order was in the following terms:

“1. The Defendant do, within 7 days of the date of this order, pay into court a sum of HK$500,000 being security of the Plaintiffs’ costs of the appeal and also all the outstanding legal costs (i.e. HK$324,654) together with all interests accrued therefrom owed by the Defendant to the Plaintiffs under the court orders in the proceedings below as set out in the Schedule to this Order;”

2.  It is common ground that the costs of proceedings below as set out in the Schedule to the Consent Order add up to $324,654 (exclusive of interest).

3.  There were correspondences between solicitors both before and after the issue of the summons of 11 September 2013.  Soon after the issue of the summons, the Defendant indicated through solicitors on 17 September 2013 that he was agreeable to the release of the $500,000 to the Plaintiffs’ solicitors provided that the balance (after deducting the costs below) were to be held by the Plaintiffs’ solicitors as stakeholder until after assessment/taxation of the costs of the appeal.

4.  The Plaintiffs did not agree to such proposal.  In a letter of 19 September 2013, solicitors for the Plaintiffs said that the balance was not even enough to cover counsel’s fees incurred by the Plaintiffs.  Further, the Plaintiffs said the balance should be paid out to the Plaintiffs to partially settle another costs order made by To J in HCMP 2027 of 2011 on 7 May 2013 in the sum of $500,000 in favour of the Plaintiffs.  In this connection, the Plaintiffs relied upon Order 49 Rule 9.

5.  There were subsequent debates between the solicitors and no agreement could be reached.  Another major disagreement between the parties, as shown in the correspondence, was the costs of the summons.  The Defendant suggested no order as to costs whilst the Plaintiffs insisted on having costs of the summons.

6.  In my judgment, the costs order of To J cannot assist the Plaintiffs in the present application.  Order 49 Rule 9 refers to money standing to the credit of a judgment debtor.  After a sum of money is paid into court as security for a particular purpose, it is no longer the payer’s money as such.  It has already been designated as security for that particular purpose.  It is doubtful if such a sum so encumbered can be regarded as money standing to the credit of the payer.

7.  I have looked at the authorities cited in the Hong Kong Civil Procedure 2013 under this rule.  The rule has been applied in respect of money held in court to the credit of a person where the money was not subject to any encumbrance as security for some potential obligations, see London County Council v Monks [1959] 1 Ch 239; In re Prior [1921] 3 KB 333 and Brereton v Edwards (1888) 21 QBD 488.

8.  On the other hand, in Common Professional Examination Board ex p Mealing McCleod [2000] All ER (D) 588, in respect of a sum paid into court as security for costs, the English Court of Appeal rejected an application for payment out to the Board to satisfy costs order in another action.  The payer was successful in the proceedings in which security was ordered (in favour of the Board) against her.  She contended that the money should be paid back to her so that she could repay a bank loan she raised specifically for paying the security.  The Court of Appeal accepted her contention that a Quistclose trust existed and it prevailed over the Board’s claim notwithstanding that security was actually ordered for the benefit of the Board in the first place (though in respect of costs of another set of proceedings).

9.  Solicitors appearing at the hearing had not read these cases in advance and I do not have the benefit of full arguments on them.  In such circumstances, I would refrain from expressing a conclusive view on whether a sum paid into court as security can be regarded as money standing to the credit of the payer when it is still uncertain whether there will be any balance after the security has been fully met. As presently advised, I would observe that if a judgment creditor can come to court to apply for payment out in his favour notwithstanding the uncertainty as to extent of liability under the designated security, it could defeat the purpose of ordering such security.  This would particularly be so where the party for whose benefit security was ordered is not the judgment creditor who applies for payment out.  Whilst the position might be different if the judgment creditor is the same person as the party for whose benefit the security had been ordered (as in McCleod, supra.), it remains doubtful whether the money held in court can be regarded as standing to the credit of the payer when it is still subject to the encumbrance of meeting the obligation secured.

10.  Here, on the Plaintiffs’ own case, there is unlikely to be any balance after the costs of the appeal is also settled.

11.  In any event, if the application is made pursuant to Order 49 Rule 9, it should be regarded as an application distinct from an application for payment out in enforcement of the security.  As such, it is not within the scope of section 13 of the High Court Ordinance Cap 4.  That being so, the application should be made to the Court of First Instance as opposed to this court, see TCWF v LKKS CACV 166 of 2012, 24 December 2012.

12.  After this court raised the above concerns at the hearing, Mr Chun (solicitor appearing for the Plaintiffs) indicated that he would not rely on the costs order of To J for the purpose of this application.  Therefore, I will not order payment out to the Plaintiffs on account of the costs order of To J.

13.  In respect of the costs of the present appeal, I agree with the Defendant that there must be taxation of such costs before the Plaintiffs can be entitled to obtain payment out for it.

14.  For these reasons, I will only order payment out to the Plaintiffs in the sum of $324,654.

[Submissions on costs]

15.  As regards the costs of the application, since the Plaintiffs do not achieve a result better than what was offered by the Defendant in the letter of 17 September 2013, I order the Plaintiffs to pay the costs of the Defendant incurred after that date, such costs to be taxed if not agreed. As for costs incurred prior to 17 September 2013, bearing in mind the short time lapse between the handing down of the judgment on appeal and the reasonableness of the request of the Defendant for time to consider the matter in the letter of 10 September, I order that there be no order as to costs.