LIEU TSENG VAN v. JIUZHOU DEVELOPMENT CO LTD

CACV 149/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 149 OF 2010

(ON APPEAL FROM HCA NO. 1645 OF 2009)

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DECISION

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1.  This is an application by the defendant for security for costs of an appeal due to be heard on 7 December 2010. In the summons, the defendant seeks security in the amount of $500,000 for an appeal on an interlocutory matter scheduled to last for half a day. I understand from Ms Cheung, who appeared for the defendant, that the security sought is reduced to a figure in the region of $470,000.

2.  The subject of the appeal is an application for an interlocutory injunction, which was dismissed by Au J on 17 June 2010.  The injunction was to restrain the defendant from enforcing its rights under a share charge, including the sale of the shares in a company known as Super Cruise Limited (“Super Cruise”) and to take over the ownership or management of Super Cruise and a golf and leisure club in Zhuhai operated by Super Cruise.  Au J refused to grant the interlocutory injunction because he took the view that damages would be a sufficient remedy to the plaintiff and there was no suggestion that the defendant, a listed company in Hong Kong, would not be in a position to pay the damages awarded.

3.  The plaintiff appealed, with the leave of the judge, on the grounds that the judge erred in finding that damages would be sufficient remedy for the plaintiff if no interlocutory injunction were granted, and that he erred in finding the appointment of receivers and allowing the receivers to sell shares under the share charge would not affect the plaintiff’s reputation.

4.  I do not think it is necessary to go into the merits of the appeal for the purpose of this application.  There is no suggestion from Mr Lo, who appeared for the plaintiff, that his appeal is so strong that it would be a very good reason not to order security.  Ms Cheung has submitted it is highly unlikely that the plaintiff would succeed on appeal, but in view of the fact that the judge gave leave for the appeal to be brought, I do not think one can say the appeal is hopeless to justify by itself an order for security.

5.  The defendant made the application for security on the basis that the plaintiff is impecunious, further or alternatively, that it would be difficult or expensive to enforce any costs order against him if his appeal should fail.

6.  I have examined the evidence filed and the submissions made.  A lot of the matters urged upon me seem to be of no consequence and I do not propose to mention them, except to say I have fully considered them.

7.  The most material factor, to my thinking, is this.  The only real asset of the plaintiff in this jurisdiction that could be used to meet his cost liability is his shares in Super Cruise, a private company. So far, despite efforts made by the receivers appointed by the defendant and by the plaintiff himself, no one has been able to find a buyer for those shares.  On the available evidence before me, only one offer was made in a letter of intent to purchase the entire share holding of Super Cruise at HK$110 million.  It is also apparent from the unaudited accounts of Super Cruise and its Mainland subsidiary made up to March 2010, and the additional information provided by the plaintiff’s solicitors in April 2010, that Super Cruise and the subsidiary had very substantial deficits.  In the event the shares of Super Cruise are sold, it is doubtful if the proceeds of sale would be sufficient to meet all its liabilities, some of which I recognize would appear to be contingent.

8.  On this material, I am satisfied the defendant has made out a case for the court to exercise its discretion to order security for costs of the appeal.

9.  On the amount of appropriate security, I have considered the skeleton bill and Mr Lo’s submission.  In my view, an appropriate amount would be $250,000.

10.  I make the following orders:

(1)        the plaintiff do within 21 days hereof give security of $250,000 for costs of and occasioned by the plaintiff’s appeal by payment into court;

(2)        until such security be provided and notice be given by the plaintiff to the Registrar of Civil Appeals and to the defendant’s solicitors the said appeal be stayed;

(3)        in default of such security being provided within time, the solicitors for the defendant do notify the Registrar of Civil Appeals and that thereupon the said appeal do stand dismissed out of court without further order with costs occasioned by the appeal to be taxed and paid by the plaintiff to the defendant;

(4)        for costs of this application be to the defendant in any event, assessed on a gross sum basis at $80,000.