GREAT BILL LTD v.JFK HOLDING COMPANY LTD AND ANOTHER

CACV 53/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 53 OF 2012

(ON APPEAL FROM HCA NO. 1609 OF 2008)

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BETWEEN

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D E C I S I O N

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1.  There are today two cross-applications by summons before me in this appeal, which is due to be heard on 9 January 2013. The first in time is an application for security for costs by the respondents to the appeal (who were plaintiff by original action and 1^st and 2^nd defendants by counterclaim below). The second in time is an application for a stay of execution of the judgment by the appellant (who was 2^nd defendant below), which has recently been made directly to this court, no previous application having been made to the trial judge.

2.  By the judgment under appeal, Chung J found for the plaintiff by original action, Great Bill Limited, and entered judgment in its favour against JFK Holding Company Limited (1^st defendant below) and the appellant, ordering them to pay to Great Bill Limited the sum of HK$3.4 million plus interest.  The Judge rejected a defence of duress that had been advanced in respect of the issue by JFK Holding Company Limited of various post-dated cheques.  The Judge also dismissed the counterclaim of JFK Holding Company Limited, the counterclaim of the appellant having already been struck out for failure to appear at a case management conference.

3.  The principles on which the court will grant a stay of execution were not in dispute.  It is provided by RHC O.59 r.13(1) that an appeal does not operate as a stay of execution.  Unless the appellant can justify a stay of execution, one will not be ordered and it is the practice of the court that such justification can be demonstrated only if good reasons exist.

4.  In the present case, the appellant suggests that good reasons for the stay of execution exist in that, first, he has strong prospects of success in the appeal and, secondly, the absence of a stay will render the appeal nugatory.

5.  I will come back to deal with the prospect of success in the context of the security for costs application.

6.  So far as the suggestion that the absence of a stay would render the appeal nugatory is concerned, the argument here is based on the appellant’s evidence concerning a toy and household goods trading business carried on by him and a partner based in Hong Kong with clients in mainland China, Taiwan and Thailand.  It is said that cash flow is important for running this business and that the enforcement of the money judgment under appeal would have immediate adverse effect on the business and might eventually cause the business to close down.  It is further said that if the judgment debt were paid, there would be no reasonable prospect, or an appreciable risk, of the appellant not being able to recover that sum from the respondents in the event of the appeal succeeding.

7.  I have no hesitation in rejecting this basis for the stay of execution.  The judgment under appeal is a money judgment and, in the circumstances, the court will require evidence as to why the levying of execution will result in the appeal being rendered nugatory.  In my view, such evidence is wholly lacking in the present case.  Insofar as the appellant has hinted at deleterious financial consequences from the enforcement of the judgment, this is merely a bare assertion and there is no sufficient evidence to support the assertion, such as the production of accounts or other documents to justify it.  Since the business which is said to face the risk of potential ruin is one operated by the appellant himself, it is self-evident that he could have produced relevant accounts to justify the assertion.  His failure to do so gives rise to the inference that the assertion is insupportable.

8.  Subject to the question of the merits of the appeal, I am disinclined to grant a stay of execution of the judgment under appeal.

9.  The principles on which the court will order security for the costs of an appeal were also not in dispute.  The court’s jurisdiction derives from RHC O.59 r.10(5) which empowers the Court of Appeal, in special circumstances, to order that such security shall be given for the costs of an appeal as may be just.  Insolvency or impecuniosity is one of the established categories of special circumstances.  So too is difficulty or expense in enforcing a costs order.

10.  In the present case, the respondents appeared to rely on both these categories of special circumstances as supporting the application for security for costs.

11.  The evidence on this application discloses that the appellant is a Malaysian national and is often out of the jurisdiction.  He disputes this characterisation but accepts that he travels for more than 10 days at a time about twice a month.  I would accept the characterisation that he is often away from Hong Kong.  The evidence also shows that the address he gave in his Notice to Act in person before the trial below was an office address and correspondence addressed to him there was returned. At the Judge’s direction at the conclusion of the trial below he gave an address for service in Clearwater Bay but that property is owned by a company with no apparent connection to the appellant.  That is apparently a rented property in which the appellant resides, and has resided for three years, with his wife and daughter.

12.  Despite demands for the payment of this judgment sum, no payment has been made.  Moreover, it would appear from the correspondence that the appellant has been avoiding service of a statutory demand to recover the judgment sum.  The appellant says that the evidence demonstrates only two attempts to effect personal service on him at his residential address.  He says he was away from Hong Kong on business on those occasions.

13.  Be that as it may, there is no evidence that the appellant has any assets within the jurisdiction.  After the writ was issued in the action but before judgment was entered, it would appear that the appellant transferred shares in his name in JFK Holding Company Limited to a third party, who has the same surname as him and who may or may not be a relative.  A property owned by that company was sold to another company, Elite Group Holding (HK) Company Limited, in which the appellant had shares but a company search shows he transferred those shares to two third parties after the writ in the action was issued.  I am satisfied that these transfers support an inference that the appellant was seeking to make it difficult for the respondents to the appeal to find assets of his against which to execute any judgment.

14.  That leaves the question of the merits of the appeal since, if the merits are strong, that is a countervailing factor militating against an order for security for costs.  Just as on an application for a stay of execution, in an application for security for costs, it is impractical and even undesirable for the court to go deeply into the merits and strengths of an appeal.  Nevertheless, it must form a preliminary view of these aspects.

15.  In this regard, I have considered the draft amended grounds of appeal in the notice of appeal exhibited to the appellant’s affirmation dated 30 August 2012.  This considerably expands upon the original notice of appeal dated 16 March 2012.  However, save that grounds 5 and 6 of the original grounds of appeal are no longer pursued, the same underlying grounds, albeit expanded, are relied upon.  In part, those grounds seek to attack primary findings of fact made by the Judge or the weight attached by the Judge to particular evidence.  The expanded ground 1 of the notice of appeal seeks to criticise the Judge for his handling of the trial in view of the fact the appellant was acting in person.

16.  Having considered the draft amended grounds of appeal on the preliminary basis appropriate to these interlocutory applications, whilst I am prepared to accept that the appellant’s case on appeal is not unarguable, I am not prepared to say that the merits appear to go strongly in his favour.

17.  On the basis of this conclusion, it follows that there is no proper basis for granting a stay of execution and that application is dismissed.  So far as the security for costs application is concerned, the Court will look to see whether or not there are other factors to tilt the balance in favour of granting security.  I have already concluded that there are such factors here and so I consider that liability for security for costs is, in principle, established.

18.  That leaves the question of the quantum of security for costs to be ordered.  The respondents seek the sum of HK$150,000 as security, as shown in the draft skeleton bill of costs exhibited but excluding the estimated costs of the application for security for costs itself.

19.  The appellant contends that this sum is grossly inflated and unreasonable.  It is said that the application was made late because the appeal was set down for hearing on 23 March 2012 and the application for security was not made until 27 July 2012.  Although the application could have been made sooner, I do not think the delay is such as to warrant refusing the application for security.  At least part of the period between March and July was taken up by the respondents seeking to enforce the judgment and to serve a statutory demand on the appellant.

20.  In fixing the appropriate amount of security for costs, the court is not of course conducting a taxation of the respondents’ costs.  Instead, the exercise on which it is engaged is to arrive at an appropriate estimate of the likely amount of costs which would be ordered to be paid by the appellant to the respondents on a party and party taxation.

21.  In the circumstances, allowing for the likelihood that part of the costs in the skeleton bill of costs would be reduced on taxation, I propose to order the appellant to provide security for costs of the appeal in the sum of HK$125,000.

22.  I therefore make an order that the appellant pay into court the sum of HK$125,000 as security for the respondents’ costs of the appeal on the usual terms, namely that:-

(1)  such payment be made within 28 days;

(2)  the appeal be stayed in the meantime; and

(3)  in default of such payment into court, the appeal do stand dismissed with costs without further order.

23.  I will now hear the parties on costs.

[Argument on costs]

24.  Costs in respect of both summonses will follow the event.

25.  The respondents seek a summary assessment of the costs of the application for security for costs and the application for a stay of execution and have provided a statement of costs for such summary assessment.  The costs indicated in that statement are HK$115,940.

26.  In my view, that sum of costs stands to be reduced.  The application for security for costs was a relatively simple application as was the application for a stay of execution and the costs estimated in the main skeleton bill of costs in respect of the security for costs application appears to be considerably less than the costs now put forward.  Adopting the broad brush approach suitable to such gross sum assessments, I assess the respondents’ costs of the application for security for costs and the application for a stay of execution in the sum of HK$70,000, to be paid within 7 days.