RE LO TAK WING BENSON

CACV 26/2022

[2022] HKCA 1125

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 26 OF 2022

(ON APPEAL FROM HCB NO. 4242 OF 2021)

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JUDGMENT

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Hon Chu JA (giving the judgment of the Court):

Introduction

1.  By summons filed on 13 April 2022 (“the Summons”), Ngan Ng Yu Ying (“the petitioner”) applies for an order:

(1) striking out the notice of appeal issued by Lo Tak Wing Benson (“the Debtor”) and dismissing the appeal (“Striking Out Application”); and

(2) alternatively, that the debtor provides security for the costs of this appeal (“Security for Costs Application”).

2.  Both the petitioner and the debtor had filed affirmations and also put in written submissions on the applications.

3.  Having considered the papers, we are of the view that it is appropriate to deal with the applications on the papers without an oral hearing, pursuant to Order 59 rule 14A(1) of the Rules of the High Court, Cap. 4A.

Background

4.  On 23 October 2020, judgment in default of notice of intention to defend was entered in favour of the petitioner against the debtor in HCA 1488 of 2020 (“HCA 1488/2020 Judgment”). The judgment is for the principal sum of HK$10,000,000 together with interest for the period from 23 June 2019 to 1 September 2020 in the sum of HK$2,155,068.49 and further interest from 2 September 2020 to the date of judgment at 18% per annum and thereafter at judgment rate until full payment.

5.  There is no appeal against the HCA 1488/2020 Judgment. The judgment debt remains wholly unpaid.

6.  On 22 July 2021, the petitioner filed a bankruptcy petition in HCB 4242 of 2021 based on the unpaid judgment debt.

7.  The petition was listed for hearing before Master Rita So on 22 December 2021. The debtor was absent at the hearing. A bankruptcy order was made against him.

8.  The debtor files a notice of appeal on 12 January 2022 to appeal against the bankruptcy order. The grounds of appeal in the notice of appeal states as follows:

“I could not locate any time trace of the alleged received funds from the plaintiff in my bank records. I don’t understand why she alleged that I owed her money.”

9.  By letter dated 16 February 2022, the petitioner’s solicitors requested the debtor to provide security for the costs of the appeal, and an estimate of the costs was enclosed with the letter. There was no response from the debtor.

10.  On 13 April 2022, the Summons was issued.

Striking Out Application

11.  As held by this Court in Leung Chung Lan Lorraine v. Hang Seng Bank Ltd (16/12/2019, CACV551/2018) [2019] HKCA 1408 at [34][1], the Court of Appeal has inherent jurisdiction to strike out a notice of appeal where an appeal is plainly not competent[2], or where the appeal is frivolous, vexatious or an abuse of the process of the court[3]. In the case of the latter, the inherent jurisdiction would be exercised on precisely the same basis as if Order 18 rule 19 strictly applied to notices of appeal[4]. The jurisdiction to strike out is discretionary and is only to be exercised in plain and obvious cases[5].

12.  The petitioner’s affirmation in support of the Summons (“P’s Aff”) says that the grounds of appeal are not viable and amount to an abuse of process for the following reasons:

(1) The debtor had signed 14 promissory notes from March 2016 to June 2019 and given four cheques as interest payments pursuant to the promissory notes. He had alsosigned an Acknowledgment of Debt and Undertaking to Repay dated 7 July 2020 (“Acknowledgement of Debt”), and had discussed the signing and collection of the Acknowledgement of Debt in WhatsApp messages sent to the petitioner. Copies of the above documents and the record of messages were exhibited to the affirmation.

(2) The debtor is an experienced businessman proficient in English, and will have no difficulty understanding the terms and effect of the promissory notes and the Acknowledgement of Debt.

13.  The debtor’s affirmation opposing the Striking Out Application (“D’s Aff”), however, states the following:

(1) The debtor had not borrowed from the petitioner and did not owe her money. The HCA 1488/2020 Judgment should be set aside.

(2) The debtor had only borrowed from the petitioner’s son (“Roger Ngan”), who had told him to make the repayments to the petitioner. The debtor therefore made interest payments to the petitioner and signed promissory notes in her favour.

(3) On 23 October 2020, Roger Ngan had obtained judgment against the debtor for the debt he owed in HCA 1487 of 2020 (“HCA 1487/2020 Judgment”).

14.  The petitioner’s reply affirmation (“P’s 2^nd Aff”) refutes the debtor’s assertions and says as follows:

(1) The petitioner and Roger Ngan had each advanced a loan of HK$10,000,000 to the debtor. The debtor had provided separate promissory notes to Roger Ngan. Copies of seven promissory notes given by the debtor to Roger Ngan were exhibited to the affirmation.

(2) The debtor had sent WhatsApp messages to the petitioner acknowledging the debt owed to her, which was separate from the debt owed to Roger Ngan, and had further discussed with the petitioner the terms of repayment. The record of the messages was exhibited to the affirmation.

(3) The debtor has been legally represented in other proceedings from at least November 2020 to June 2021. He also has legal advice all the time, as evidenced by the WhatsApp messages. The debtor has taken no step to set aside the HCA 1488/2020 Judgment.

15.  Mr Chan for the petitioner submits that the debtor’s notice of appeal should be struck out on the following grounds:

(1) The notice of appeal is not competent as it does not specify any question of law for determination, and the appeal also does not involve any question of law.

(2) D’s Aff has made factual assertions that relate to the underlying judgment debt and the merits of the claim in HCA 1488/2020. They are irrelevant to this appeal and the debtor has not taken any step to set aside the HCA 1488/2020 Judgment.

(3) The debtor’s claim in the notice of appeal that he does not understand the petitioner’s claim and his assertion in D’s Aff that he had only borrowed HK$10,000,000 from Roger Ngan and had not borrowed from the petitioner are plainly false and unworthy of belief having regard to the 14 promissory notes and the Acknowledgement of Debt, the four cheques for payment of interest as well as the WhatsApp exchanges between the petitioner and the debtor.

16.  We refuse the Striking Out Application for the following reasons:

(1) The primary focus of the petitioner’s argument is that the debtor’s grounds of appeal are untenable in light of the facts stated in P’s Aff and P’s 2^nd Aff and the documents exhibited to them. However, these are not evidence before the Master when she made the bankruptcy order under appeal[6]. The same goes for the factual assertions in D’s Aff and the exhibits to it. There has been no application by either party, and no order has been given, for admission of new evidence in this appeal. This Court will not have regard to the factual matters and the exhibits in the parties’ affirmations relating to the claim and judgment in HCA 1488/2020 in considering whether the debtor’s appeal is viable or arguable.

(2) The gist of the debtor’s grounds of appeal as appeared by the notice of appeal is that he does not owe the debt on which the bankruptcy order is based. Although the grounds are sketchy, we are not prepared to say it is plain and obvious that the notice of appeal is incompetent and/or the grounds of appeal are unarguable or amount to an abuse of process.

The Security for Costs Application

17.  Under Order 59 rule 10(5) of the Rules of the High Court, the Court of Appeal may, in special circumstances, order that such security shall be given for the costs of an appeal as may be just.

18.  It is settled practice to require security for costs to be given by an appellant who would be unable through impecuniosity to pay the costs of the appeal, if unsuccessful.  Security for costs may also be ordered upon proof that the respondent will be likely to encounter undue delay or put to undue expense in enforcing any order for costs in the appeal. The court, however, has a discretion and is entitled to consider other relevant factors such as the strength of the appeal to determine whether or not it would be just to order that security for costs be provided. But once a case of impecuniosity or some other factor such as difficulty or expense in enforcing a costs order is demonstrated, it is generally up to the appellant to demonstrate countervailing factors militating against an order being made: Chung Kau v. Hong Kong Housing Authority & Others [2004] 2 HKLRD 650 and Hong Kong Civil Procedure 2022 Vol.1 §§59/10/26 & 59/10/27.

19.  In deciding whether to order security for costs of an appeal, the court takes into account the fact that the appellant has already had the issue concerned determined in the court below, and it is prima facie an injustice to a respondent to allow an appeal to the Court of Appeal to proceed without security for costs being furnished in circumstances where the respondent will be unable to enforce against the appellant any order for costs made by the Court of Appeal: Hong Kong Civil Procedure 2022 Vol.1 §59/10/25.

20.  The petitioner’s grounds for the Security for Costs Application are that the debtor is impecunious, and the petitioner will encounter difficulty in enforcing any costs order made against him.

21.  The petitioner relies on the following facts to support her application:

(1) The debtor has been adjudged bankrupt and he has no assets at his disposal. The Officer Receiver, who was the provisional trustee in bankruptcy, only realised HK$21,047.68 from the debtor’s bank account, but the debtor’s indebtedness is in excess of HK$430,000,000, according to the estimate he provided to the Official Receiver.

(2) The debtor ignored the petitioner’s repeated demands for repayment of the loan and interest as well as the judgment debt.

(3) The debtor had evaded service of the statutory demand and the bankruptcy petition resulting in delays and various applications for substituted service. In particular, the solicitors representing him in two other sets of legal proceedings were instructed not to accept service of the statutory demand and the petition.

22.  Apart from asserting that the debtor does not owe money to the petitioner, D’s Aff does not take issue with the petitioner’s case that he is impecunious or that the debtor had evaded service of the statutory demand.

23.  In his written submission, the debtor argues that the petitioner is using procedural steps to dismiss his appeal and that it will be unjust to order him to provide security. He reiterates that he has not received any money from the petitioner, and points out that the petitioner has not produced any documentary evidence to show that Roger Ngan had advanced HK$20,000,000 to him.

24.  For the reasons set out below, we are satisfied that the debtor should be ordered to provide security for the costs of the appeal:

(1) We are satisfied, on the materials before the court, that the debtor is impecunious and/or the petitioner will likely encounter undue delay or be put to undue expense in enforcing any order for costs in the appeal.

(2) Having regard to the notice of appeal and taking an overall view of the case, we are not convinced that the debtor’s appeal has substantial chances of success and/or that there are other circumstances justifying exercising the discretion against making an order for security for costs of the appeal.

25.  As to the amount of security to be ordered, the petitioner’s estimate of costs[7] consists of two parts. Section 1 is the estimated costs of the application for security for costs, and Section 2 is the estimated costs of the appeal. Section 1 has been overtaken by the Statement of Costs and Disbursements for the Summons filed on 22 June 2022. Applying the normal rule of costs follow the event, as the petitioner only succeeds in the Security for Costs Application but fails in the Striking Out Application, we will order the debtor to pay the petitioner one-half of the costs of the Summons. We will also disallow the costs of items D3 (attendance at court) and E(iii) (counsel’s fee for attending court hearing) as there is no oral hearing for the Summons. Taking a broad brush approach, we will summarily assess the costs of the Summons to be paid by the debtor at HK$46,000.

26.  As to Section 2, the total amount comes up to HK$73,640. Having considered the breakdown, we consider HK$70,000 to be a reasonable estimate of the costs of the appeal.

27.  Accordingly, we will order the debtor to provide security in the amount of HK$116,000 (HK$46,000 + HK$70,000) by making payment into court within 28 days.

Disposition

29.  The orders we make are as follows:

(1) The debtor shall within 28 days from the date of handing down of this judgment give security for the petitioner’s costs of this appeal in the sum of HK$116,000, by making payment into court of the said sum;

(2) Until the debtor has given the security ordered in (1) above and notice thereof is given to the solicitors for the petitioner (such notice to be given on the same day as the lodgement is made), all proceedings in this appeal are to be stayed;

(3) In default of the debtor giving security as ordered in (1) above, this appeal do (upon the solicitors for the petitioner certifying such default to the Registrar of High Court) stand dismissed out of this court without further order;

(4) In the event that the appeal is dismissed in the circumstances provided for in (3) above, the debtor shall pay the petitioner the costs of this appeal, such costs to be taxed or summarily assessed if not agreed; and

(5) The debtor pays the petitioner one-half of the costs of the Summons in any event summarily assessed at HK$46,000.