LAU WILLIAM JOHN v. WAN YUK LIN, ALISON AND OTHERS

CACV 62/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 62 OF 2016

(ON APPEAL FROM HCB NO 4198 OF 2014)

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J U D G M E N T

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

The applications

1.  There are two applications before us.

2.  The summons issued first in time, on 25 January 2017, is for security for costs of the appeal in CACV 62/2016.  It was taken out by Stephen Briscoe and Chan Pui Sze, both of Briscoe Wong Advisory Limited, the trustees in bankruptcy (“the Trustees”) of Lau William John (“the Bankrupt”), against the Bankrupt.

3.  The other summons, issued on 8 March 2017, was taken out by the Bankrupt.  He sought an order to vacate the hearing of the Trustees’ application for security for costs and the hearing of his appeal in CACV 62/2016 on 2 June 2017, and an order that he may have leave to fix a date for the hearing of that appeal within two weeks of the disposal of his other appeal in CACV 222/2017, if necessary.

4.  The Bankrupt has been acting in person throughout.  The Trustees have filed submissions but sought to be excused from attendance at the hearing as this is in open court and they cannot instruct counsel due to the lack of assets and funding in these bankruptcy proceedings.  The Official Receiver takes a neutral stance.

5.  We have considered all the materials filed by the Bankrupt, being his affidavits and three written submissions, as well as his oral submissions.

Background

6.  The relevant background matters have been set out in considerable detail in the 1^st affirmation of Chan Pui Sze §§6 to 14 and the Bankrupt’s 1^st affirmation §37.  We do not propose to recite them.

7.  We would just set out the salient matters necessary for a proper understanding of this judgment.

8.  On 20 August 2014, a bankruptcy order was made against the Bankrupt by a Master at a hearing in which he was absent.  The petition for bankruptcy was presented by judgment creditors on a debt of about $1.47 million consisting of taxed costs.  The Trustees were appointed on 30 October 2014.

9.  The Bankrupt issued a summons on 17 December 2014 to remove the Trustees and to appoint the Official Receiver in their place (“the Removal Application”), alleging they are guilty of misconduct or failure to perform their duties, and their connection with the major creditor, Wan Yuk Lin Alison (“Wan”), might make it difficult for them to act with impartiality.

10.  The Removal Application was heard by Ng J who handed down his decision on 2 March 2016.  He dismissed the application, holding that the complaints are bare assertions, without any substance, and totally without merits.  On 12 May 2016, the judge varied his costs order nisi and ordered the Bankrupt to be personally liable for the Trustees’ costs in the Removal Application.

11.  On 24 March 2016, the Bankrupt filed a notice of appeal against the dismissal of the Removal Application.  This is CACV 62/2016. He then issued two further summonses in the bankruptcy proceedings in April 2016.  The first was on 20 April for an order that the decision of the Trustees in the matter of an assignment of the right of action in HCA 517/2014 be reversed or modified (“the Reversal Application”)[1].  The other was on 25 April for the annulment of his bankruptcy order on the basis that he did not owe any money to the petitioning creditors as although he did not dispute the petitioning debt, Wan owed him far more than what he owed her (“the Annulment Application”).

12.  On 9 May 2016, the Bankrupt wrote to the court proposing to adjourn or put on hold CACV 62/2016 pending the determination of the Annulment Application.  The Trustees disagreed with that proposal.  On 20 July 2016, Master Lai as the Registrar of Civil Appeals ordered that the time for the Bankrupt to file the “Application to Fix a Date for Hearing of an Appeal” in CACV 62/2016 be extended to 14 days after the disposal of the Annulment Application.  He further ordered the Bankrupt to inform the court in writing within seven days of the disposal of that application.

13.  The Annulment Application was heard by Ng J on 28 September 2016 and dismissed on 17 October 2016 with costs assessed summarily against the Bankrupt on 21 November 2016 of $120,000.

14.  On 21 October 2016, the Bankrupt wrote to inform the court of the dismissal of the Annulment Application and sought indulgence of the court to postpone making any order in CACV 62/2016 until 14 November 2016.  No order was made until 22 November 2016, when the Bankrupt was ordered to file the “Application to Fix a Date for Hearing of an Appeal” in CACV 62/2016 on or before 6 December 2016.  This was complied with by the Bankrupt.

15.  In the meantime, on 11 November 2016, the Bankrupt filed a notice of appeal against the dismissal of the Annulment Application.  This is CACV 222/2016.  Notice was given by the Director of Legal Aid on 18 November 2016 that the Bankrupt had applied for legal aid in CACV 222/2016.

16.  The Trustees first wrote to the Bankrupt seeking security for the costs of the appeal in CACV 62/2016 on 13 December 2016.  The Bankrupt responded on 5 January 2017 refusing to provide security.  The Trustees issued their summons for security on 25 January 2017.

17.  On 19 December 2016, the appeal in CACV 62/2016 was set down for a half-day hearing on 2 June 2017.

18.  On 9 February 2017, the Bankrupt submitted the draft appeal bundles for CACV 222/2016 for the directions of the court.  No hearing date has yet been fixed for this appeal.

The application to vacate the hearings

19.  The Bankrupt sought to vacate the hearing of the Trustees’ application for security for costs and the appeal in CACV 62/2016 until after the determination of his appeal in CACV 222/2016.  He contended this is to save the resources of the court as the appeal in CACV 62/2016 would not be pursued if he should succeed in the annulment of his bankruptcy order in CACV 222/2016.  It would be a complete waste of resources to hear CACV 62/2016 on 2 June in the event he is ultimately successful in CACV 222/2016.  He claimed this is to further the underlying objectives in Order 1A rule 1 of the Rules of the High Court, that the Trustees would not be prejudiced as they are the successful party in the Removal Application and their functions and duties are not affected in any way by vacating the hearing dates.

20.  We note the Annulment Application was taken out some 20 months after the bankruptcy order was made, and a month after the Bankrupt filed his notice of appeal against the dismissal of the Removal Application.  It is apparent that from the start (as early as May 2016), he had sought to put this appeal on hold on the ground that he was pursuing the Annulment Application.  As deposed to in §39 of his 1^st affidavit, he did not wish to proceed with this appeal.  Due to the stance he took, CACV 62/2016 was indeed put back for half a year, to await the determination of the Annulment Application.  He now seeks to further delay CACV 62/2016 until his appeal against the dismissal of the Annulment Application is decided.  That would be a delay of at least half a year.  The Trustees have deposed in §23 of the 1^st affirmation of Chan Pui Sze that “the Bankrupt is using all means available to delay providing substantive information relating to his bankruptcy to the Trustees.”

21.  The court had already granted him indulgence in allowing him to put CACV 62/2016 on hold until the Annulment Application was determined.  He has not been successful.  We see no reason why in these circumstances that further indulgence should be granted to await the outcome of another appeal.  It is also an underlying objective in Order 1A rule 1 to ensure that a case is dealt with as expeditiously as is reasonably practicable. The hearing of the appeal in CACV 62/2016 is less than two months away.  For all the above reasons, we have declined to exercise our discretion to vacate the hearing dates of the security for costs application and of the appeal in CACV 62/2016.  The Bankrupt’s summons of 8 March 2017 is dismissed.  We make an order nisi awarding the costs of this application to the Trustees.  We do not propose to assess the costs summarily, for the reason given in the latter part of this judgment.

The application for security for costs on appeal

22.  The Trustees sought security for costs of the appeal in CACV 62/2016 on the basis that this appeal is unmeritorious and is unlikely to succeed.  Further, having regard to three special circumstances of the case, it is just for security to be provided.  First, there is the insolvency or impecuniosity of the Bankrupt, that he would be unable to pay the costs of the appeal if unsuccessful.  Second, there is the difficulty or expense in enforcing the costs order against the Bankrupt.  Third, the appeal is an abuse of the process of the court, when considered with the Bankrupt’s conduct in the bankruptcy proceedings and other related actions.

23.  The principles governing the discretion to order security for the costs of an appeal are well established.  The fact that an appellant is impecunious does not lead automatically to such an order.  The court 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 security be provided.  That said, as a matter of practice, once an applicant for security can demonstrate that impecuniosity or some other factor such as difficulty or expense in enforcing a costs order exists, while the court retains an overall discretion whether or not to make the order, it would then generally be up to the party resisting to demonstrate countervailing factors which would militate against an order being made (Chung Kau v Hong Kong Housing Authority & Ors [2004] 2 HKLRD 650 at §14).

24.  The impecuniosity of the Bankrupt is not in doubt.  He has applied for legal aid on a number of occasions between 2014 to 2016, as mentioned in §22 of the 1^st affirmation of Chan Pui Sze.  He has also deposed in §31(i) of his 1^st affidavit that “the Trustees were well aware of the fact that there is no fund in [his] estate” and asserted that the Trustees “would not be able to recover costs from [him] personally as [he is] 70 years old and chances of employment is [sic] very slim.”

25.  The difficulty or expense in enforcing costs orders against the Bankrupt is demonstrated.  In addition to the costs order made against the Bankrupt in the Removal Application in May 2016, there are other outstanding costs orders: (a) the costs order against him in favour of the Trustees dated 16 June 2016 of $5,000; and (b) the two costs orders against him in favour of the petitioning creditors being (i) the costs order for $18,000 dated 26 September 2016 and (ii) the costs order for $120,000 dated 21 November 2016.

26.  In view of the above special circumstances, and in accordance with established principles, the court would exercise its discretion to award security for costs on appeal as a matter of practice, in the absence of countervailing factors.  We do not think it necessary for the Trustees to go so far as to demonstrate that the appeal is wholly unmeritorious or an abuse of the process of the court.

27.  Much of the evidence filed and the submissions made went to the merits or otherwise of the appeal.  We have considered them and do not propose to go into them in any detail.  Only a preliminary view on the merits is required for present purpose.  We note his grounds of appeal in the notice of appeal of some 36 pages and his contentions repeated in his 1^st affidavit (in particular §§42 to 61) and submissions, and the new evidence he proposed to seek leave to file in the appeal (§§22 to 28 of his 1^st affidavit).  This is not the place to deal with his contentions.  Suffice it to say we are firmly of the view that it cannot possibly be said the merits of the appeal are such that it could be regarded as a countervailing factor not to order security.  The court would have to look to other factors, if any, to tilt the balance.

28.  The Bankrupt contended that the Trustees should not seek security for costs against him in §31 of his 1^st affidavit. Quite apart from being aware of his impecuniosity, he asserted that the Trustees did not have to litigate with him in the first place and they could have just resigned.  He contended that the Trustees could have applied for security for costs in the court below (which is misconceived), or to strike out the Removal Application or the appeal.  In §§36 and 65 of his 1^st affidavit, he repeated his allegation that the Trustees jeopardised his claim in HCA 517/2014 by their reluctance to assign the cause of action to him (this formed the basis of the Reversal Application, for which judgment has not been given) and asserted that to award security for costs in the appeal would result in the denial of justice as the Trustees’ action have been harmful to his estate and he had demonstrated that the judge erred in his findings of fact.

29.  Clearly, none of the matters mentioned could be regarded as countervailing factors.  Insofar as they touch on the merits of the appeal, we have already stated that this cannot be a countervailing factor to tilt the balance.

30.  We therefore exercise our discretion to order the Bankrupt to provide security for costs of his appeal in CACV 62/2016.

31.  We turn to the quantum of security.  The Trustees provided an outline bill of costs in the total sum of $450,550, which cover the costs of the security application and the appeal.  The item of $75,000 being disbursements for counsel’s fees in attending the security for costs hearing should be removed as the Trustees did not instruct counsel, bringing down the total sum to $375,550.  To take account of excessive time and/or duplication of work, we would further reduce this to $270,000 and order this to be provided as security for costs of the appeal.  We take into account that the summons for security was taken out in January 2017 and the appeal is to be heard in less than two months.  The security should be provided within 21 days from the date of our judgment.

32.  We make the following order on the security for costs application:

(1) the Bankrupt do within 21 days hereof give security for the Trustees’ costs of the appeal in CACV 62/2016 in the sum of $270,000 by making lodgement in court of the said sum by cash or bankers draft, and until such lodgement be made and notice thereof given to the Registrar and to the solicitors for the Trustees (such notice to be given on the same day as the lodgement is made) all proceedings in the said appeal are to be stayed;

(2) in default of the Bankrupt making such lodgement as aforesaid within the time specified, the said appeal do (upon the solicitors for the Trustees certifying such default to the Registrar) stand dismissed out of this court without further order;

(3) in the event that the appeal is dismissed in the circumstances provided for above, the Bankrupt do pay to the Trustees their costs occasioned by the said appeal, such costs to be taxed if not agreed; and

(4) an order nisi that the Bankrupt do pay to the Trustees their costs of this application in any event.

33.  We do not propose to assess the costs for this application in (4) summarily.  If the Trustees are able to recover their costs occasioned by the appeal in (3), the assessment of costs can be carried out by the taxing master at one go.