SARAS GOPI v. BINA DEEGAN

HCA 3075/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3075 OF 2015

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J U D G M E N T

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1.  This is an application for security for costs.  If the evidence filed in support of, and in opposition to, the application is anything to go by, the application has been made and resisted as if it was a state trial.  That is not all that surprising.  The case relates to a dispute between mother and daughter, and experience tells us that interlocutory applications in family disputes tend to be contested with the tenacity normally reserved for the trial of the action.

2.  The plaintiff is Saras Gopi.  She is the mother of the defendant, Bina Deegan.  Mrs Deegan defends her mother’s claim and counterclaims against her as well.  Mrs Deegan’s application for security for costs is based on the fact that her mother lives in London.  It is said on Mrs Deegan’s behalf that Mrs Gopi has tried to conceal where she lives, for example, by asserting that she is a Hong Kong permanent resident.  I am not in a position to judge whether Mrs Gopi has deliberately tried to give the court a different impression, but the fact is that Mrs Gopi does not dispute that she is ordinarily resident out of the jurisdiction.  The issue therefore is how the court’s undoubted discretion under Ord 23 r 1(1)(a) of the Rules of the High Court should be exercised.

3.  An order for security for a defendant’s costs may only be made if “having regard to all the circumstances of the case, the court thinks it just to do so”.  There is no inflexible rule or practice that a plaintiff resident abroad will be ordered to give security for costs.  But it has correctly been said that

“...it is the usual, ordinary or general rule of practice of the courts to require the foreign plaintiff to give security for costs, because it is ordinarily just to do so”: see Hong Kong Civil Procedure 2017 (“the White Book”) at para 23/3/4.

The reason why it will ordinarily be just to do so is because of the difficulty which a defendant will usually encounter in enforcing any order for costs in its favour against a plaintiff who has little or no assets in Hong Kong.

4.  The question therefore is whether it is just for security for costs to be ordered in this case.  The right balance needs to be struck between giving Mrs Deegan at least some confidence that any order for costs in her favour will be met, and ensuring that Mrs Gopi is not treated in an inappropriately oppressive way.

5.  I start by summarising, as briefly as I can, the parties’ respective cases.  Mrs Gopi makes two claims.  The first relates to some jewellery (“the jewellery claim”). The jewellery was deposited in a safe deposit box in London many years ago in her daughter’s name.  Mrs Gopi claims that the jewellery belongs to her.  Her daughter claims that she owns the jewellery, which she says was given to her by her parents as gifts in anticipation of, or upon, her marriage.  Mrs Gopi’s other claim relates to funds in various bank accounts in the joint names of the two of them (“the funds claim”).  Mrs Gopi claims that the funds belong to her, and were held in accounts in their joint names so that her daughter would be able to use the money to look after her.  Her daughter claims that the funds belong to her, and that they represent

(a)   part of the proceeds of sale of a flat owned by her, and

(b)   lifetime gifts from her mother which amounted to more money than her mother needed for herself, and which her mother was prepared to give away to reduce the tax payable on her death.

6.  Mrs Deegan’s counterclaim has five limbs.  The first relates to some of the jewellery. Mrs Deegan claims that these pieces of jewellery were removed from the safe deposit box by her mother in 2014, and she seeks its return.  Her mother claims that this jewellery is in her daughter’s possession already, and it includes some pieces of jewellery which belong to her.  The next limb of the counterclaim relates to the return of sums totalling £100,000.00 which Mrs Deegan claims she lent to her mother (“the loan claim”).  Her mother claims that these were not loans at all but remittances made to her by her daughter at her request from the money which was to be used to look after her.  The third limb of the counterclaim relates to a share in a property company which Mrs Deegan claims was transferred to one of her brothers as a result of her signature on the relevant instrument being forged (“the share claim”).  The fourth limb of the counterclaim relates to what is alleged to be the unlawful transfer of a property in India into Mrs Gopi’s name (“the property claim”).  The final limb of the counterclaim is a claim for damages for sexual assault on Mrs Deegan whilst she was a child by a driver for whom Mrs Gopi is alleged to be vicariously liable (“the assault claim”).

7.  I have summarised the parties’ claims and counterclaims because the merits of the parties’ respective claims will sometimes be relevant on an application for security for costs.  To quote again from the White Book for a correct summary of the law, this time at para 23/3/3:

“If the case of the plaintiff is genuine and strong, no order for security [will] be granted... On the other hand, an order for security [will] usually be granted if the plaintiff cannot clearly demonstrate that it has a high degree of probability of success at trial.”

The text correctly goes on to caution against treating the hearing of the application for security for costs as a mini-trial of the action.  It reads:

“[The merits are] to be approached in a broad-brush manner, and the court is not to embark on an assessment exercise as though it were considering an application for summary judgment under O. 14... It is not the function of the court, when faced with an application for security for costs, to make a ‘preliminary run’ at deciding the ultimate success or failure of the claim.”

Indeed, the text correctly refers to what the parties should not do:

“Parties should not attempt to go into the merits of the case unless it can clearly be demonstrated one way or another that there is a high degree of probability of success or failure.”

8.  In these circumstances, I have looked at the parties’ respective claims and counterclaims in the impressionistic way suggested by the authorities.  The outcome of this case will unquestionably depend on whose oral evidence the court accepts at trial, and I am simply not in a position to form any judgment about how the factual disputes between the parties are likely to be resolved. I do not accept the contention made on behalf of Mrs Deegan that her mother’s claims appear improbable.  But the other side of the coin is that I cannot say that Mrs Gopi has demonstrated that she has a high degree of probability of success at trial.  That is realistically accepted by Mrs Gopi’s legal team. She might win.  She might not.  In those circumstances, I go back to the passage in the White Book to which I have already referred:

“an order for security [for costs will] usually be granted if the plaintiff cannot demonstrate that it has a high degree of probability of success at trial.”

9.  So what are the countervailing arguments?  It is not said in this case that an order for security for costs would stifle a genuine claim.  No doubt that is because Mrs Gopi is relatively well off, and can afford to pay into court such sum by way of security as she might be ordered to pay.  Of some significance, of course, is that Mrs Deegan, though a defendant to her mother’s claim, is also in the position of a plaintiff on her counterclaim.  That is the first of the two significant points made on behalf of Mrs Gopi.

10.  The principles which should be applied when security for costs is sought against a plaintiff against whom the defendant has made a counterclaim were considered by Yam J in Ai Zhong v Metrofund Ltd [2010] 1 HKLRD 213 at [22].  I trust that I will be forgiven for not setting out that passage here in its entirety, though I note that Yam J thought that it would be helpful to inquire who is what he described as “the real attacker” in the case.  For me, an equally important consideration is whether an order for security for costs “would effectively be tantamount to providing security to the defendant for the prosecution of its counterclaim”: see the White Book at para 23/3/3.  It is correctly said that “the court should be slow to exercise its discretion to order security against a plaintiff” in such a situation.  The rationale for that is explained in what follows:

“If the claim and counterclaim or cross-claim raise essentially the same issues which will have to be fully litigated anyway, then it may in all the circumstances be unjust to order security for costs against the plaintiff. To order security in such circumstance may prevent the plaintiff from pursuing his claim when he will still have to litigate the same issues in defending the counterclaim.”

11.  In fact, there is only some overlap between the claims and counterclaims.  There is, of course, no overlap in respect of the share claim, the property claim and the assault claim.  There is some overlap in respect of the funds claim and the loan claim, but that overlap only arises because Mrs Gopi’s defence to the loan claim relies on the same agreement as the one on which the funds claim is based.  On Mrs Deegan’s case, there is no link at all between the two claims. The only other overlap is in respect of the jewellery claim and that part of the counterclaim which relates to jewellery.  However, that overlap is limited to the pieces of jewellery which Mrs Deegan claims were removed from the safe deposit box by her mother in 2014.  It may be that some, indeed much, of the evidence relied on by both sides will be relevant to both claims, but the overlap in respect of the claims themselves, as opposed to the evidence relied upon to support those claims, is relatively small.  In the circumstances, I do not think that the existence of the counterclaim, and the extent to which the claims and counterclaims overlap, make it inappropriate in this case for an order for security for costs to be made.

12.  The final consideration which I need to address relates to the enforceability of any order for costs which might be made in Mrs Deegan’s favour.  That is the second of the two significant points made on Mrs Gopi’s behalf.  It is accepted by Mrs Gopi’s legal team that she has no assets in Hong Kong against which any order for costs could be enforced.  The law here again is correctly summarised in the White Book at para 23/3/4:

“The court is properly entitled to take into account the ease of enforcement of an order for security in the jurisdiction where the plaintiff is ordinarily resident...If the plaintiff is resident in a jurisdiction which has a common law system similar to that in Hong Kong, and there is an arrangement for the reciprocal enforcement of judgments between Hong Kong and that jurisdiction, more evidence about the difficulties in enforcing a judgment may be required before the court exercises its discretion to order security for costs.”

To the extent that Mrs Gopi has assets in India, arrangements for the reciprocal enforcement in India of orders of the Hong Kong courts are in place.  But to the extent that Mrs Gopi has assets in England and Wales, there are no arrangements in place for the reciprocal enforcement of orders of the Hong Kong courts in England and Wales, even though there is, of course, a common law system in England and Wales similar to that in Hong Kong. So to enforce any award for costs in her favour in England and Wales, Mrs Deegan would have to issue fresh proceedings, relying on the judgment of the court in Hong Kong and then enforcing any judgment given in those proceedings.

13.  I turn to such evidence as there is about Mrs Gopi’s assets in India and in England and Wales.  Mrs Gopi’s only assets in India which have been identified are five bank accounts and a property in the joint names of her and one of her sons.  The only assets which she has identified in England and Wales are a flat in London and three bank accounts.  With the exception of two of the bank accounts in India, Mrs Gopi has not revealed what the credit balances in the bank accounts are, or what her interest in the properties is worth, or whether they are unencumbered.  Her counsel says that no criticism has ever been made before now about the absence of proper disclosure of the value of her assets.  But the fact is that an application for security for costs will always focus on the value of the plaintiff’s assets, and they are things which are within the plaintiff’s knowledge and unlikely to be known about by the defendant.

14.  It is said on behalf of Mrs Deegan that Mrs Gopi has a track record of taking such steps as she can to defeat the claims of her creditors.  I am not in a position to judge that, because it assumes that various adverse findings will be made against Mrs Gopi at the trial of the action, and I am not prepared to make that assumption.  Having said that, though, there is unfortunately so much animosity between the parties in this case that Mrs Gopi might be tempted to put such assets which she has beyond the reach of her daughter.  The fact is that the court should not ignore the practical realities of a dispute of this kind. Moreover, this application for security for costs is seeking to protect Mrs Deegan against not being able to enforce an order for costs in her favour at the end of the trial which is still a long time off.  Anything can happen to Mrs Gopi’s assets in that time.  All in all, therefore, although it may be possible for Mrs Deegan to enforce any order for costs made in her favour, that is no more than a possibility, and in any event the enforcement of orders made in Hong Kong against overseas assets could well be a costly exercise.  In the circumstances, I do not think that these considerations should deter me from making an appropriate order for security for costs.

15.  But what is the appropriate order in this case?  Three points need to be made. First, since it is argued on behalf of Mrs Deegan, and I agree, that there is very little overlap between the claims and the counterclaims, it follows that the sum which Mrs Gopi should be ordered to provide by way of security should not include the costs of the loan claim, the share claim, the property claim and the assault claim.  Otherwise, the order would be tantamount to requiring Mrs Gopi to provide security to her daughter for the prosecution of the counterclaim.  A skeleton bill of costs prepared by Mrs Deegan’s solicitors does not exclude those costs.

16.  Secondly, the skeleton bill of costs (which covers the period up to the date of setting down) includes expenditure on items which may not be incurred, for example, it includes the costs of applications for specific discovery, for further and better particulars and for letters of request for the taking of evidence abroad.  Although Mr Morrison for Mrs Deegan assures me that those applications will be made, you never know with certainty in litigation what is going to happen.  Thirdly, the skeleton bill of costs, is pitched at a level greater than I think the bill would be taxed at, including, for example, the solicitors’ hourly rates.  It is completely inappropriate for me to subject the bill to an item by item analysis.  Everyone agrees that nothing but a broad-brush approach is appropriate.  Applying such an approach, I think that I should order Mrs Gopi to provide her daughter with security for costs in the sum of $2,000,000.00. Subject to any further submissions on the topic,  I propose to stay all proceedings on the claim until that security is provided.  I shall hear from the parties how that security should be provided.