U FOOK SHING TSO v. COMCEWOOD DEVELOPMENT LTD.

CACV 284/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 284 OF 2000

(ON APPEAL FROM HCA No

3814, 3815, 3816, 3817, 3818 & 3819 of 1989)

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R U L I N G

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Hon Leong JA (giving the ruling of the Court):

1. On 26 June 2000 Deputy Judge S Kwan dismissed the claim by the 11th plaintiff against the 5th defendant for a declaration that an English sale and purchase agreement for the sale of two pieces of land to the 5th defendant is null and void and for damages in conspiracy. The Deputy Judge also dismissed the 5th defendant's counterclaim against the 11th plaintiff for a return of the deposit under the English agreement and for damages.

2. The 5th defendant appealed against the decision of the Deputy Judge.

3. The 11th plaintiff now seeks an order from this court that the 5th defendant is required to give security for costs of his appeal.

4. In support of the application, Mr Yu Cho-sing manager of the 11th plaintiff in his affirmation states that the 5th defendant will be unable to pay the costs of the appeal if he is unsuccessful, for the following reasons:

1. the 5th defendant is a shelf company formed solely to hold the property in dispute and has not conducted business operation since its incorporation.

2. there is no evidence to show that the 5th defendant has any assets in Hong Kong.

3. the 5th defendant had been struck off from the register of companies in 1997 and 1998 for failing to file annual business returns. That is an indication that it had no business operation.

4. the 5th defendant was only restored to the register of companies by order of the trial judge shortly before the trial on the undertaking by the directors to furnish the outstanding returns within three days.

5. the finding of the trial judge is that the 5th defendant had no assets and would not be in a position to satisfy a judgment obtained against it.

6. the 5th defendant had failed to satisfy previous costs order against it in favour the 11th plaintiff.

7. the 5th defendant did not agree to furnish security for costs.

5. In the affirmation, Mr Yu states the estimated costs of the appeal is $150,000.

6. The 5th defendant's director Mr Shing on the other hand states on his affirmation that the 5th defendant is not insolvent and directors would inject funds into it as when it is necessary.

7. Mr Kwong for the 5th defendant states this morning that the amount of costs estimated by the 11th plaintiff is unreasonable and in view of the availability of counsel at present time in open market, fees for counsel would not be excessive and Mr Kwong suggests that an amount of $60,000 discounted by one-third should be the estimated costs of the appeal and if security for costs is required to be given by the 5th defendant, that should be the amount.

8. Miss Tsang for the 11th plaintiff states that the amount of estimated costs in the affirmation of Mr Yu should not be the guideline for the amount of security required, because the costs of today's application should be discounted from it. She suggest that the probable taxed costs would be in the region of $70,000.

9. In my opinion, undoubtedly the 5th defendant has no assets. It has no business operation and its source of funds depends on the directors' contributions. The conclusion cannot be anything other than the 5th defendant's lack of assets and funds will not enable it to pay from its own resources the costs of the appeal if it is unsuccessful. I have also considered whether requiring the 5th defendant to give security for costs is oppressive and whether it will stifle the appeal. But I am of the view that it would not, since the directors of the 5th defendant are in a position to assist the company if necessary in order that the appeal may proceed.

10. The amount of costs to be furnished as security for costs of the appeal should not exceed a reasonable estimate of the taxed costs of the appeal. I agree with Miss Tsang that $70,000 is a reasonable estimate of the taxed costs of the appeal. The 5th defendant is accordingly ordered to furnish a sum of not less than $70,000 either in cash or by bank guarantee as security for the 11th plaintiff's costs in the appeal and such security shall be provided within 14 days hereof. Until such security is furnished within the specified time, the appeal shall be stayed. The appeal shall stand dismissed in default of the 5th defendant complying with this order.

11. Costs of this application shall be to the 11th plaintiff in any event.