GURDAS SABHAGCHAND CHOITHRAMANI v. THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD

CACV 86/2021, [2025] HKCA 921

On Appeal From [2021] HKCFI 301

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 86 OF 2021

(ON APPEAL FROM HCA NO 143 OF 2020)

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court):

1.  This is the Defendant’s application for security for costs in respect of the Plaintiff’s appeal (“the Appeal”) against the order of G Lam J (as he then was) dated 27 January 2021 (“the Order”) striking out the Plaintiff’s Statement of Claim and dismissing his action against the Defendant on the principal ground that the Plaintiff did not have standing to pursue the action.

2.  Having read the evidence and submissions filed by the parties, we consider that it is appropriate to determine the Defendant’s application on paper without an oral hearing pursuant to Order 59, rule 14A(1) of the Rules of the High Court, Cap 4A.

BACKGROUND FACTS

3.  The background facts of this matter have been set out in the Reasons for Decision given by the Judge on 5 February 2021 (“the Reasons”), at §§2 to 6, and will not be repeated here. In gist, the Plaintiff’s claims relate to a Restructuring Agreement entered into in 1984 by, inter alia, (i) Esquire (Electronics) Limited (“Esquire”), a company of which the Plaintiff was its founder and a 50% shareholder, (ii) the Plaintiff as guarantor of Esquire’s obligations, and (iii) 5 creditor-banks, including the Defendant. The Plaintiff complains that the Restructuring Agreement contained false information, in that it stated that the amount of the Defendant’s “Property Portion” of the Esquire group’s indebtedness was HK$182.1 million as at 13 September 1983 when it was in fact only HK$152 million (in other words, there was an overcharge of some HK$30 million), as confirmed by a report dated 9 June 2006 by Mr Neil P Poole, a forensic accountant. The Defendant knowingly inserted, or allowed to be inserted by its legal representatives or otherwise, the false figure of HK$182.1 million in the Restructuring Agreement. The Plaintiff had no way of knowing the figure of HK$182.1 million was false until many years later. The Defendant’s fraudulent action was a primary cause of the Plaintiff’s bankruptcy. The Restructuring Agreement was therefore null and void.

4.  As a matter of fact, the Plaintiff’s complaints in respect of the Restructuring Agreement have previously been litigated, unsuccessfully, in a number of actions brought by the Plaintiff himself or by Esquire against the Defendant or the Defendant’s former solicitors, including:

1.  HCA 11077/1994 (“the Esquire Action”), an action brought by Esquire against the Defendant and another;

2.  HCA 2073/2011, an action brought by the Plaintiff against the Defendant; and

3.  HCA 507/2019, an action brought by the Plaintiff against Mayer Brown (formerly known as Mayer Brown JSM formerly known as Johnson Stokes & Master) and others.

5.  As pointed out by the Judge at §34 of the Reasons, by this action, the Plaintiff is seeking, essentially, to advance the same claims that were struck out by Deputy High Court Judge Whitehead, SC on 28 April 2014 in HCA 2073/2011, whose decision was upheld by the Court of Appeal on 21 July 2017 in CACV 117/2014.

6.  The Judge struck out the Plaintiff’s action on the principal ground that he had no standing to pursue it. This was the first ground relied upon by the Defendant in its application for striking out and dismissal, which the Judge summarised at §7(1) of the Reasons:

“The events concerning the alleged false figure of the Property Portion of the indebtedness to the defendant took place before the two bankruptcies of the plaintiff. Any related cause of action has vested in the trustee in bankruptcy. The plaintiff therefore has no standing to pursue any claim in that connection.”

7.  The Judge’s reasoning is set out at §§10 to 12 of the Reasons, as follows:

“[10] The plaintiff does not dispute the following matters in his written submissions or during the hearing, when he was represented by Mr Byron Chiu:

(1) The plaintiff was made a bankrupt on two occasions. He was first bankrupted on 30 December 1996, and then again on 9 March 2015.

(2) On each occasion, the Official Receiver became his trustee in bankruptcy.

(3) By virtue of section 58(1) of the Bankruptcy Ordinance (Cap 6) (‘BO’), on the making of each of the bankruptcy orders, the plaintiff’s pre-existing property (including his things in action) became vested in the Official Receiver as trustee in bankruptcy.

(4) Such property included any such cause of action that the plaintiff might have as pleaded in the present case, as it had accrued before the bankruptcies, which does not fall within the ‘personal action’ exception allowing a bankrupt to retain rights to actions that are personal to him.

(5) By a letter dated 12 May 2020, the Official Receiver informed the plaintiff’s solicitors that she had not assigned any cause of action to the plaintiff or otherwise consented to the plaintiff’s pursuing any cause of action by commencing legal proceedings, including the pleaded cause of action herein.

[11] On these premises, there is no escape from the conclusion that it is the Official Receiver alone who has standing to pursue the present action, and that, without an assignment by or the consent of the Official Receiver, the plaintiff has no standing to pursue it.

[12] On this ground alone, the plaintiff’s claims must be struck out, and the action dismissed: Colvin Morton Brown v HSBC [2019] HKCFI 526, [30] (Deputy High Court Judge Le Pichon); Koo Ming Kown v Pacific Online Ltd (unrep, HCA 2333/2016, 16 May 2017), [23] (Deputy High Court Judge To). In fact, the statement of claim in the GSC Action begun by the plaintiff in 2011 was struck out by DHCJ Whitehead SC precisely for this reason (see Ruling in HCA 2073/2011 dated 28 April 2014). That decision was supported by the observations of Yuen JA in her judgment on the defendant’s application for security for costs of the plaintiff’s appeal (see Judgment in CACV 117/2014 dated 3 December 2014, at [15] & [34]) and eventually upheld by the Court of Appeal (see Judgment in CACV 117/2014 dated 21 July 2017).”

8.  For the sake of completeness, the Judge also briefly addressed a few other grounds relied upon by the Defendant in support of its application to strike out the Plaintiff’s Statement of Claim and dismiss the action. In particular, the Judge upheld the following grounds advanced by the Defendant, namely, (i) causation, (ii) time bar, and (iii) no cause of action in relation to “Wing On property”. Nevertheless, as made clear by the Judge, he considered the ground relating to the Plaintiff’s standing to sue to be “an independently sufficient ground for dismissal”, and the other grounds were “alternative, independent bases to strike out the pleading or dismiss the action or any part thereof” (see §9 of the Reasons).

9.  The Plaintiff lodged an appeal against the Order by a Notice of Appeal dated 24 February 2021. The Notice of Appeal contains 4 grounds, of which only Ground 1 is relevant to the Judge’s decision concerning the Plaintiff’s standing to sue. We shall come back to this ground later in this judgment when we consider the merits of the Plaintiff’s appeal. The other 3 grounds relates to the Judge’s alternative reasons for striking out the Statement of Claim and dismissing the action.

10.  On 20 December 2024, the Plaintiff filed a Supplementary Notice of Appeal containing 17 paragraphs or grounds. They essentially relate to the Plaintiff’s complaint that the Judge “failed to give any or sufficient consideration to the serious misconduct, concealment and deception of the Defendant”, but do not address the issue of the Plaintiff’s standing to sue.

THE DEFENDANT’S APPLICATION FOR SECURITY FOR COSTS

11.  By a summons dated 22 April 2025, the Defendant applies for security for costs of the Appeal. The amount of security sought by the Defendant comes to HK$589,100. The application is made on the ground that (i) the Plaintiff’s appeal has no prospect of success and is an abuse of process, and (ii) the Plaintiff is in serious financial difficulties, and it is highly probable that the Defendant will be unable to recover any costs from the Plaintiff.

DISCUSSION

12.  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 of the costs of an appeal as may be just. The principles for the exercise of this jurisdiction are well settled. For this purpose, “special circumstances” include cases of insolvency or impecuniosity, and difficulty or expense in enforcing costs order (see Hong Kong Civil Procedure 2025, Vol 1, at §§59/10/26 and 59/10/27). Nevertheless, even in such cases, the court retains a discretion not to order security if the appellant can demonstrate sufficient countervailing factors which would militate against the making of an order of security for costs (see Hong Kong Civil Procedure 2025, at §59/10/28).

13.  In the present case, the Plaintiff does not dispute that he has financial difficulty, but contends that his dire financial position was brought about as a result of the Defendant’s misconduct and wrongdoing.

14.  Since the Plaintiff’s impecuniosity is not in issue, the question is whether there are sufficient countervailing factors which would militate against an order for security for costs being made against him.

15.  In respect of the merits of the Appeal, as earlier noted, only Ground 1 of the Notice of Appeal (which was drafted by the Plaintiff’s former solicitors) is relevant. It reads as follows:

“In relation to the Judge’s conclusion that the Plaintiff has no standing to pursue the Action herein (see §17 of the Reasons), the Judge’s attention having been drawn to at least two sets of proceedings (namely, HCA 1548/2020 and an application under sections 83 and 84 of the Bankruptcy Ordinance (Cap 6)) which may have a bearing on the Plaintiff’s standing to pursue the Action herein, the Judge ought to have exercised extreme caution against (and accordingly refused) striking out the Action pending resolution of the said proceedings, particularly when the technical hurdle may be cured by a subsequently joinder of the trustee in bankruptcy, if necessary and depending on the determination of the said proceedings.” [emphasis added]

16.  The Judge considered the said proceedings relied on by the Plaintiff, ie HCA 1548/2020 and the application under sections 83 and 84 of the Bankruptcy Ordinance, at §§13-16 of the Reasons, and came to the view that they did not affect the Plaintiff’s lack of standing to sue as the matters stood before him. The Plaintiff has not pointed to any error in the Judge’s analysis. The highest that the Plaintiff can put his argument is that those proceedings “may have” a bearing on the Plaintiff’s standing to pursue the present action. This is plainly not sufficient to give rise to a valid ground of appeal. We agree with the Judge’s view. On the basis of the existing materials before the Court, we consider the Plaintiff’s lack of standing presents an insurmountable obstacle to his action against the Defendant. We do not see that the Plaintiff’s appeal has any reasonable prospect of success.

17.  In respect of the argument that the Plaintiff’s impecuniosity is the result of the Defendant’s misconduct and wrongdoing, the Plaintiff’s underlying allegations against the Defendant, including the complaint about the alleged overcharge of HK$30 million[1], have already been rejected by the Court of Appeal in CACV 312/2005 (12 October 2006) on appeal from the judgment of Waung J dated 19 July 2005 in the Esquire Action. The Plaintiff’s further applications for leave to appeal against the judgment of the Court of Appeal have been dismissed by the Court of Appeal (2 March 2007), and by the Appeal Committee of the Court of Final Appeal in FAMV 19/2007 (1 June 2007). While the Plaintiff may not be satisfied with the judgments of the Court of Appeal/Court of Final Appeal, there must, it seems to us, be finality to his litigation against the Defendant and, we would add, the Defendant’s lawyers, in respect of his complaints concerning the Restructuring Agreement.

18.  In respect of the argument that the Plaintiff would be denied justice if security for costs is awarded, the Plaintiff says that his friends, who had been helping and assisting him financially, have passed away and he has no other means or ways to raise funds to satisfy the amount of security sought by Defendant or anything like it from any other source. He says that currently, he relies on his three sons to provide him with a roof over his head, and contribute towards his expenses on food and medicines, but they do not have the finance to pay for his legal expenses or pay the amount of security sought by the Defendant. He also says that the monthly social security amount that he receives is not sufficient to cover his essential needs. We note that other than his bare, general assertions, the Plaintiff has not given any particulars of his expenses, or produce any documentary evidence in relation to financial situation. In any event, it is important to appreciate that it is inherent in an order for security for costs made against an impecunious appellant that the order may operate to prevent the appellant from pursuing an appeal. If it can be shown that the application is made with a view to stifling a reasonably arguable appeal, it may properly lead the court to conclude that the granting of security for costs will or may result in the denial of justice to the appellant. We do not, however, consider this to be the position in the present case. The Plaintiff has already had his days in court, and his present appeal has no apparent merit. Further, as pointed out by the Judge at §34 of the Reasons, his action against the Defendant is an abuse of process. On the other hand, to refuse to make an order for security for costs would mean, in all probability, that the Defendant will not be able to recover its costs should it succeed in resisting the Plaintiff’s appeal. We do not consider that an order for security would result in a denial of justice to the Plaintiff.

19.  There is one other matter that we wish to mention. We note with some concern the Defendant’s delay in taking out the present application for security for costs. Generally, an application for security for costs ought to be made without delay, as soon as an appeal is lodged and set down and the notice of appeal is served (see CWG v MH & Others [2014] HKFLR 166, at §§42.1, 43.1 and 43.2). There is, however, no inflexible rule that delay is necessarily fatal to an application for security for costs. It is just one of the relevant factors that the court may take into account when exercising its discretion on whether to make an order. The weight that may be given to the factor of delay depends on the circumstances. In the present case, we bear in mind the substantial delay on the Defendant’s part in making the application. On the other hand, it is also relevant to take note of the following matters: (i) after the Appeal was set down on 9 March 2021, the Plaintiff took no further step to prosecute the Appeal until he filed a notice to act in person and the Supplementary Notice of Appeal on 20 December 2024, followed by an application for legal aid on about 17 February 2025[2], (ii) other than the above matters, it does not appear that the Plaintiff had incurred any substantial costs in the Appeal between the date of setting down of the Appeal and the date of the Defendant’s summons for security for costs dated 22 April 2025. We also take into account the apparent lack of merit of the Appeal, and the Plaintiff’s abuse of process as mentioned above. We do not consider that the Defendant’s application for security for costs should be denied because of its delay in taking out the present application.

20.  In all, we do not consider that there is any sufficient countervailing factor against the court’s exercise of its discretion to make an order for security for costs in the present case.

DISPOSITION

21.  We allow the Defendant’s application for security for costs. We have considered the Defendant’s skeleton bill of costs seeking the total amount of HK$589,100 by way of security. Items 3, 4 and 6-11 shown on the skeleton bill of costs relate to the present application for security for costs. We fix the amount of the security (excluding the costs of the present application) at HK$420,000.

22.  The following orders are made:

(1)  The Plaintiff do within 28 days from the date of the order herein pay into court the sum of HK$420,000 as security for the Defendant’s costs of the Appeal.

(2)  Until such payment into court be made and notice thereof given by the Plaintiff to the Registrar of Civil Appeals and to the solicitors for the Defendant, all proceedings in the Appeal be stayed.

(3)  In default of making such payment into court within the time aforesaid, the Appeal, upon the solicitors for the Defendant certifying such default to the Registrar of Civil Appeals, do stand dismissed without further order of the court with costs to be paid by the Plaintiff to the Defendant, such costs to be taxed if not agreed.

23.  We further order the Plaintiff to pay the Defendant’s costs of the present application, which shall be summarily assessed. The Defendant shall file and serve an updated statement of costs which complies with the requirements of §10 of Practice Direction 14.3 within 14 days from the date of this order, and the Plaintiff shall have leave to file and serve a statement of objections (limited to 2 pages) to the Defendant’s statement of costs within 14 days thereafter. Subject to any further directions as may be given by the Court, the Defendant’s costs shall be summarily assessed after receipt of the Plaintiff’s statement of objections (if any).