GURDAS S. CHOITHRAMANI v. MAYER BROWN (formerly known as MAYER BROWN JSM formerly known as JOHNSON STOKES & MASTER) AND OTHERS

CACV 91/2022

[2022] HKCA 1133

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 91 OF 2022

(ON APPEAL FROM HCSD NO 27 OF 2021)

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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 Respondents’ application for security for costs in respect of the Applicant’s appeal (“the Appeal”) against the order of Deputy High Court Judge Le Pichon dated 18 January 2022 (“the Order”) dismissing the Applicant’s application to set aside a statutory demand (“the Statutory Demand”) served by the Respondents on the Applicant on 10 June 2021 in respect of the costs of HK$185,000 (“the Assessed Costs”) ordered to be paid by the Applicant to the Respondents pursuant to a costs order (“the Costs Order”) made by Deputy High Court Judge To on 12 March 2021 in HCA 507/2019 (“the 2019 Action”). The said costs were summarily assessed by Deputy High Court Judge To on 9 April 2021.

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

THE BACKGROUND FACTS

3.  The background facts of this matter have been summarised in §§4-16 of a recent judgment of this Court in CACV 180/2021 dated 3 March 2022 (“the Judgment on Security”), and shall not be repeated here. In that judgment, the Court allowed the Respondents’ application for security for costs in respect of the Applicant’s appeal in CACV 180/2021 (“the Principal Appeal”) against the judgment of Deputy High Court Judge To dated 12 March 2021 (“the Principal Judgment”) striking out the Applicant’s Writ of Summons and Statement of Claim in the 2019 Action, and ordered the Applicant to pay into court the sum of HK$350,000 within 28 days of the date of the order (ie on or before 31 March 2022) as security for the Respondents’ costs of the Principal Appeal, in default of which the Principal Appeal was to stand dismissed without further order of the court. The Applicant has failed to make payment into court, and has not applied for any stay of execution of the Judgment on Security. Accordingly, the Principal Appeal has been dismissed, and there is no extant appeal against the Principal Judgment (including the Costs Order).

4.  The Applicant has made a further application to the Court of Final Appeal for leave to appeal against the Judgment on Security in FAMV 263/2022. We have been informed by the Respondents that the Registrar of the Court of Final Appeal has issued a Rule 7(1) summons in respect of that application on 12 July 2022. The Rule 7(1) summons, we understand, has not yet been determined.

5.  In the meantime, the Respondents issued the Statutory Demand in respect of the Assessed Costs, and served it on the Applicant on 10 June 2021.

6.  On 28 June 2021, the Applicant took out a summons to set aside the Statutory Demand (“the Set Aside Application”). That application came before Deputy High Court Judge Le Pichon on 18 January 2022, who dismissed the application on the same day. In her Reasons for Decision dated 19 January 2022, the learned Judge gave the following reasons for her decision:

“[9] The only ground the applicant relies on is that the debt is disputed on substantial grounds.

[10] The applicant does not dispute that where a statutory demand is based on a judgment [or] order, the court will not go behind the judgment or order and inquire into the validity of the debt, absent evidence of fraud or collusion or a miscarriage of justice which must be particularised and supported by clear and credible evidence …

[11] While accepting that there is no such allegation in the present case, the applicant sought to invite this court to depart from the general rule. It was said that there is an allegation of fraud against HSBC in earlier actions that formed the backdrop to the underlying action.

[12] It would appear from the notice of appeal filed by the applicant in the underlying action that his complaint is that [Deputy High Court Judge To] failed to have sufficient regard to the fact that it was the very fraud and wrongdoing which the applicant alleges to have been perpetuated by the respondents and HSBC that caused the applicant’s bankruptcy and in turn gave rise to the complaints raised by the respondents.

[13] The applicant’s grievances are detailed in the notice of appeal and his affirmations. On that basis, it was said that the high threshold for striking out his claim had not been met and [Deputy High Court Judge To]’s decision was thus wrongly made.

[14] Those matters may be relevant to the applicant’s extant appeal but cannot of themselves constitute a basis for this court to depart from the general rule and do not constitute a sufficient basis to warrant the setting aside of the statutory demand.

[15] For those reasons, the application (which was doomed from the start) was dismissed.”

7.  By a Notice of Appeal dated 15 February 2022, the Applicant appealed against the Order to the Court of Appeal.

THE RESPONDENTS’ APPLICATION FOR SECURITY FOR COSTS

8.  On 12 May 2022, the Respondents took out the present summons for security for costs of the Appeal. As stated in the Respondents’ Skeleton Submissions dated 9 June 2022, the Respondents contend that the following special circumstances exist in the present case which justify an order for security for their costs of the Appeal being made against the Applicant:

(1)  the Applicant is impecunious;

(2)  the Respondents are likely to encounter difficulty, undue delay and undue expense in enforcing any order for costs in respect of the Appeal; and

(3)  the Appeal does not have a sufficiently good chance of success, and is an abuse of the court’s process.

9.  The Applicant opposes the application for security for costs on the following grounds:

(1)  his insolvency or impecuniosity arises from what he alleges to be the Respondents’ fraud and wrongdoings;

(2)  there would be a denial of justice by an order for security for costs against him; and

(3)  the court should exercise its discretion to refuse to make an order for security for costs against him in the circumstances of the present case, including the fact that he has twice been bankrupted as a result of the wrongful acts of the Respondents, the grounds of his appeal, and other facts and matters mentioned in his affirmations filed in the proceedings below.

DISCUSSION

10.  Under Order 59, r 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 2022, Vol 1, at §§59/10/26 and 59/10/27). However, 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 such order being made (see Hong Kong Civil Procedure 2022, at §59/10/27).

11.  The Applicant states expressly that he does not dispute that he is impecunious and the Respondents may encounter difficulty in enforcing any costs order which may be made against him: see §7 of the Affirmation of the Applicant filed on 13 July 2022 (“the Affirmation”) in opposition to the present application.

12.  The question is, therefore, whether there are sufficient countervailing factors which would militate against an order for security for costs being made against him.

13.  In respect of the argument that the Applicant’s impecuniosity arises from the Respondents’ fraud and wrongdoings, as mentioned at §22 of the Judgement on Security, it is based essentially on allegations which have twice been rejected by different courts in two earlier actions (namely, HCA 11077/1994 and HCA 2073/2011).

14.  In respect of the argument that the Applicant would be denied justice if security is awarded, in the previous application for security for costs, the Applicant did not suggest that he could not raise funds from other sources such as his family or friends to provide the security sought by the Respondents (see §23 of the Judgement on Security). On this occasion, the Applicant says that he has been unable to raise funds in order make a substantial payment into court. He also says that he has made enquiries as to the possibility of raising further funds to make payment into court as security, but has been told that further funds will not be forthcoming (see §12 of the Affirmation). The Applicant has failed, however, to particularise the further enquiries that he has allegedly undertaken to raise funds. Further, it is of note that the Applicant was represented by counsel and solicitors at the hearing before Deputy High Court Judge Le Pichon on 18 January 2022. His 2^nd affirmation in support of the Set Aside Application was apparently also prepared by or with the assistance of his solicitors and filed by his solicitors on his behalf on 10 November 2021. He has not explained the source of his funds to engage counsel and solicitors to act for him in the proceedings below. It is, to say the least, unsatisfactory for the Applicant to adopt the position that while he appears to be able to raise funds to pay his own counsel and solicitors, he is unable to raise funds to give security for the Respondents’ costs of the Appeal, without any further explanation. It is also relevant that the amount of the security sought by the Respondent (in the sum of HK$331,100), while substantial, is not extravagant. We are not satisfied that there will be a denial of justice to the Applicant by making an order for security for costs against him.

15.  In respect of the merits of the appeal, for the reasons given by Deputy High Court Judge Le Pichon, we are far from being satisfied that it can be a factor in favour of the Applicant.

16.  We are also not satisfied that the matters relied upon by the Applicant, whether considered individually or cumulatively, constitute sufficient countervailing factors against the court’s exercise of its discretion to make an order for security for costs in the present case.

17.  Overall, we consider that there are special circumstances which justify ordering the Applicant to give security for the Respondents’ costs of the Appeal.

DISPOSITION

18.  We allow the Respondents’ application for security for costs, and fix the amount of the security (excluding the costs of the present application) at HK$240,000.

19.  The following orders are made:

(1)  The Applicant do within 28 days from the date of the order herein pay into court the sum of HK$240,000 as security for the Respondents’ costs of the Appeal.

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

(3)  In default of making such payment into court within the time aforesaid, the Appeal, upon the solicitors for the Respondents 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 Applicant to the Respondents, such costs to be taxed if not agreed.

20.  We further order the Applicant to pay the Respondents’ costs of the present application, which shall be summarily assessed. The Respondents shall file and serve an updated skeleton bill of costs which complies with the requirements of §10 of Practice Direction - 14.3 within 7 days from the date of this order, and the Applicant shall have leave to file and serve a statement of objection (limited to 2 pages) to the Respondents’ skeleton bill of costs within 14 days thereafter. Subject to any further directions as may be given by this Court, the Respondents’ costs shall be summarily assessed after receipt of the Applicant’s statement of objection (if any).