TWG TEA CO PTE LTD AND ANOTHER v. TSIT WING (HONG KONG) CO LTD AND OTHERS

FAMV No. 6 of 2015

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 6 OF 2015 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL
FROM CACV NO. 191 OF 2013)

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D E C I S I O N

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Mr Justice Fok PJ :

The application

1. On 20 May 2015 the Appeal Committee granted the appellants leave to appeal from the judgment of the Court of Appeal in CACV 191/2013.  In accordance with the standard order set out in Practice Direction 2.3, the grant of leave to appeal was made conditional upon the appellants paying into court, in respect of each respondent, the sum of HK$400,000 as security for the costs of the appeal.  Because there are four respondents, the order required the appellants to pay into court a total of HK$1,600,000.

2. The appellants now apply by summons to vary that order for security for costs, pursuant to the procedure set out in the standard order[1]. Instead of the total sum of HK$1,600,000, the appellants seek a variation of the order so that they are required to provide security for costs in the total sum of HK$400,000 in respect of all four of the respondents.

The grounds relied upon

3. In the appellants’ written submissions in support of the variation application, four grounds are put forward to justify the reduction in the amount of security, namely: (i) that the respondents have common causes of action against the appellants; (ii) that there was no separate assessment of costs in the courts below; (iii) that the respondents are likely to have common legal representation in the appeal; and (iv) that the order requiring the appellants to provide security for costs of HK$1,600,000 would have the effect of stifling the appeal.

Discussion of the grounds

4. Having considered the grounds put forward in support of the application, and for the following reasons, I am not persuaded to vary the amount of security for costs.

5. Section 25(2)(a) of the Hong Kong Court of Final Appeal Ordinance[2] provides that the Court may order as a condition for the grant of leave to appeal:

“… that the appellant shall enter into good and sufficient security, for the due prosecution of the appeal, and the payment of all such costs as may become payable to the respondent in the event of the appeal being dismissed for non-prosecution, or of the Court ordering the appellant to pay the respondent’s costs of the appeal;”.

The quantum of such security, as stipulated in section 25(3)(b) of the Ordinance, shall be “in a sum not exceeding $400,000 in respect of each respondent”.  It is therefore expressly provided that, where there is more than one respondent to an appeal, the discretion exists to order security for costs in respect of each respondent’s costs up to the maximum amount.

6. Normally, where separate respondents, not suing in a joint capacity, have advanced common causes of action as plaintiffs, each such respondent is entitled to be considered as pursuing a separate complaint against the appellants[3]. Unless there is some basis for concluding that a particular respondent’s asserted cause of action is not a genuine or viable cause of action vested in that respondent (in which case it would likely have been struck out or the claim based on it dismissed), the respondent’s assertion of that cause of action should be treated as a separate complaint for the purposes of the section 25(3)(b) discretion.  Thus, where common causes of action are separately advanced by multiple respondents, those respondents are each eligible to be considered as entitled to security for costs at the Court’s discretion.  The Court may decline to exercise its discretion to order security for costs but it will ordinarily not decline to do so, since the Court’s established practice is to order the maximum amount of security provided for in section 25(3)(b) of the Ordinance in respect of each respondent to an appeal.  As has been noted, this amount is “regarded as realistic, recognizing the level of costs usually incurred”[4] and is the normal practice[5].

7. In the present case, the four respondents pleaded claims against the appellants for trade mark infringement and passing off.  The respondents are separate legal entities with separate causes of action against the appellants.  For present purposes, their respective claims can be treated as being at least arguable since they have been upheld by the courts below and they are thus properly to be regarded as separate respondents.  Whether the Court should order the normal amount of $400,000 in respect of each respondent is a discrete question and will depend on whether such an order is necessary in order to constitute good and sufficient security for the appeal in question.

8. The fact that one bill of costs has been submitted in respect of the costs in the courts below does not affect the above conclusion that the respondents, assuming they each separately have genuine and viable causes of action against the appellants, are each to be treated as eligible to be considered as entitled to security for costs at the Court’s discretion.  Nor is this conclusion affected by the fact that multiple respondents are represented by the same counsel and solicitors[6]. This follows from the wording of section 25(3)(b) making provision for security “in respect of each respondent”[7].

9. What will be material, where there are multiple respondents, is the quantum of security likely to be required to constitute “good and sufficient security” for the prosecution of the appeal and the payment of such costs as may be awarded to the respondents.

10. In the present case, the costs of the trial have been taxed at approximately HK$15 million.  The respondents’ bill of costs for the appeal in CACV 191/2013, which was argued over three days, remains to be taxed but amounts to HK$4.6 million.  The appeal to this Court has been fixed to be heard over two days and, given the questions raised in the appeal[8], there is a real possibility that the appeal will occupy more than one day of the Court’s diary.  In the circumstances, it is reasonable to think that, in the event the costs of the appeal to this Court were awarded to them, the respondents’ costs would exceed HK$1.6 million.  Accordingly, security for costs in this sum is a commensurate amount of security.

11. I turn to the suggestion that the order for security for costs in the amount of HK$1.6 million will have the effect of stifling the appeal.  This is certainly a factor that may be taken into account by the Court in the exercise of its discretion as to the amount of security for costs to be ordered[9]. Here, however, there is only a bare assertion in the written submissions for the appellants that, given the defendants’ liability for the costs in the courts below, the order for security for costs in the amount of HK$1.6 million “will have the effect of stifling the appeal”[10].

12. This is not an adequate or appropriate way in which to raise this argument as a ground to oppose or vary an order for security for costs.  If the Court is to vary an order for security for costs on this ground, it needs to be satisfied that, in all the circumstances, it is probable that the order would have the effect of stifling the appeal[11]; that is to say, that it would lead to the appellants having to abandon the pursuit of an otherwise arguable appeal.  There may be cases where this can properly be inferred without direct evidence but, in most cases, a proper evidential basis for the assertion will be required.  The Court will need to know not only why the appellant cannot provide security from its own resources, but also why the security cannot be raised by the appellants from some third party source. The burden lies on the appellant to satisfy the Court that it cannot do so[12].

13. In the present case, there is no indication in the appellants’ written submissions of the factual basis for the bare assertion that the order to provide security in the sum of HK$1.6 million would stifle the appeal.  No details of the appellants’ financial situation are given to demonstrate inability or financial hardship in having to raise security for costs in the sum ordered.  Moreover, given the pleaded facts concerning the 1^st appellant (of which the 2^nd appellant is a subsidiary) that it had annual sales of 650 tons of tea in 2008 generating revenue of US$30 million and that in 2010 it had total revenue of US$40 million[13], this assertion would need to be supported by some evidence of hardship or change of circumstance in order to be a factor of any weight in the exercise of discretion as to the amount of security to be ordered.  Furthermore, the appellants’ assertion is wholly inconsistent with, and indeed contradicted by, the additional submission advanced by the appellants that there is “no reason to doubt that [the respondents] will be deprived of its [sic] costs award and there is no evidence that the [appellants] will not be able to satisfy any costs award in favour of the [respondents] at the conclusion of the appeal hearing”[14].  Yet further, the assertion is also contradicted by the appellants’ statement that they have “substantial assets which are available for enforcement purposes”; a statement said to be supported by a filing of the 1^st appellant with the Accounting and Corporate Regulatory Authority of Singapore showing that “as at 31 December 2013 the 1^st Appellant had total assets of SG$27.8 million, total net assets of SG$7.8 million and profit after tax in that year of over SG$2.5 million”[15]. 

14. In these circumstances, the submission that the order for security for costs would stifle the appeal has clearly not been responsibly made.

Conclusion

15. The appellants’ summons to vary the amount of security for costs is therefore dismissed with costs to the respondents.

Summary assessment of costs appropriate

16. In their written submissions, the respondents ask that these costs be summarily assessed and payable forthwith.  It has not been the practice of the Court to carry out summary assessments of the costs of interlocutory applications but there is no doubt that a single permanent judge of the Court has jurisdiction[16] to so assess the costs of such an application properly made to him.  In general, the procedure is appropriate as a means of saving the Court’s time, avoiding satellite litigation, discouraging unmeritorious applications and preventing successful litigants from being kept out of pocket for their interlocutory costs; and, in particular, it is appropriate in the present case since none of the grounds advanced in support of the application to vary the standard order for security for costs has been made out.

17. Accordingly, the respondents’ costs in respect of the summons will be assessed on a gross sum basis and thereafter paid forthwith and, to this end, I therefore direct the respondents’ solicitors to submit a bill of costs within seven days hereof and give leave to the appellants to submit their response within seven days thereafter.  The format of the bill of costs should be consistent with the approach to the preparation of such a bill in the High Court[17] and the appellants’ response should be limited to the same number of pages of A4 paper as the respondents’ bill of costs.  The gross sum assessment will be conducted by me on the papers without a hearing and the costs so assessed will thereafter be notified to the parties in due course.