TO KIN WAH v. TUEN MUN DISTRICT OFFICER AND OTHERS

CACV 444/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 444 OF 2002

(ON APPEAL FROM HCAL 105 OF 2002)

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REASONS FOR DECISION

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Introduction

1. On 28 October 2002, Chung J set aside the ex parte leave that had been granted to the applicant (the appellant in this appeal) to apply for judicial review. The applicant has appealed that decision by a Notice of Appeal dated 5 December 2002.

2. From 1992 to 2000, there was a large scale litigation between the To clan and the To Ka Yi Tso on the one part and the Hong Kong Government on the other, in relation to whether the t'ong, Tsing Wan Kun ('the T'ong'), was recognised by law and if so, whether $300 million accumulated as a result of a land resumption, belong to it. Eventually, the Court of Final Appeal determined the matter in favour of the To clan and the To Ka Yi Tso. Payment of over $281 million has been made into an account at the Hongkong and Shanghai Banking Corporation pending the outcome of the present proceedings.

3. The question then arose as to how to deal with this money and related matters. At a meeting of the T'ong on 12 May 2001, which the applicant did not attend, various matters were decided including the election, by a majority, of the 2nd to 4th respondents as managers of the T'ong.

4. Under section 15 of the New Territories Ordinance Cap 97, the names of all managers of a t'ong must be reported to the New Territories District Officer and approved by the Secretary for Home Affairs. Once approved, the appointment should be registered. The Secretary for Home Affairs may, if good cause is shown, cancel the appointment. For the purposes of the Ordinance, the term "Secretary for Home Affairs" includes District Officers.

5. On 2 January 2002, the Tuen Mun District Officer (the 1st respondent in these proceedings) approved the appointment of the 2nd to 4th respondents as managers of the T'ong. It is this decision that the applicant sought to quash by its Application for Leave to Apply for Judicial Review dated 2 April 2002. Originally, the Application was directed only at the 1st respondent.

6. Yeung J granted leave ex parte on 10 April 2002. That day, the 2nd to 4th respondents were also joined in the proceedings. By a summons dated 24 October 2002, these respondents applied to set aside the order granting leave.

7. The matter was heard by Chung J on 28 October 2002 and, as I have said, he set aside the leave that had been granted by Yeung J. In his Reasons for Decision handed down on 31 December 2002, the learned judge identified the applicant's complaints as being essentially that under Chinese customary law and custom (the relevant law and custom being that of the To clan), all decisions regarding the appointment of managers had to be unanimous. A majority decision (as in the present case) would not suffice, it is contended. The applicant's case is that the 1st respondent had not taken this fundamental aspect into account when arriving at his decision. At least, it is said, he should have investigated the point. There were also other complaints that the applicant makes, such as the validity of the notice convening the May 2001 meeting and that, again as part of Chinese customary law and custom, the managers of the T'ong should not also be managers of the To Ka Yi Tso. Further, the applicant attacked the integrity, propriety, ability and competence of the 2nd to 4th respondents as managers.

8. The learned judge rejected all these and other points as being unarguable. He was influenced by the fact that no proper evidence was adduced by the applicant as to the relevant Chinese customary law and custom. The applicant tried to give evidence of this himself but the judge held that he was no expert and moreover, had not even asserted he was familiar with the law and custom of the To clan. The other complaints were rejected on the clear facts as perceived by the judge.

9. The applicant having launched an appeal by their summons dated 8 January 2003, the 2nd to 4th respondents sought an order that he should provide security for costs of the appeal. This was the relevant application before the court.

The hearing before the court

10. The hearing before me took place on 22 January 2003. Mr Andrew Liao SC and Mr Colin Shipp appeared for the 2nd to 4th respondents, Mr Ronny Wong SC for the applicant.

11. At the conclusion of counsel's submissions, I ordered that security for costs in the sum of $450,000.00 be paid into court within 28 days, in the meantime the appeal being stayed (save for the filing and service of the Respondent's Notice). In default of the applicant providing security in the said sum within the time stipulated, the appeal was to stand dismissed. I also ordered that costs be costs in the appeal certified fit for one counsel.

12. I said that the Reasons for my Decision would be handed down at a later date.

The law

13. RHC Order 59 rule 10(5) gives this court the power to order security for costs where there are special circumstances making this just. The principles are set out in Hong Kong Civil Procedure 2002 Volume 1 at paragraph 59/10/28 to 59/10/38.

14. One recognised situation in which security for costs is commonly ordered is where the appellant is impecunious:- see Hong Kong Civil Procedure 2002 Volume 1 at paragraph 59/10/29. Once this circumstance exists, while the court retains a residual discretion whether or not to order security, it is then up to the appellant (against whom an order is sought) to demonstrate countervailing factors that would tilt the balance or discretion in his favour. As Saville LJ said in Foecke v University of Bristol, unreported, 30 July 1996, English Court of Appeal, "The fact that a special circumstance is established does not automatically mean that security should be ordered, but merely that in that event the Court has a discretion in the matter; though as a matter of long-settled practice the Court is, in the absence of countervailing factors, very likely indeed to exercise its discretion by ordering security if this special circumstance is established".

15. Factors which the court should take into account (whether or not 'countervailing') include an examination of the merits of the appeal. While the court at this stage is not required to (indeed should not) go deeply into this aspect (for that is a matter for the full appeal itself), the judge is required to form some sort of preliminary view of the prospects of success. The question that the court asks itself is simply this: What are the prospects of success on the basis of the materials before the court at this stage? I emphasise 'at this stage' because often, the court will not be allowed the luxury (either in terms of time or materials) to form a mature view of the matter. Nor should it be required to do so. That said, the court should be able to form a provisional or preliminary view of the merits of the appeal at the time security for costs is sought and, as I have said, it should undertake this exercise. If there is a strong likelihood of the appeal succeeding, then it may not be appropriate or right to order security for costs. On the other hand, if the appeal is merely arguable or if it can really go either way, an order for security will generally be made where other factors exist in support of such a course.

16. I should perhaps also just add this. The purpose behind an examination of the merits of the appeal at this stage is really to ascertain the likelihood or possibility of the appellant having to pay costs at the end of the appeal. In other words, the objective of the inquiry into merits is directly related to costs. In most cases, there is a direct link between the outcome of the appeal and the incidence of costs. However, this is not necessarily always so. Where, as Mr Wong for the applicant submits in the present case, the likelihood is that whichever way the appeal goes, his client would not have to bear the costs of the party seeking security for costs, this is of course relevant, if not decisive in most cases, provided of course the submission is made out.

Should security for costs be ordered in the present case?

17. The 2nd to 4th respondents contend that the applicant is impecunious and there is therefore a danger that he would be unable to pay the costs of the appeal if unsuccessful. Reliance is placed on a statement in the applicant's affirmation dated 24 October 2002 where reference is made to an application for legal aid on his part (which application was subsequently rejected). He says this, "Accordingly, I am otherwise privately funded, and must raise fund [sic] by way of loan within my family to continue this action. For this reason, the obtaining of expert evidence caused some delay when fund [sic] must first be raised, although again, every reasonable effort is being made to do so".

18. This affirmation was served in support of his application for an adjournment before Chung J (which was also rejected).

19. In a Certificate dated 14 January 2003 filed by the applicant's solicitors in support of his wish that the dates for the appeal should be fixed in consultation with counsel's diary, reference is made to the fact that the applicant is experiencing "severe financial difficulties" in pursuing the appeal and has had to borrow "heavily".

20. In his affirmation dated 17 January 2003 resisting the present application, the applicant says that the 2nd to 4th respondents are fully aware he is not impecunious and that he has assets to satisfy any costs order on appeal. He makes reference to the fact that he has an interest in the T'ong (which, it will be recalled, is entitled to over $281 million).

21. However, no explanation has been given by the applicant as to his earlier claims of impecuniosity and these cannot just be ignored.

22. I am satisfied that impecuniosity exists as a ground to order security for costs in the present case. Indeed, Mr Wong accepts this. Are there, however, any countervailing factors?

23. Mr Wong contends that the decision of the District Officer can be impugned, first, on the basis he did not even investigate the lawfulness of the election of the 2nd to 4th respondents and secondly, it was at least strongly arguable that unanimity was required for the election of managers of the T'ong. He submitted that his client had a strong appeal. Mr Liao for his part made submissions to demonstrate that the applicant's appeal was not as strong as Mr Wong had submitted. In my view, the appeal cannot be described as having such a strong likelihood of success that it would be unjust for an order for security for costs to be made. I need not deal more with the merits.

24. Mr Wong then contends that in the appeal itself, whatever the result, it is not likely that he will have to bear the costs of the 2nd to 4th respondents in any event. Reliance is placed on Bolton Metropolitan District Council v Secretary of State for the Environment [1995] 1 WLR 1176 for the proposition that, while costs are in the general discretion of the court, nevertheless where different parties, especially in appellate proceedings, run the same arguments and not separate issues peculiar to them, even where the appeal is dismissed, it may well be unjust to order that the losing party will have to pay more than one set of costs. That principle makes good sense in most cases. However, in the present case, I am not convinced (at this stage I emphasise) that it necessarily applies to the 2nd to 4th respondents. First, the appeal is in relation to a decision of Chung J made in respect of an application by the 2nd to 4th respondents themselves. The applicant and they are therefore the chief protagonists. Secondly, it is not to be forgotten that the learned judge awarded the 2nd to 4th respondents their costs of the application (on an indemnity basis). If the appeal is unsuccessful, there is at least a reasonable likelihood that the 2nd to 4th respondents' costs would be ordered to be paid by the applicant again. I do not rule out the possibility that the applicant may succeed in his arguments here, but at the moment, I am not convinced.

25. Mr Wong then submits that the sum sought by the 2nd to 4th respondents is exorbitant. It is said that the 2nd to 4th respondents are in effect trying to stifle the applicant's appeal. Quite apart from this further supporting the respondents' case on impecuniosity, nothing is said about the applicant's ability to raise money through loans from other people. It will be recalled that in his affirmation dated 24 October 2002, the applicant makes express reference to the fact that he is privately funded. He has not deposed to the fact that this has somehow changed.

26. I am therefore satisfied that an order for security for costs should be made. But in what amount?

27. In the summons asking for security, the respondents claim the sum of $1,291,642.00. Of this, counsel's fees amount to $1,000,000.00. For an appeal which is due to last one day and given the nature of the issues, the total estimated costs seem to be on the high side. Added to this is also the fact that costs may be ordered only on a party and party basis. I appreciate that the learned judge awarded costs on an indemnity basis but there is no certainty that this will be the basis of costs if the appeal fails. Doing the best I can at this stage (and on the materials before me), I therefore made the order that security for costs be provided in the sum of $450,000.00.