WING TRANS LOGISTICS (HK) LTD v. LO SAU CHI t/a SMART ENTERPRISES & LOGISTICS

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JUDGMENT

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1.    On 11 December 2007, I gave summary judgment for Wing Trans for the sum claimed (HK$226,038.20), on the basis that Ms Lo’s counterclaim of US$22,382.00 (HK$181,989.00) does not amount to any legal or equitable set-off against Wing Trans claim, and thus she cannot show any triable defence.  See: my previous written decision at paras 8 to 15 and 24.

2.   Ms Lo now applies leave to appeal to the Court of Appeal against the summary judgment.  Wing Trans opposes the application.  As I set out below, Wing Trans also later seeks a condition that Ms Lo should pay security for costs of the intended appeal for leave to be granted.

Leave to appeal

Applicable principle

3.     In considering whether to allow leave to appeal to the Court of Appeal, Ms Lo needs to satisfy the Court that the intended appeal has a realistic prospect of success, in the sense that she has at least an arguable case in the intended appeal:  Ma Bik Yung v. Ko Chuen (unrep., HCMP4303 of 1999, 8 September 1999) per Leong CJHC at paragraph 5, in adopting and approving Smith v. Cosworth Casting Processes Ltd [1997] 1 WLR 1538.

Grounds of appeal

4.    Under the short affirmation filed in support the present application for leave, Ms Lo raises principally two grounds of appeal.  For the first one, she repeats her case of the counterclaim.  For the second one, she says (in one line) that there are problems in Wing Trans’ 18 invoices.

Discussion

5.    As set out in my pervious judgment, Wing Trans’ claim is based on the outstanding air freight and service charges for services rendered to Ms Lo.  The outstanding sum is covered by 18 invoices issued between January and February 2007.

6.    Ms Lo defends the claim by way of set-off on the basis of the counterclaim, which arises from a separate service transaction (not related to the transactions giving rise to the sum claimed by Wing Trans) provided by Wing Trans.

7.    In relation to the defence of set-off by way of Ms Lo’s counterclaim, based on the authority of Karpex (HK) Limited v. Yasmine Printing (China) Ltd (unrep., CACV 124/2006, Cheung JA and Chu J, 10 July 2006), I came to the view in my previous decision that there could not be any equitable set-off as the two transactions were not closely related to make it inequitable for Wing Trans to succeed in its claim without having any regard to Ms Lo’s counterclaim.

8.    However, given the common background in this case that the parties had been in business dealing over a period of time, I cannot say it is unarguable that the Court of Appeal may come to a different view that the respective transactions are arguably sufficiently closely related to support an equitable set-off.  Notwithstanding the decision in Karpex, whether the transactions are closely related is an evidence sensitive issue, and thus it has to be decided on a case-to-case basis.   For this purpose, it must be reminded that for Ms Lo to successfully oppose Wing Trans summary judgment application, all she has to do is to show a triable defence.

9.    In the premises, I cannot say this intended ground of appeal does not have an arguable chance to succeed. 

10.    In relation to Ms Lo’s intended second ground of appeal that there are alleged problems in the 18 invoices, I see no merits in it :

(1)	This point was never raised at the substantive hearing before me, and it is not supported by any evidence filed in opposition to Wing Trans’ summary judgment application.  This is not even mentioned in Ms Lo’s opposition affirmation.
(2)	In any event, the allegation now raised is vague and devoid of any particulars.

11.    I do not think there is any arguable chance that Ms Lo could succeed in the intended appeal based on this proposed second ground of appeal.

12.    For the reasons given in paragraphs 7 to 9 above, I am inclined to grant leave to Ms Lo to appeal my judgment dated 11 December 2007 to the Court of Appeal. 

Security for costs as a condition for the prosecution of the intended appeal

13.    Upon my indication at the hearing on 10 January 2008 that the Court was inclined to grant leave to Ms Lo to appeal, Mr Lee, counsel for the Plaintiff, further submitted that the Plaintiff would seek security for costs of the intended appeal as a condition to the leave under O 58 r 2(7) of the District Court Rules.  The quantum sought is HK$50,000.00, and Mr Lee relied on the ground that Ms Lo would be unable to pay Wing Trans’ costs of appeal if she failed in the intended appeal.

14.    In light of Mr Lee’s application (albeit made late), I adjourned the matter to today (12 February 2008) for the parties to file the relevant evidence in support and in opposition of the same.

Applicable principles

15.    O 58 r 2(7) of the District Court Rules provides that the Court may in its discretion grant leave to appeal on such terms as to costs, payment of money into court, giving security for the prosecution of the appeal or otherwise as it may think fit.

16.    In my view, given that the giving of security is in relation to an appeal made to the Court of Appeal, the principles governing the granting of security for costs in an appeal under O 59 r 10(5) of the Rules of High Court should similarly apply.

17.    These principles are well established and have been succinctly summarized in Hong Kong Civil Procedure 2008 at para 59/10/29 as follows :

(1)	It is settled practice to require security for costs to be given by an appellant who would be unable through impecuniosity to pay the costs of the appeal, if unsuccessful.
(2)	However, the fact that an appellant is impecunious does not lead automatically to an order that security for costs must be provided.  The court is entitled to consider other relevant factors such as the strength of the appeal to determine whether or not it would be just to order that security for cost be provided.
(3)	Once the existence of impecuniosity has been demonstrated, it is generally up to the party resisting the application to demonstrate countervailing factors militating against an order being made.
(4)	In considering the merits of an appeal, a detailed examination is neither required nor desirable – the court should form some sort of preliminary, even instinctive, view.
(5)	The overriding consideration for the court is to consider whether “special” (not exceptional) circumstances exist making it “just” to order security.
See also : Chung Kau v Hong Kong Housing Authority [2004] 2 HKLRD 650; Li Mei Yung v Eastern Pacific Circuits (HK) Ltd (unrep., CACV 9 of 2007).

Discussion

18.    Mr Lee submits that the following show that Ms Lo is unlikely to be able to pay Wing Trans’ costs if she fails in the intended appeal :

(1)	For over a year, she has not paid Wing Trans the undisputed sum of some HK$44,049.20 (which represents the difference between the claimed sum and Ms Lo’s counterclaim) without any good reasons.  She is clearly unable to pay financially.
(2)	Ms Lo admitted in her Defence at paragraph 2 that there were outstanding payments from her customers in the sum of around HK$400,000 odd which resulted in her firm unable to continue doing business.  Ms Lo formerly traded under the name and style of “Smart Enterprises & Logistics”.  The firm has since ceased trading.  These show again that Ms Lo is in severe financial difficulty and there is no evidence of her other incomes, if any.
(3)	Although formerly legally represented, Ms Lo has since the commencement of these proceedings acting in person.  This implies that she has financial difficulty in retaining solicitors.
(4)	Ms Lo has not satisfied the judgment sum notwithstanding the fact that she was served with a statutory demand on 15 January 2008.

19.    For the grounds set out in paragraphs 18(3) and (4) above, I do not think they themselves on a balance of probabilities point one way or the other to Ms Lo’s ability to pay costs, in particular given that she would be appealing against my earlier judgment. 

20.    On the other hand, I find the grounds set out in paragraphs 18(1) and (2) of substance, which suggest prima facie that Ms Lo will be unable to pay Wing Trans’ costs of appeal.  The burden now rests on Ms Lo to rebut this.

21.    However, in the affirmation filed by Ms Lo dated 18 January 2008, other than vaguely saying that she is now employed by an unnamed listed company as a quality assured staff, and that she has maintained other part-time employments as well as running her part-time business under the name of “Smart 868 & Ltd”, she has not provided any evidence or information as to her income from any of these engagements.  She has also not provided any evidence on her financial position or as to whether she has any other assets. 

22.    In light of the state of the evidence, I am satisfied that she would be unable through impecuniosity to pay the costs of the appeal. 

23.    I also see no countervailing factors to militate against the granting of an order for security for costs.  In light of the decision in Karpex, I cannot at this stage say that the merit of Ms Lo’s intended appeal is so strong to make it unjust to order security.  

24.    In my judgment, this is an appropriate case where security for costs of the appeal should be ordered.  The HK$50,000.00 sought is also a reasonable amount.

Conclusion

25.    For the reasons set out above, I will grant leave to Ms Lo to appeal to the Court of Appeal against my judgment dated 11 December 2007 on the condition that within 14 days from the day hereof, she makes payment into Court the sum of HK$50,000.00 as security for Wing Trans’ costs in the appeal. 

26.    I further order that costs of these applications be in the cause of the appeal if the above condition is met.  If Ms Lo fails to meet the condition, and unless the Court otherwise orders, the costs of these applications be to Wing Trans.  There be also certificate for counsel for Wing Trans.