RE ZULIFQAR ALI

CACV 181/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 181 OF 2012

(ON APPEAL FROM HCB NO. 6146 OF 2011)

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REASONS FOR DECISION

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1.  This application for security for costs on appeal was taken out by Standard Chartered Bank (Hong Kong) Limited, the petitioning creditor of a bankruptcy petition in HCB 6146/2011. A bankruptcy order was made by Mr Recorder A Chow against the debtor, Zulifqar Ali, on 26 July 2012. The debtor filed a Notice of Appeal against his bankruptcy order on 23 August 2012.

2.  The bankruptcy petition presented against the debtor was founded on a judgment debt in excess of $12.9 million.  Final judgment was entered against the debtor for the said sum on the bank’s application for summary judgment which was heard on 20 December 2010.  The claim was for the amounts due to the bank under 3 personal guarantees given by the debtor in respect of the facilities granted by the bank to his company, Azico International (Hong Kong) Limited (“Azico”).  No appeal was brought against this judgment.  On 30 May 2011, the bank served a statutory demand on the debtor for payment of the judgment debt.  As payment was not made, the bankruptcy petition was presented.

3.  Before the Recorder, the debtor sought to go behind the final judgment which is subsisting and binding on him.  He alleged that he is not liable under the final judgment because certain documents relied upon by the bank in its claim in the High Court action were forged by the general manager of Azico.  He asserted he was not in Hong Kong during a certain period and so could not have signed two of the documents, namely, the 3^rd guarantee and the 2^nd facilities letter, on the dates of those documents.  The Recorder rejected his allegations as incredible and held that they cannot give rise to any bona fide dispute of the judgment debt on substantial grounds, for the reasons given in paras 12 to 16 of his judgment on 26 July 2012.

4.  The present application for security for costs was made on the basis that the debtor is impecunious.  There can be no serious dispute about this.  The bankruptcy order against the debtor is prima facie evidence of this.  The debtor has admitted in the documents he filed in court that he has “no resources to appeal against the Final Judgment” (para 1 of the grounds in the Notice of Appeal dated 23 August 2012) and that he does not “have the means to arrange for such a big sum of money for security deposit” (an undated document entitled “Defence and Counterclaim” filed on 21 December 2012).  He has also made repeated applications for legal aid.  The fact that he has made claims in excess of $1.5 million in the District Court which he is not able to pursue due to the bankruptcy order is not relevant.

5.  The impecuniosity of an appellant is generally recognised as a “special circumstance” for ordering security for costs on appeal pursuant to Order 59 rule 10(5).  I am satisfied that the bank is likely to encounter difficulty and delay in enforcing any costs order it may obtain against the debtor if his appeal should fail.

6.  Security for costs can be ordered in an appeal from a bankruptcy order (Ho Ho Wah v The Incorporated Owners of Hoi Fu Court [2010] 1 HKLRD 278 at paras 6 to 8; Re Alice Li Miu Ling, CACV 168/2012, 24 October 2012, para 10).

7.  The debtor asked rhetorically as he cannot afford to pay legal expenses, does it mean he cannot seek justice in these courts.  The relevant principles governing applications for security for costs on appeal are well established.  In deciding whether to award security for the costs of an appeal to the Court of Appeal, the court takes into account the fact that the appellant has already had the dispute determined against him in the court below, and it is prima facie an injustice to the respondent to allow an appeal to the Court of Appeal to proceed without security for costs being furnished in circumstances where the respondent will be unable to enforce against the appellant any order for costs made by the Court of Appeal (Hong Kong Civil Procedure 2011, Vol. 1, para. 59/10/28).

8.  Although the court retains an overall discretion whether to order security where special circumstances are made out, the practice is to order security unless the appellant is able to establish counterveiling factors that would militate against such an order being made, see Chung Kau v Hong Kong Housing Authority [2004] 2 HKLRD 650 at para 14.

9.  I have considered the grounds of appeal advanced by the debtor in this appeal.  Essentially, he relied on the allegations of forgery which were rejected by the Recorder.  On a provisional assessment, I agree with Mr Chong who appeared for the bank that the appeal is without merit.  There are no counterveiling factors that would persuade me not to exercise my discretion to order security.

10.  The bank sought security in the sum of $250,000 in its summons.  Mr Chong fairly accepted before me $100,000 should be sufficient to cover the bank’s estimated costs on appeal that may be allowed on taxation.  I think this is an appropriate sum to be ordered as security.

11.  I have made the following order:

(1)  the debtor do within 28 days hereof give security for the petitioner’s costs of the appeal in CACV 181/2012 in the sum of $100,000 by making lodgement in court of the said sum in cash; and until such lodgement be made and notice thereof given to the Registrar and to the solicitors for the petitioner (such notice to be given on the same day as the lodgement is made) all proceedings in the said appeal are to be stayed;

(2)  in default of the debtor making such lodgement as aforesaid within the time specified, or within such further time as the court may for special reasons allow, the said appeal do (upon the solicitors for the petitioner certifying such default to the Registrar) stand dismissed out of this court without further order;

(3)  in the event that the appeal is dismissed in the circumstances provided for above, the debtor do pay to the petitioner its costs occasioned by the said appeal, such costs to be taxed if not agreed; and

(4)  the costs of this application be costs in the appeal.