LIN JAN v. LONG XIAOBO

CACV 325/2021

[2022] HKCA 281

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 325 OF 2021

(ON APPEAL FROM HCA NO 1516 OF 2012)

________________________

________________________

____________________

JUDGMENT

____________________

Hon Chow JA (giving the judgment of the Court):

1.  This is the Defendant’s application for security for costs in respect of the Plaintiff’s appeal against the judgment of Ng J dated 31 May 2021 (“the Judgment”) dismissing the Plaintiff’s claim against the Defendant and giving judgment in favour of the Defendant on his counterclaim against the Plaintiff in the sum of HK$2 million together with interest thereon and costs of the action.

2.  Having read the evidence and submissions filed by the parties, we consider that it is appropriate to determine the Defendant’s 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.  For the purpose of disposing of the present application, the following brief summary of the facts of this case, taken from the Judgment, should suffice.

4.  Global Green Tech Group Limited (“Company”) was at all material times a company listed on the Hong Kong Stock Exchange (Code no 274).  In 2011, it changed its name to and is now known as China Billion Resources Ltd.

5.  In January 2010, Suo Lang Due Ji (“Suo”) became the Company’s largest shareholder, holding 14.56% of the Company’s issued share capital.

6.  By a written agreement between the Company and the Plaintiff dated 7 September 2010 (“Service Agreement”), the Plaintiff was appointed as an executive director of the Company for a term of 3 years. He did not, however, complete his 3-year term, and remained as an executive director of the Company until 30 June 2011 when he retired from its board.  According to the Plaintiff, it was Suo who procured his appointment as director of the Company.

7.  The Defendant was at all material times since 2010 an executive director of the Company.  On 15 April 2011, the Defendant replaced Suo as the largest shareholder of the Company after purchasing from Suo his 14.56% of the Company’s issued share capital.

8.  Mr David Yip (“Yip”) was at all material times an executive director and the CEO of the Company.  Disputes had arisen between Yip and the Plaintiff from March/April 2011 onwards.  By a Writ of Summons dated 8 June 2011, Yip instituted HCA 946 of 2011 against the Plaintiff for damages for defamation and injurious falsehood (“HCA 946”). 

9.  The Plaintiff’s claim against the Defendant is for a sum of HK$2 million, said to be the outstanding balance due under an agreement made between the parties in June 2011 (“June Agreement”):

(1) It is the Plaintiff’s pleaded case the June Agreement was made orally during 2 meetings between the Plaintiff and the Defendant, one on 14 June 2011 at the Defendant’s office in Shenzhen and the other in late June 2011 at Pacific Coffee in Shun Tak Centre, Sheung Wan, and was evidenced by a hand-written document dated 4 July 2011 in Chinese signed by the Defendant at the coffee shop of Four Seasons Hotel in Hong Kong (“Four Seasons Memorandum”).

(2) According to the Plaintiff, the Defendant, being the Company’s largest shareholder, was keen to persuade the Plaintiff to resolve his disputes with Yip and not to seek re-election as executive director.  For that purpose, the Defendant agreed inter alia to pay the Plaintiff HK$4 million by 2 instalments of HK$2 million each as part of the June Agreement, the first to be paid on or before 31 December 2011 and the second to be paid on or before 30 June 2012.

(3) Following the making of the June Agreement, (i) Yip caused HCA 946 to be discontinued and apologized to the Plaintiff in writing, (ii) the Plaintiff’s solicitors received HK$100,000 from the Company as the agreed costs incurred by him in HCA 946, (iii) on 6 July 2011, the Company issued a public announcement to thank the Plaintiff for his contribution to the Company, and (iv) on 31 October 2011, the Defendant paid the 1^st instalment of HK$2 million to the Plaintiff.

(4) On the Plaintiff’s side, he had not offered himself for re-election as director at the Company’s AGM and had not taken legal action against Yip.

(5) However, the Defendant failed to pay the 2nd instalment of HK$2 million to the Plaintiff under the June Agreement. Hence, he commenced the present action against the Defendant to recover the outstanding sum of HK$2 million.

10.  The Defendant denied the June Agreement as alleged by the Plaintiff.  His pleaded case is that after he had had knowledge of HCA 946 and that the Plaintiff intended to make a claim against Yip, he approached the two to try to settle their disputes.  In the end, consensus was reached among the Plaintiff, the Defendant, and Yip prior to 22 June 2011, the effect of which was that Yip would discontinue HCA 946, the Plaintiff would not make a claim against Yip while the Company would pay the Plaintiff’s legal costs and issue a public announcement to confirm the Plaintiff’s contribution to the Company.

11.  Further, according to the Defendant:

(1) The agreement to pay HK$4 million to the Plaintiff related to a separate agreement made partly oral and partly in writing between the Plaintiff and the Defendant at a meeting held at the Four Seasons Hotel on 4 July 2011 (“Four Seasons Meeting”).  The Four Seasons Meeting was attended by the Plaintiff, the Defendant and a person called Sun.  The Four Seasons Memorandum was also relied upon by the Defendant as evidence of what was agreed at the meeting.

(2) Prior to the Plaintiff’s retirement as director of the Company, he had already been involved in a project in Hubei, PRC (“Hubei Project”) which, if successful, would be injected in to the Company.  However, in June/July 2011, the Company encountered difficulties in funding the Hubei Project.

(3) After his retirement, the Plaintiff offered to the Defendant to assist in arranging funding of US$60 million for the Hubei Project before the end of June 2012.  It was agreed between them that the Plaintiff would act as the Defendant’s consultant to obtain funding of US$60 million for the Hubei Project before end of June 2012 while the Defendant agreed to pay him HK$4 million for his services in successfully arranging the funding (“Hubei Agreement”).  According to the Hubei Agreement, the Defendant would pay HK$2 million to the Plaintiff on or before 31 December 2011 as part payment with the balance payable on or before 30 June 2012.  It was also a term of the Hubei Agreement that the HK$2 million part payment would be refunded to the Defendant if the Plaintiff failed to obtain the required funding by the deadline.

(4) Pursuant to the Hubei Agreement, the Defendant paid the Plaintiff by procuring his company to issue a HK$2 million cheque dated 31 October 2011 to the Plaintiff.  However, since the Plaintiff failed to obtain funding for the Hubei Project as agreed, the Defendant claimed that he was not liable to the Plaintiff to pay the balance of HK$2 million.

(5) The Defendant also counterclaimed for the return of the HK$2 million already paid.

12.  Pausing here, it may be noted that the Four Seasons Memorandum merely states that after discussion between the parties, the Defendant agrees to pay HK$4 million to the Plaintiff, HK$2 million before 31 December 2011 and HK$2 million before 30 June 2012.  It does not state the reason(s) why the Defendant would agree to pay HK$4 million to the Plaintiff, or any consideration for such agreement.  It does not point to the Plaintiff’s version or Defendant’s version as being more believable.

13.  As mentioned by the Judge at §26 of the Judgment, since there were only a few contemporaneous documents which could shed light on the issues, both counsel agreed that the outcome of the trial would turn largely on the credibility of the witnesses’ testimony.  The Judge went on to consider the evidence of the witnesses, and came to the following views:

(1) The Plaintiff was an evasive and unreliable witness and his testimony was highly incredible.  Further, the Plaintiff’s case as revealed in his oral testimony was inherently improbable and could not be believed.  Among other things, there were a lot of discrepancies between his pleaded case, his oral testimony, his affirmations filed in support of an earlier Order 14 application and the contemporaneous documents.  In conclusion, the Judge held that the Plaintiff’s testimony simply could not be believed, and his claim must be rejected (see §§29 and 57 of the Judgment).

(2) On the other hand, the Defendant’s case on the Hubei Agreement was supported by the testimony of the Defendant and Sun and contemporaneous documents.  Both witnesses were clear and firm in the witness box that the promise to pay HK$4 million related to fees payable to the Plaintiff for arranging finance for the Hubei Project.  The Judge considered both witnesses truthful and accepted their testimony.  The Judge was satisfied that the Defendant’s case on the Hubei Agreement was supported by credible evidence and that his counterclaim for the return of HK$2 million should be allowed.

14.  By a notice of appeal dated 25 June 2021 (“the Notice of Appeal”) containing some 24 grounds of appeal, the Plaintiff appeals the Judgment to the Court of Appeal.  It is not necessary to set out the grounds of appeal in this judgment, save to point out that they consist largely of detailed arguments seeking to challenge the Judge’s findings of fact in the Judgment, as well as various complaints against the conduct of the Defendant’s counsel and the Judge.

THE DEFENDANT’S APPLICATION FOR SECURITY FOR COSTS

15.  On 8 October 2021, the Defendant took out the present application for security for costs of the appeal.  In the Defendant’s Skeleton Submissions dated 5 November 2021, it is stated that the Defendant’s application is based on the following grounds:

(1) the Plaintiff is impecunious; and

(2) the Plaintiff’s appeal is unmeritorious.

16.  As can be seen from the “Reasons in Opposition” attached to the Plaintiff’s Affirmation dated 10 December 2021 (which the Registrar of Civil Appeals has directed should stand as the Plaintiff’s written submissions), the Plaintiff opposes the Defendant’s application on the ground that his claim for the balance of HK$2 million and his case on the alleged Hubei Agreement are reasonable and fully supported by evidence.

DISCUSSION

17.  Under Order 59, r 10(5) of the Rules of the High Court, Cap 4A, 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).

18.  The Plaintiff’s impecuniosity is evidenced by, or can be inferred from, the following matters:

(1) he has failed to pay the judgment sum of HK$2 million and interest thereon notwithstanding a statutory demand dated 15 June 2021;

(2) in view of the failure of the Plaintiff to accept personal service of the statutory demand notwithstanding his notice of intended service of the same (as acknowledged in his letter dated 27 July 2021), the statutory demand had to be served on the Plaintiff by way of advertisement in a local newspaper on 23 August 2021; and

(3) he was previously represented by counsel and solicitors at trial, but gave notice to act in person on 7 June 2021 shortly after the Judgment was given on 31 May 2021.

19.  The Plaintiff has not disputed that he is impecunious.  We are satisfied that the Defendant will likely encounter difficulty, undue delay or undue expense in enforcing any order for costs of the appeal which may be made against the Plaintiff.

20.  In respect of the merits of the appeal, we do not propose to examine in any detail the Plaintiff’s grounds of appeal here.  Suffice it to say that, having considered the Notice of Appeal and the other materials before us, we do not consider that the merits of appeal operate in the Plaintiff’s favour in so far as the issue of security for costs is concerned. On the contrary, we consider that the Plaintiff’s appeal, which largely seeks to challenge various findings of fact made by the Judge, will be fraught with difficulties.

21.  On the materials before this Court, we cannot see any sufficient countervailing factors which would militate against an order for security for costs being made against the Plaintiff.

22.  Overall, we are satisfied that there are special circumstances in the present case which justify ordering the Plaintiff to give security for the Defendant’s costs of the appeal.

DISPOSITION

23.  We allow the Defendant’s application for security for costs, and fix the amount of the security for the Defendants’ costs of the appeal (excluding the costs of the present application) at HK$280,000.

24.  The following orders are made:

(1) The Plaintiff do within 28 days from the date of the order herein pay into court the sum of HK$280,000 as security for the Defendant’s costs of the appeal.

(2) Until such payment into court be made and notice thereof given by the Plaintiff to the Registrar of Civil Appeals and to the solicitors for the Defendant, 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 Defendant 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 Plaintiff to the Defendant, such costs to be taxed if not agreed.

25.  We further order the Plaintiff to pay the Defendant’s costs of the present application for security for costs, which shall be summarily assessed.  The Plaintiff shall have leave to file and serve within 14 days a statement of objection (limited to 2 pages) to the Defendant’s statement costs dated 11 December 2021.  Subject to any further directions as may be given by this Court, the Defendant’s costs shall be summarily assessed after receipt of the Plaintiff’s statement of objection (if any).