LIANG WEIZHEN v. T.K. CHENG & CO. AND OTHERS

[English Translation - 英譯本]

CACV 78/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 78 OF 2013

(ON APPEAL FROM HCA NO. 232 OF 2012)

_______________________

________________________

REASONS FOR DECISION

1.  On 17 July 2013 the Defendant (Respondent) took out a summons seeking an order that the Plaintiff (Appellant) do pay into court $291,250 as security for costs of the appeal lodged by her against the judgment dated 9 April 2013. After hearing, I ordered the Plaintiff to pay into court security for costs of the appeal in the sum of $50,000 within 14 days. The reasons for this decision are now stated.

Civil Action No. 232 of 2012 (HCA 232/2012)

2.  The Plaintiff filed a petition (FCMC 9937/2009) with the Family Court on 8 August 2009 applying for dissolution of marriage on the ground of one year’s separation, custody of the son and an order that there be no order as to costs. The Defendant were the solicitors acting for the Plaintiff in that case. The Plaintiff did not make any application for ancillary relief in the petition. Subsequently, the Plaintiff submitted a “notice of intention to act in person” and, before decree nisi was made absolute, filed a notice of application for ancillary relief seeking maintenance including a lump sum order.

3.  On 7 September 2010, in the absence of any objection raised by the ex-husband of the Plaintiff, Judge Chu allowed the Plaintiff to apply for ancillary relief, which was mainly to seek the return by her ex-husband of the one million dollars previously deposited in her Bank of China account. On 19 January 2012 Judge Chu handed down a judgment, finding that the Plaintiff’s ex-husband did not promise to make a gift of the one million dollars to her. Judge Chu ordered that the Plaintiff’s ex-husband do pay her a lump sum of $140,000, and that upon payment of that sum, the applications for ancillary relief of both parties and other applications inter se be dismissed.

4.  On 5 February 2012, the Plaintiff filed an action (HCA 232/2012) with the Court of First Instance of the High Court seeking damages from the Defendant. In the “writ of summons”, the Plaintiff alleged that the Defendant, in handling FCMC 9937/2009, failed to perform the retainer, misled her into abandoning the application for maintenance of $1 dollar, and betrayed her. The Plaintiff sought from the Defendant one million dollars as compensation for loss of maintenance and five million dollars as damages for injury to feelings suffered by her and her family.

5.  On 31 January 2013, by an amended summons, the Defendant applied to strike out the statement of claim and dismiss the Plaintiff’s action. On 13 March 2013, the Master ordered that the statement of claim be struck out and the Plaintiff’s action be dismissed. The Plaintiff was also ordered to pay the Defendant’s costs of $64,750.

6.  The Plaintiff lodged an appeal against the judgement of the Master. On 9 April 2013, M Chan J dismissed the appeal and ordered that the Plaintiff do pay the Defendant’s costs of the appeal.

7.  The Plaintiff lodged the present appeal on 22 April 2013.

Application for security for costs of the appeal

8.  The Defendant wrote to the Plaintiff on 6 June 2013 demanding that she pays security for costs of the appeal. The Plaintiff wrote to the court on 24 June 2013 rebutting the Defendant’s demand and applying to strike out the application for security for costs. The Defendant thus made the present application by summons on 17 July 2013.

9.  The grounds of the application put forward by the Defendant are: (1) the Plaintiff does not ordinarily reside in Hong Kong; (2) the Plaintiff has no financial means, and thus should the appeal fail, it is highly likely that she will be unable to pay the Defendant’s costs; and (3) there is a slim chance that the Plaintiff’s appeal would be successful.

10.  The Plaintiff opposed the Defendant’s application for security for costs.

11.  The Plaintiff did not dispute that she is residing at Longgang Town, Shenzhen. However, she was of the view that the Defendant could not rely on this reason to ask for security for costs preventing her from conducting the litigation.

12.  The Defendant alleged that the Plaintiff lacked financial means mainly because: (1) the Plaintiff had described herself as impecunious in an affirmation filed in HCA 232/2012; and (2) the Plaintiff did not comply with the costs order made by the court in HCA 232/2012 to pay the Defendant two separate sums of costs in the amounts of $23,000 and $64,750.

13.  On the other hand, the Plaintiff submitted that as could be seen from the judgement of Judge Chu in FCMC 9937/2009, she once owned assets of $760,000, and because of the defendant, however, she had now become impecunious. She also submitted that her appeal had reasonable prospects of success, and thus there was no need for provision of security for costs.

Applicable legal principle

14.  Order 59 rule 10(5) of the Rules of the High Court, Chapter 4A, Laws of Hong Kong, provides:

“The Court of Appeal may, in special circumstances, order that such security shall be given for the costs of an appeal as may be just.”

15.  Special circumstances under rule 10(5) include the appellant residing outside Hong Kong, the appellant’s lack of financial means which will render her unable to pay the costs of the appeal should the appeal fail, and a situation where the respondent will encounter obstruction, undue delay or be put to undue expenses in enforcing any orders for costs in respect of the appeal from the appellant. See Hong Kong Civil Procedure 2013, Volume 1, paragraphs 59/10/26 to 59/10/28.

16.  The court has a discretion under rule 10(5). Even if the appellant lacks financial means, the court may still take into account other relevant factors (such as the strength of the appeal) in making such order as it thinks just. See Chung Kau v Hong Kong Housing Authority & Others [2004] 2 HKLRD 650 and Hong Kong Civil Procedure 2013, Volume 1, paragraph 59/10/32.

17.  In deciding whether to make a security for costs order, the court not only has to take into account the right of appeal of the appellant, but also has to have regard to the interest of the respondent as a party in whose favour the judgment was given. At the present stage, the Court of First Instance has entered judgment for the Respondent. If the appellant is unable to pay the costs of the appeal that may be awarded to the respondent, allowing the appellant to prosecute an appeal which does not have substantive prospects of success will cause injustice to the respondent. Therefore, Order 59 rule 10(5) of the Rules of the High Court confers upon the court the discretion to order the appellant to provide security for costs to safeguard the respondent from being prejudiced. See Hong Kong Civil Procedure 2013, Volume 1, paragraph 59/10/25.

Discussion

18.  The Plaintiff claimed at the hearing that the Defendant’s application was made out of time because the case had reached the stage of “case management conference”. In making such submission the Plaintiff had mixed up the two cases HCA 232/2012 and CACV 78/2013. What I am dealing with is the Defendant’s application for security for costs in the appeal case CACV 78/2013, while the “case management conference” as mentioned by the Plaintiff are proceedings in HCA 232/2012 which have nothing to do with the appeal proceedings and proceedings for security for costs of appeal application.

19.  It is clear from the information pertaining to the present application that the financial capacity of the Plaintiff is not good. She will be unable to pay costs of the appeal if the appeal fails. Furthermore, she resides outside Hong Kong. Therefore, if the Defendant seeks to recover costs from her, there will be delay, and extra expenses will be incurred. All these constitute the special circumstances under Order 59 rule 10(5). What I have to consider is whether the Plaintiff’s appeal has good prospects of success to the extent that I should exercise the discretion so that the Plaintiff is not required to provide security for costs of the appeal.

20.  As I am not hearing the Plaintiff’s appeal at the present stage, it is not appropriate to have a detailed analysis and discussion of the issues of the appeal. Thus I only need to form a preliminary view of the strength of the appeal; see Chung Kau v Hong Kong Housing Authority & Others.

21.  The Plaintiff’s claim against the Defendant boils down to her failing in recovering one million dollars from her ex-husband. However, it is because the Family Court ruled that her ex-husband did not make a gift of the one million dollars to her and that she merely held this sum as a trustee for her ex-husband. Her failing in recovering one million dollars from her ex-husband has nothing to do with the fact that she did not apply for maintenance in the petition for divorce, the reason being that Judge Chu had already allowed her to apply for ancillary relief.

22.  Furthermore, Judge Chu also ruled that in petitioning for divorce, the Plaintiff had verbally confirmed that she would not apply for other maintenance or ancillary relief except maintenance for the son. It was only that the Plaintiff later went back on her word (paragraph 50 of the judgment). The judgment is binding on the Plaintiff.

23.  Moreover, the Plaintiff’s complaint against the Defendant is mainly that while the latter did not clearly explain the meaning of $1 nominal maintenance, they still made an application for decree absolute on her behalf when she was dealing with the litigation herself, and that when she made the application for ancillary relief, they provided her ex-husband with a letter issued by the Defendant to the Plaintiff. Even if all such misconduct or conduct in breach of the retainer as alleged by the Plaintiff can be proved, it is not the reason for her failing in recovering the one million dollars.

24.  From the above circumstances and analysis, the Plaintiff’s claims against the Defendant are bound to fail. I do not see that the Plaintiff’s appeal has an extremely high chance of success to the extent that the court should exercise its discretion to exempt the Plaintiff from providing security for costs of the appeal.

Security order

25.  The amount of security applied for by the Defendant was $291,250. Having considered the statement of costs prepared by the solicitors for the Defendant, I am of the view that there is room for downward adjustment in respect of the estimated time used by the solicitors concerned and the counsel fee. It is because the issues involved in the present appeal are not complicated and are basically more or less the same as those before the Master and M Chan J. In my view, security of $50,000 is already appropriate at the present stage. I give the Plaintiff 14 days to provide the above security.

26.  Therefore, I make the following orders:

(1) The Plaintiff shall, within 14 days of this order (namely on or before 24 September 2013), pay into court $50,000 as security for costs incurred by the Defendant in the appeal lodged by her against the judgment dated 9 April 2013 (“the Appeal”).

(2) Pending the provision of the above security for costs by the Plaintiff, the Appeal shall be stayed temporarily.

(3) In the event the Plaintiff fails to provide the above prescribed security for costs at the expiration of the period specified in paragraph (1) above, the Appeal shall, without further order or notice, be dismissed and the Plaintiff shall pay the Defendant’s costs of the appeal (to be assessed summarily).

Costs of the present application

27.  In line with the usual practice, costs are to follow the event. I also order that the costs of the present application shall be paid by the Plaintiff to the Defendant in any event, to be assessed summarily. I also direct the Defendant to submit “statement of costs assessed summarily” within 3 days of this Order and the Plaintiff may make submission in respect of it within 7 days thereafter. Result of the assessment of costs will be given in writing thereafter.

Translated by the Judgment Translation Unit of the Judiciary and vetted by Mr. P. Y. Lo, Barrister-at-law.