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FAMV No. 33 of 2008
IN THE COURT OF FINAL APPEAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
MISCELLANEOUS PROCEEDINGS NO. 33 OF 2008 (Civil)
(ON APPLICATION FOR LEAVE TO APPEAL FROM
CACV No. 244 of 2004)
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IN THE MATTER of the Companies Ordinance (Chapter 32) |
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IN THE MATTER of Wing Fai Construction Company Limited |
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IN THE MATTER of an application on behalf of Kelly Cheng Kit Yin and Robert Yip Kwong (“Respondents” to this application for Leave to Appeal) for an Order of Committal against DAVID JOHN KENNEDY (“Applicant” to this application for Leave to Appeal) |
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Coram: Mr Justice Ribeiro PJ in Chambers
Date of Ruling: 5 December 2008
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R U L I N G
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Mr Justice Ribeiro PJ:
1. This is a Ruling handed down having considered written submissions lodged by the parties regarding the amount of security to be provided by the applicant in respect of the pending appeal.
2. On 31 October 2008, the Appeal Committee[1] granted the applicant leave to appeal against the decision of the Court of Appeal dated 12 October 2007.[2] The Court of Appeal had directed that the respondents’ application for an order of committal against the applicant for contempt should be remitted to Kwan J for the hearing before her Ladyship to be resumed, thereby reversing Kwan J’s decision[3] that there was no case to answer. The questions which will arise in the appeal relate to whether it is a contempt for a liquidator to put notes and transcripts of private examinations to certain uses without the prior leave of the court. The applicant is the liquidator in question and the respondents are two former directors of the company in liquidation.
3. On 11 November 2008, the order giving leave was sealed (“the Order”). It is evidently based on the Standard Order annexed to Practice Direction 2.3 (“the practice direction”).[4] The Order materially states that leave to appeal is granted on condition that the applicant pays into court the sum of HK$400,000 “as security for the due prosecution of the appeal and payment of all such costs as may become payable to the respondent in the event of the appeal being dismissed for non-prosecution or of the Court ordering the applicant to pay the respondent’s costs of the appeal.”
4. Although there are two respondents, the Order refers to “the respondent” in the singular. The respondents have taken issue with the applicant’s intended course of providing security limited to the sum of HK$400,000. They contend that they should each have security in that sum and accordingly, that security totalling $800,000 ought to be provided. Their view was shared by the Acting Registrar of the Court.
5. In consequence, the applicant has, pursuant to the practice direction, issued a summons seeking a variation of the Order so that the words “payable to the respondent” are replaced by the words “payable to both respondents” to make it clear that the HK$400,000 amount should stand as security for both respondents’ costs of the appeal.
The relevant provisions
6. By section 25(1) of its statute,[5] the Court (exercising its power through the Appeal Committee[6]) is given a broad discretion to impose such conditions for the granting of leave to appeal as it considers necessary.
7. Section 25(2)(a) provides that one such condition may be:
“... that the appellant shall enter into good and sufficient security, for the due prosecution of the appeal, and the payment of all such costs as may become payable to the respondent in the event of the appeal being dismissed for non-prosecution, or of the Court ordering the appellant to pay the respondent's costs of the appeal.”
8. As to the quantum of such security, section 25(3)(b) lays it down that it should be “in a sum not exceeding $400,000 in respect of each respondent”. The Court’s discretion is therefore restricted as to the maximum sum of security it may order, but it obviously has power to require a lesser amount to be provided or to do away with the requirement altogether. It is especially relevant to note that the Ordinance lays down the amount of security that may be ordered “in respect of each respondent”.
9. Over the years, the practice has grown up whereby security in the maximum sum of HK$400,000 for each respondent has generally been ordered. This is regarded as realistic, recognizing the level of costs usually incurred. The practice direction acknowledges this and provides that in default of the Appeal Committee expressly otherwise ordering, it shall be taken to be granting leave on the terms of the annexed Standard Order made “in respect of each respondent”, imposing the condition that the applicant should pay into court the sum of HK$400,000 as security for the due prosecution and costs of the appeal. The Order followed the wording of the Standard Order, but without giving effect to the stipulation in the practice direction that this was to be “in respect of each respondent”.
The discretion
10. The position comes to this: the usual order in a case like the present would be for the applicant to provide a total of HK$800,000 by way of security, given that there are two respondents. But the Court plainly has power to limit the total security payable to HK$400,000, as requested by the applicant. The question is whether it should take that course.
11. The applicant submits that the requirement for separate maximum sums of security for each respondent may be justified if each respondent is separately represented, but is unwarranted where, as here, the respondents are represented by the same solicitors and counsel. He argues that since there will only be one set of costs, security should be limited to HK$400,000. He elaborates as follows:
“The position here is equivalent to that when trustees or office-holders are a party to litigation in their joint capacity. It would be arbitrary to multiply the amount of security payable in proportion to the number of commonly-represented trustees or office-holders that there happen to be. Likewise, it would be arbitrary to double the amount of security to be paid for this appeal.”
12. The respondents contend that there are no grounds for an exercise of discretion in the applicant’s favour. They argue that he is inviting the Court to invent a new qualification to the established practice so that respondents who have common legal representation will have to be treated as if they were a single respondent. That, they say, runs contrary to the clear words of section 25(3)(b) and the practice direction which address the amount of security to be given “in respect of each respondent”. In this particular case, they state that even with joint representation, counsel’s fees alone will be well in excess of HK$800,000. Moreover, they point out that the applicant has left Hong Kong so that there is likely to be delay and expense in enforcing any order for costs in their favour insofar as it is not covered by security.
13. The only substantive basis advanced by the applicant for departing from the usual practice is the fact that the respondents will have common legal representation. It follows, so he argues, that no differentiation should be made between the two of them. I am unable to accept that argument. Section 25(3)(b) makes provision for security “in respect of each respondent”. It therefore acknowledges that each respondent has prima facie a separate right to security. This is unsurprising where, at the leave to appeal stage, each respondent separately has the advantage of a judgment of the Court of Appeal in his favour. The Ordinance empowers the Court to order security in favour of each such respondent up to a maximum of HK$400,000 as a condition of permitting the applicant to challenge the advantage each respondent prima facie enjoys. And, as mentioned above, the maximum amount is generally treated as realistic unless a sufficient basis is made out for ordering a lesser amount.
14. I have much sympathy for the applicant’s contention that trustees or office-holders who are parties to litigation in their joint capacity should generally be treated as a single party. However, that analogy does not apply here. Each respondent is individually pursuing a separate complaint. They do not sue jointly, nor on behalf of the company, nor on behalf of the board as a whole. They are former directors who allege that the information derived from each of them individually has been misused in a manner constituting a contempt. Of course, that allegation may or may not ultimately be made out. But for the moment, they each have the benefit of a Court of Appeal ruling that the applicant has a case to answer which should be remitted to be dealt with by Kwan J.
15. I am therefore unable to accept the only ground advanced by the applicant for the exercise of the court’s discretion in his favour. No other grounds suggest themselves. There is no suggestion, for instance, that the appeal would be stifled by requiring $800,000 instead of $400,000 by way of security or that the larger amount would be excessive in the light of the anticipated costs of the appeal. Nor is this a case of the applicant bringing the appeal altruistically to clarify a point of law in the public interest.
16. I therefore dismiss the applicant’s summons for variation of the Order and, for the avoidance of doubt, direct that paragraph 2 of the Order should instead be varied to read as follows:
“Leave to appeal to the Court of Final Appeal be granted to the applicant on condition that the applicant do within the 14 days from the date of this Ruling pay into Court the sum of HK$400,000 in respect of each respondent, such payments totalling HK$800,000 (or such alternative sum or form of security provided in such manner as may be agreed by the parties within 7 days from the date of this Order in accordance with paragraph 3 of this Order), as security for the due prosecution of the appeal and payment of all such costs as may become payable to each respondent in the event of the appeal being dismissed for non-prosecution or of the Court ordering the applicant to pay the respondents’ costs of the appeal.”
17. I also direct that the costs of this application be reserved to the Court on its determination of the appeal.
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(R A V Ribeiro) |
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Permanent Judge |
Written submissions by Messrs Clifford Chance for the applicant
Written submissions by Messrs Barlow Lyde & Gilbert for the respondents
[1] FAMV No 33 of 2008 (Chief Justice Li, Bokhary and Chan PJJ).
[2] CACV 244/2004 (Tang VP, Yeung and Yuen JJA ).
[3] [2004] 3 HKLRD 357.
[4] PD 2.3: Leave to appeal granted by the Court of Final Appeal in civil cases.
[5] Hong Kong Court of Final Appeal Ordinance (Cap 484).
[6] Section 18(2).
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