LOK WAI YEE v. MAN KOON HUNG

CACV 582/2020

[2021] HKCA 802

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 582 OF 2020

(ON APPEAL FROM HCA 1181/2014)

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JUDGMENT

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Hon Lam VP (giving the Judgment of the Court):

A.   INTRODUCTION

1.  This is the plaintiff’s application for security for costs in this appeal.

2.  The appeal was brought by the defendant on 28 October 2020 against the judgment (“the Judgment”) of Keith Yeung J (“the Judge”) dated 30 September 2020 in favour of the plaintiff.  The Judge adjudged that the defendant is liable to the plaintiff for loans in the total sum of HK$1,219,165.68 (“the Judgment Sum”).

3.  By a summons dated 18 December 2020, the plaintiff asked for security for costs of the appeal in the sum of HK$314,000.

4.  The plaintiff’s supporting affirmation was filed on 18 December 2020.  On 6 January 2021, the Registrar of Civil Appeals directed that unless the defendant filed and served his affidavit in opposition by 4 pm on 22 January 2021, the defendant would be barred from doing so.  The defendant did not file any affidavit in opposition.

5.  Counsel for the plaintiff lodged her written submissions on 2 February 2021.  The defendant lodged his submissions on 8 March 2021.  Having read those submissions, we are of the view that the matter can be decided on the paper without any oral hearing.

B.   BACKGROUND AND THE JUDGMENT

6.  The plaintiff and the defendant were a married couple.  At different stages of their relationship (dating, cohabitating and whilst married), the plaintiff had advanced monies to the defendant.  She claimed that such monies were advanced to him pursuant to a number of legally enforceable loan agreements (“Loan Agreements”)[1] and, by this action, sued him for repayment of those monies.

7.  As observed by the Judge at [20] of the Judgment, the main issues at trial were (1) whether the Loan Agreements existed and (2) if so, whether the Loan Agreements were intended to be legally binding.

8.  On the first issue, the Judge ruled in favour of the plaintiff.  He found that the Loan Agreements existed and the loans were repayable upon demand.  There is no challenge against this part of the judgment.

9.  On the second issue, the Judge applied the law as set out in the recent decision of this Court in Ho Lai King v Kwok Fung Ying [2020] HKCA 657 and concluded that the plaintiff had discharged the burden of showing that most[2] of the Loan Agreements were made with the requisite contractual intention. 

10.  For present purposes, it is pertinent to note that in the course of analysing the second issue, the Judge took into account, among other things, the plaintiff’s financial position at the material time.  This can be seen from [76] to [79] of the Judgment:

“ 76. P’s own financial position at the material time is in my mind an important objective consideration. I have referred to Ms Lau’s submission in that regard. P’s following answer, though given when being cross‑examined in the context of D’s Expenses Loans, in my view bears upon all the Loan Agreements:

「  同埋有一個立場，我希望喺呢件事上面清晰嘅就係，當時搬出嚟住，我收入並唔高，而我需要供養父母，如果被告唔係承諾做呢一啲嘢，根本我冇能力去交租、交水、電、煤喇，搬出嚟住呢個說法係根本唔成立㗎，咁我根本冇錢去交租、交水、電、煤，交呢樣嗰樣，仲要養屋企，自己生活，根本我嘅收入都唔足夠應付所有嘅開支，咁如果被告唔承諾，根本就唔會搬出嚟住囉，而唔係搬咗出嚟住先諗水、電、煤、租究竟點交，呢一個係衍生到呢一件事發生嘅始祖。」

77. While the presence or otherwise of the parties’ intention to be legally bound is in dispute, the fact that P has been out of pocket for more than $1 million in total is not (and at least cannot be). Viewed objectively, that was a very large sum for a person in P’s position.

78. The consequences of D not honouring his promises to repay would be grave for a person in the position of P. As submitted by Ms Lau, which I accept, unless D repaid her the loans, she, and a person in her position, would not be able to shoulder those debts or expenses on her own unless she were to raise funds elsewhere.

79. The above suggest objectively that P would have relied heavily on the Loan Agreements.  This is one factor which suggests the existence of an intention to be legally bound.”

C.   THIS APPLICATION

C1.   The appeal

11.  The defendant’s Notice of Appeal, dated 28 October 2020 was settled by counsel.  The grounds of appeal are directed against the Judge’s finding on contractual intention.  The grounds of appeal were set out in 7 paragraphs but the arguments boiled down to 3 points:

(1)  The Judge erred in placing weight or excessive weight on the plaintiff being out of pocket for more than $1 million in total.  The sum of $1 million was accumulated over the years and included the payment of water, electricity and Town Gas bills etc. the nature of which was found by the Judge not to have any intention to be legally bound[3];

(2)  The Judge also erred in failing to consider that, although the defendant had only made limited repayment of the alleged loans, the plaintiff kept on advancing money to him year after year, which suggests that there was no intention to be legally bound[4]; and

(3)  For each type of loan that was found by the Judge to have been made with contractual intention, the Judge “failed to consider or properly consider the relationship of the parties and the circumstances when the transactions were made, and the plaintiff’s repeated advancement of money to the defendant despite limited repayment of previous alleged loans”[5].

C2.   This security for costs application

12.  The plaintiff’s application is made on the bases that (i) the defendant is impecunious; (ii) there will be difficulty in enforcing costs order against the defendant because he has shown a pattern of non-compliance with court orders in this case; and (iii) the defendant’s appeal is unmeritorious.  In relation to quantum of the security, the plaintiff claims an amount of HK$314,000.

13.  The defendant filed a notice to act in person on 7 January 2021.  As mentioned above, the defendant did not file any evidence, but lodged written submissions opposing this application.  In the submissions, the defendant cited some passages from case law in English.  It is therefore clear that either the defendant is himself conversant in the English language or he is assisted by someone who is conversant in English.

C3.    Discussion

14.  The relevant principles governing applications for security for costs of an appeal have been summarized by Ma CJHC (as he then was) in Chung Kau v Hong Kong Housing Authority [2004] 2 HKLRD 650 at [14] :

(1)  The fact that an appellant is impecunious does not lead automatically to an order that security for costs must be provided.  The court would consider other relevant factors such as the strength of the appeal to determine whether or not it is just to order that security for costs be provided.

(2)  However, as a matter of practice, once the impecuniosity of an appellant or some other factor such as difficulty in enforcing a cost order is demonstrated, it would then generally be up to the appellant to demonstrate countervailing factors to militate against such an order being made.  And

(3)  A common countervailing factor is the merits of an appeal.  In the context of a security for costs application, while a detailed examination on the merit is not required, the court should form some sort of preliminary view.  An appeal which is very strong would often be a very good reason not to order security, while a hopeless one may by itself justify an order for security.  However, if the appeal could go either way, then generally the court will look to the existence of any other factors to tilt the balance, in the absence of which security will be ordered.

15.  Bearing these principles in mind, we are of the view that it is just to order security for costs in the present case.

16.  We are satisfied that the defendant is impecunious:

(1)  The plaintiff relies on the following matters to assert that the defendant is impecunious: (i) the defendant has not paid the Judgment Sum[6]; (ii) he admitted at trial that he had financial difficulties and was (due to his poor credit) unable to borrow money or apply for credit cards from banks; (iii) he has charged his property to various financial institutions.  And

(2)  In our view, these matters raise at least a prima facie case that the defendant is impecunious.  Further, although the plaintiff has put the defendant’s financial position in issue in her supporting affirmation, the defendant has not disputed the allegation or demonstrated his financial means (whether by way of evidence or submissions).

17.  Second, the defendant’s impecuniosity aside, we are also satisfied that the plaintiff will face difficulty in enforcing any costs order to be made in the appeal.  As shown by the plaintiff: (i) in previous proceedings, the defendant only satisfied a costs order of HK$1,040 after a charging order absolute was made against him; (ii) the defendant has refused to satisfy the Judgment Sum; (iii) the defendant had sold his property in October 2017.  The defendant did not explain for these matters in his submissions.

18.  Coming to the examination of countervailing factor, the defendant focused on the merit of his appeal in his submissions.  Having read the judgment, the notice of appeal and the submissions of the parties, we are of the view that the present appeal is far remote from those cases where the strength of the appeal carries sufficient countervailing weight for the court to refuse to grant security.  The Judge had referred to the latest authority on contractual intention and it cannot be suggested that he had applied the wrong legal test.  The only issue is how the test was applied on the facts of the present case.  The judgment referred to all the relevant factors.  As regards the weighing of these factors, an appellant has to surmount a high threshold in order to succeed.

19.  We are not persuaded that the merit of this appeal constitute sufficient countervailing reason for not granting security.  For these reasons, we consider it appropriate to order security for costs against the defendant.

20.  As to the amount of security, the plaintiff’s skeleton bill estimates the costs of the appeal at HK$314,000.  That sum includes HK$100,000 for this security for costs application.  There are items in the skeleton bill which, given the defendant’s failure to file any evidence in opposition and the fact that the present application is dealt with on paper, have not actually been incurred.[7]

21.  In assessing the appropriate amount for security for costs, the court normally takes a broad brush approach and does not conduct a taxation of the respondent’s costs.  Also we are not minded to include the costs of this application in the security amount as we shall make a separate order for costs in that regard.  

22.  For the purpose of security for costs for the appeal proper, we will fix the amount at HK$180,000.

D.   DISPOSITION

23.  For the above reasons, we order that:

(1)  The defendant to pay into court the sum of HK$180,000 within 28 days from the date of this decision as security for costs of this appeal.

(2)  The appeal shall be stayed until the payment of the security as ordered and notice thereof is given by the defendant to the Registrar of Civil Appeals and to the solicitors for the plaintiff under (1) above.

(3)  In default of payment of the security within 28 days, the appeal shall be dismissed without further order. And

(4)  Upon such dismissal, the defendant shall pay the plaintiff the costs of this appeal, such costs are to be taxed if not agreed.

24.  As to the costs of this application, there is no reason why costs should not follow the event as the defendant did not respond to the plaintiff’s letter dated 3 December 2020 requesting security for costs. We therefore order that the defendant should pay the costs of this summons to the plaintiff.  Having considered the items in the skeleton bill regarding this application, we fix such costs summarily at HK$80,000.  Such costs are payable forthwith.

25.  We deliver this judgment in English since, as we said above, the defendant is able to lodge submissions containing citation of judgment in English.  However, should the defendant need interpretation service, he can make an appointment with the clerk to Lam V-P within 7 days from the delivery of the judgment to arrange for the same at the High Court Building by court interpreter.

26.  We also direct solicitors for the Plaintiff to prepare a draft formal order in Chinese setting out the above order within 5 days from the handing down of this judgment for approval and sealing.  Such sealed order shall be served on the defendant within 3 days from the sealing of the same by the court.