LAU KAM SING DICKIE v. LO HON KWONG

CACV 330/2019

[2019] HKCA 459

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 330 OF 2019

(ON APPEAL FROM HCB 2311 OF 2019)

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D E C I S I O N

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Hon Au JA (giving the decision of the court):

A.     INTRODUCTION

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

2.  The appeal was lodged by the appellant (the debtor) on 19 July 2019 against the judgment (“the Judgment”) of Hon Au‑Yeung J (“the Judge”) dated 24 June 2019 making a bankruptcy order against him.

3.  By way of the summons dated 11 October 2019, the creditor asked for security for costs against the debtor.  On the other hand, 20 November 2019, the debtor filed an application to fix a date for the hearing of this appeal.

4.  In relation to this application, the Registrar of Civil Appeals directed[1] that the debtor should lodge his written submissions on or before 11 December 2019, failing which he shall be deemed to have no such submissions to lodge, and the summons would be considered by the Court of Appeal on paper.  He further directed that the debtor’s application to fix a date for hearing of the appeal would be entertained after the determination of the security for costs application.

5.  The debtor has not lodged any written submissions as directed.  We agree that this application shall be dealt with on paper.

B.     BACKGROUND AND THE JUDGMENT

6.  Pursuant to a loan contract dated 14 July 2016, the creditor gave the debtor a loan of $8 million, repayable with interest at 2% per month.  The debtor however defaulted in repayment.  The creditor issued a statutory demand dated 27 February 2019 against the debtor for the repayment of the outstanding sum of about $8.7 million which was personally served on the debtor on 25 March 2019.  The debtor had neither complied with nor applied to set aside the statutory demand.

7.  On 18 April 2019, the creditor presented a bankruptcy petition against the debtor to the court based on the unsatisfied statutory demand.  The petition was personally served on the debtor on 4 June 2019.

8.  The debtor’s solicitors filed a notice of intention to oppose the petition on 17 June 2019.  The only ground relied upon in the notice to dispute the debt was the assertion that the creditor was a money lender without a money lender licence and thus he was not entitled to recover the debt under section 23 of the Money Lenders Ordinance (Cap 163) (“the MLO”).  However, the debtor had not filed any affirmation in support of this ground by the time the petition was heard before the Judge[2].

9.  After hearing the parties, the Judge dismissed the debtor’s objection and granted the bankruptcy order.  She explained her reasons at [5] - [8] of the Judgment as follows:

“5. Despite service of the petition on 4 June, the debtor has not filed any affirmation as of today. Mr Pang, solicitor acting on behalf of Mr Lau, seeks a week’s adjournment in order to file an affidavit in opposition.

6. The court asks rhetorically: what is there to oppose? It is not appropriate for a debtor to sit on a petition and wait for the court’s direction to file an affidavit in opposition. He should have made use of the time from service to the hearing and used his best endeavours to produce sufficiently precise evidence which is believable to demonstrate a bona fide dispute as regards the debt: Re Szeto Chi Sing, a Debtor [2019] HKCFI 434, Au‑Yeung J, §13.

7. I have heard the submission of Mr Pang today. Even if I accept all that he says as to the facts, there is no arguable issue of law raised:

(1) There is no doubt there was a loan for $9.8 million in 2014 but the interest was only 2% per month. That did not violate the Money Lenders Ordinance, Cap 163.

(2) Allegedly, the creditor had lent money to Mr Lau and his friend. The small number of loans in itself did not make the creditor a moneylender within the meaning of the Money Lenders Ordinance. Mr Pang could not point to any other provision in the Ordinance to assist the court.

(3) Mr Lau claims that the client would pay him US$2 million and that would be sufficient to pay off the debt. There is no proof of such intended payment. Again, even based on what Mr Pang told the court, the invoice stated the due date of payment to be 11 June 2019 which is now past. There is nothing to indicate that the money would be coming from the client in the near future.

(4) Mr Lau has purportedly been negotiating with the creditor for settlement. Such conduct is inconsistent with his having a moneylender’s defence. But in any event, negotiation for settlement is not a ground for adjournment nor is it a defence to the petition.

8. In the premises, I can see nothing which can demonstrate a bona fide dispute as regards the debt stated in the petition. I therefore issue a bankruptcy order. Costs be to the petitioner.”[3] (emphasis added)

C.      THIS APPLICATION

C1.    The appeal

10.  By way of the Notice of Appeal dated 19 July 2019 settled by leading and junior counsel, the debtor advanced two grounds of appeal:

(1)  The Judge erred in law in proceeding on the basis that it was legally irrelevant whether the petitioner was a money lender operating without a licence, contrary to section 23 of the MLO (“Ground 1”);

(2)  The Judge also erred in proceeding on the basis that the debtor could not possibly demonstrate (or demonstrate a bona fide dispute on substantial grounds), if he were allowed to file evidence, that the creditor petitioner was such a money lender (“Ground 2”).

C2.    This security for costs application

11.  The creditor’s application is made on the basis that the debtor is impecunious and that there is a risk of the creditor not being able to enforce any costs order in favor of him because the debtor has shown a pattern of delay in handling these proceedings.  In relation to quantum of the security sought, he claims an amount of $631,157.

12.  The debtor filed a notice to act in person on 29 November 2019 but, as mentioned above, he did not file any evidence or written submissions in opposing this application.

C3.    Discussion

13.  The relevant principles governing applications for security for costs of an appeal in relation to an impecunious appellant are well established.  They have been summarized by Ma CJHC (as he then was) in Chung Kau v Hong Kong Housing Authority[4]at [14] - [15].  Relevant for the present purpose, they are these:

(1)  It is a matter of discretion for the court of appeal to decide whether there are special circumstances to make it just to order security of costs of an appeal.  In the consideration, the court can take into account various relevant factors.

(2)  Although the fact that an appellant is impecunious (such as where the appellant has been adjudged bankrupt) does not lead automatically to an order for security for costs, as a matter of practice, it would then be generally up to the party resisting the application for security to demonstrate countervailing factors which would militate against such an order being made.  A common such countervailing factor is the merits of an appeal.

(3)  On a consideration of the merits of an appeal, while a detailed examination 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.

14.  Bearing these principles in mind, it is clear that security for costs should be ordered in the present case.

15.  First, the appellant is impecunious as he has already been adjudged bankrupt.  In any event, there is no dispute that he has not been able to repay the outstanding sum to the creditor.

16.  Second, the debtor has not provided or shown to this court by way of evidence or submissions any other countervailing factors as to why, notwithstanding the impecuniosity, security for costs should not be ordered against him.

17.  Finally, and in any event, for the purpose of considering security for costs and in the absence of any other submissions, in our view, the appeal lacks merits:

(1)  In relation to Ground 1, the Judge did not find the question of whether the creditor was a money lender irrelevant as suggested. She instead had considered the question but found that, even on the fact as alleged by the debtor’s solicitor at the hearing, the creditor was not a money lender within the meaning of the MLO[5]. The complaint in this ground of appeal is without any substance.

(2)  For Ground 2, as mentioned above, the Judge proceeded to determine that the creditor was not a money lender on the basis of the facts as alleged by the debtor’s solicitor as advanced at the hearing.  This was thus decided by taking the debtor’s case to the highest.  The complaint herein that the Judge had erred as she should and could not have so concluded without effectively waiting for the debtor to file evidence is thus plainly unjustified, especially when it was the debtor who had not filed any evidence in support of his opposition even up to the time when the petition was heard by the Judge.  It is even more telling that even by now in the appeal process, the debtor has still not sought to file any evidence to support his allegation that the creditor is a money lender under the MLO presumably on the basis that he carried on the business of making loans[6].

18.  For the above reasons, we agree with Mr Chu for the creditor that this is an appropriate case where security for costs should be ordered against the debtor.

19.  As to the amount of security, the creditor’s skeleton bill provides that the costs of the appeal (including this security for costs application) are estimated to be $631,157[7].

20.  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.  Instead, the exercise on which it is engaged is to arrive at an appropriate estimation of the likely amount of costs which would be ordered to be paid by the appellant to the respondent on a party and party taxation: see Great Bill Ltd v JFK Holding Company Ltd[8] at [20] and Allied Ever Holdings v Li Shu Chung[9] at [8].

21.  Given that this is a simple case involving very little documents and evidence[10] and that appeal does not involve any complex or complicated arguments on law or evidence, we regard the estimated professional costs of $122,075 for the solicitors and $509,000 for two counsel to be excessive.  Given the nature of the appeal, we are of the view that only one counsel is necessary.  Junior counsel’s fee for the attendance of the appeal is said to be $60,000.  For the purpose of security for costs, we will revise it to $200,000 which includes $50,000 for the costs of the present application.

D.    DISPOSITION

22.  For the above reasons, we order that:

(1)  The debtor to pay into court the sum of $200,000 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 debtor to the Registrar of Civil Appeals and to the solicitors for the creditor under (1) above.

(3)  In default of payment in, the solicitors for the creditor do notify the Registrar of Civil Appeals and that thereupon the appeal shall be dismissed without further order.

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

23.  As to the costs of this application, there is no reason why costs should not follow the events[11]. We therefore further order that the debtor should pay the costs of this summons to the creditor, to be taxed if not agreed.