HO HO WAH v. THE INCORPORATED OWNERS OF HOI FU COURT

Before: Hon Cheung JA and Poon J in Court

JUDGMENT

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

Security for costs of appeal

1. On 26 May 2008 Chu J made a bankruptcy order against the debtor in pursuance of a petition presented by the creditor.  The debtor appealed to the Court of Appeal against the order.  The creditor applied to the Court of Appeal for an order requiring the debtor to provide security for costs of the appeal in the sum of $110,000.

2. On 5 August 2008, Yuen JA ordered the debtor to provide security for costs.  The debtor was required to pay the security into court within 28 days from the date of the order, during which all proceedings relating to the appeal would be stayed.  If the debtor failed to pay the security into court within the time limit, the appeal would be dismissed.

3. The debtor now appeals against the order of Yuen JA.

Background

4. The creditor is the incorporated owners of a multi-storeyed building, while the debtor is one of the owners of that building.  As a result of legal proceedings between the parties in the Lands Tribunal, the creditor obtained an order from the Lands Tribunal requiring the debtor to pay to the creditor two items of costs in those proceedings.  As the debtor failed to pay the costs as taxed, the creditor issued a statutory demand and subsequently presented a bankruptcy petition against the debtor.  By the time of the hearing of the petition, one of the items of taxed costs had been paid by another person, and therefore the petition was based solely the second item of the costs, i.e. $33,428.66 and interest thereon.

Discretion

5. Mr. Sui, Counsel for the debtor, puts forward six grounds of appeal against the order of Yuen JA.  They will be dealt with in turn, but we must begin by pointing out that the order of Yuen JA was made in exercise of a discretion.  When the Court of Appeal deals with an appeal arising from the exercise of a discretion by a single judge of the same Court, it will not exercise the discretion anew but, instead, will consider whether the single judge has erred in exercising the discretion by, for example, wrongly taking into account irrelevant matters or overlooking relevant matters, or erroneously applying the relevant legal principles.

First ground of appeal: Intention of the legislature

6. Mr. Sui submits that, in enacting section 98(2) of the Bankruptcy Ordinance (Cap. 6 of the Laws of Hong Kong), which confers upon a debtor the right to appeal against a bankruptcy order, the legislature must have taken into account the fact that a bankrupt does not have any asset at his disposal and, by reason of his poor credit, cannot possibly obtain any loan.  It is submitted that when Yuen JA ordered the debtor to give security in respect of the bankruptcy case, she failed to consider and acted against the legislative intent.  This, Mr. Sui submits, was ‘an error in the exercise of judicial discretion’.

7. With respect, we do not agree.  Section 98(2) of the Bankruptcy Ordinance only confers on the debtor the right to appeal.  When he exercises this right, the other party is not precluded from exercising the right conferred by the law to apply to the Court for security for costs of the appeal.  As a matter of fact, section 14(1) of the High Court Ordinance (Cap. 4 of the Laws of Hong Kong) makes it clear that an appeal shall lie as of right from every judgment of the Court of First Instance in any civil cause or matter (and section 14(3) of the same Ordinance sets out the matters from which an appeal does not lie as of right).  However, even those cases that allow an appeal as of right are subject to the power of the Court of Appeal to impose security for costs of appeal.  This power is also exercisable in an appeal relating to bankruptcy.  Mr. Sui’s argument is unsubstantiated.

8. Furthermore, in our judgment, it makes no difference that the power of the Court to order an appellant to provide security for costs of the appeal stems from ‘subsidiary legislation’ (i.e. the Rules of the High Court) as opposed to ‘primary legislation’ (i.e. the High Court Ordinance).  The reason is that the right of a debtor to appeal against a bankruptcy order is still subject to the inherent power of the Court of Appeal to regulate the appeal process, and the Rules of the High Court goes no further than recording that power in black and white.  In the present case, therefore, there is no question of ‘primary legislation’ being overridden by ‘subsidiary legislation’.

Second ground of appeal: Purpose of the application for security

9. Mr. Sui submits that the content of the document dated 19 November 2008 and issued by the creditor to the owners of the building shows that the creditor applied for security for costs with a view to terminating the present proceedings by means of the bankruptcy order.  The creditor, it is submitted, was deliberately trying to obstruct judicial proceedings by abusing the process of the court.  The document reads as follows:

                      “To the owners of Hoi Ning House:

Ho Ho Wah sued the Incorporated Owners of Hoi Fu Court
in his own name
He lost the lawsuit but does not pay costs to
the Incorporated Owners

We, the present Incorporated Owners, have always been striving to establish a harmonious community; it is our duty to ensure that all owners can live and work in peace and contentment.  After a considerable period of peacefulness, recently someone distributed leaflets again in order to stir up trouble, with intent to confuse the public and confound right with wrong.

We would like to draw all the owners’ attention to the following points:

1.     The lawsuit started on 13 March 2006 when Ho Ho Wah and Ng Sui Wah (吳瑞華) sued the Incorporated Owners of Hoi Fu Court, the Housing Department and the committee members elected at the owners’ general meeting on 10 and 11 December 2005.

2.     The Court has given judgment against Ho Ho Wah and Ng Sui Wah and ordered them to pay costs to the Incorporated Owners, but Ho Ho Wah has repeatedly ignored the court judgment and never paid any compensation to the Incorporated Owners.  Instead, he has incessantly lodged appeals.  Who has lost the lawsuit but failed to pay compensation; and who is continuously wasting the $ of the management fund? !!!  This is plain as a pikestaff.

3.     The lawsuit, which was initiated by Ho Ho Wah and Ng Sui Wah, would never come to an end if they incessantly appealed against the judgments that had been entered against them.  For this reason, the Incorporated Owners had no alternative but to petition for their bankruptcy in order to put an end to the lawsuit.  The fact is that, since the Incorporated Owners filed the bankruptcy petition against Ng Sui Wah, and by reason of that petition, she has paid costs to the Incorporated Owners in the total sum of $88,036.92.

4.     On the other hand, despite his constant defeat in the lawsuit, Ho Ho Wah kept on adopting various delaying tactics and lodging appeals.  As a result, he now owes the management fund $225,987.32 (and this amount has not yet included the costs and compensation relating to the appeal with which he is now proceeding!).

We all have a natural sense of justice, and we believe that the owners can tell with their discerning eyes who is right and who is wrong!!

Remarks: Details of the series of litigation arising from Ho Ho Wah suing the Incorporated Owners of Hoi Fu Court are set out in the notice dated 3 October 2008.  Any owner who needs to inspect the notice can contact the management office.

The Third Management Committee of the Incorporated Owners of Hoi Fu Court”

10. We do not agree with this contention.  The debtor indulged in litigation and kept wasting the management fund, thereby forcing the creditor to present the bankruptcy petition in order to put an end to the litigation.  This being the case, we do not consider the creditor’s application for security for costs to be an abuse of process.  Costs in respect of formal appeals are usually higher than those in respect of interlocutory proceedings.  It follows that if the creditor did not make the present application at this stage, then, should the debtor’s formal appeal failed, an even more substantial amount of management fund would be spent by reason of his inability to pay costs of the appeal.

Third ground of appeal: Striking out the appeal

11. Mr. Sui submits that the creditor could have set down the appeal for hearing or applied to strike out the application on the ground that “it disclosed no ground of appeal”, but instead the creditor chose to obstruct the appeal by applying for security for costs.  It was a waste of costs, a violation of the legislative intent and an abuse of process.  This, in our view, merely repeats Mr. Sui’s previous submission.  This ground of appeal must fail.

Fourth ground of appeal: the Basic Law and Bill of Rights

12. Mr. Sui contends that the making of the order for security for costs of the appeal was in contravention of Article 22 of the Bill of Rights and Article 35 of the Basic Law, and that a debtor should not be deprived of the right to appeal by reason of his impecuniosity.

13. Article 22 of the Bill of Rights provides that all persons are equal before the law and are entitled without any discrimination to the equal protection of the law.  In this respect, the law shall prohibit any discrimination and guarantee to all persons equal and effective protection against discrimination on any ground such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status.

14. Article 35 of the Basic Law provides that Hong Kong residents shall have the right to confidential legal advice, access to the courts, choice of lawyers for timely protection of their lawful rights and interests or for representation in the courts, and to judicial remedies.  Hong Kong residents shall have the right to institute legal proceedings in the courts against the acts of the executive authorities and their personnel.

15. In To Kin Wah v. Tuen Mun District Officer and others, CACV 358/2004, the Court of Appeal held that an order for security for costs of appeal did not contravene Article 10 of the Bill of Rights, which provides that all persons shall be equal before the courts and tribunals, and that in the determination of any criminal charge against him, or of his rights and obligations in a suit at law, everyone shall be entitled to a fair and public hearing by a competent, independent and impartial tribunal established by law.

16. In our view, as Article 35 of the Basic Law and Article 10 of the Bill of Rights serve similar purposes, the making of the order for security for costs did not contravene Article 35 of the Basic Law either.  Nor, in our view, is there any question of the debtor having been discriminated against by reason of his impecuniosity, so that Article 22 of the Bill of Rights had been breached.  The determination of an application for security for costs involves the exercise of a discretion.  The appellant’s financial condition is not the sole consideration.  The Court also has to take into account the prospect of success of the appeal.  The Court will not determine the application for security against the appellant merely because he is having financial difficulties.

Fifth ground of appeal: Power of a single judge

17. Mr. Sui submits that Yuen JA was only a single judge of the Court of Appeal and, as such, had no power to make the order.  We find this submission untenable.  Section 35(1) of the High Court Ordinance expressly provides that in pursuance of the civil jurisdiction of the Court of Appeal, any order or direction not involving the determination of the appeal may be made or given by a single judge sitting in court or in chambers.  It clearly follows that Yuen JA had jurisdiction to deal with the application.  Furthermore, although Yuen JA’s order contained a term that the debtor’s appeal would be dismissed if he failed to provide security for costs of the appeal, this merely provides for the legal consequence of the debtor’s failure to comply with the order and is not a determination on the merits of the substantive appeal.  Therefore, Yuen JA’s decision did not contravene section 35(1) of the High Court Ordinance.

Sixth ground of appeal: Written resolution

18. Mr. Sui submits that the Building Management Ordinance (Cap. 344 of the Laws of Hong Kong) did not empower the management committee to pass written resolutions, and hence the written resolution by which the creditor authorized the chairman to present a bankruptcy petition against the debtor was invalid.  This issue has in fact been dealt with by Yuen JA, who had this to say in paragraph 13 of her judgment:

‘13. As far as authorization is concerned, Chu J has in paragraphs 16 to 46 of her judgment canvassed the two issues pertaining to the authority to present the bankruptcy petition.  First, regardless of the validity or otherwise of the written resolution, the management committee of the Incorporated Owners had subsequently held a meeting and ratified the authorization.  Ratification means validating what were hitherto invalid activities.  Therefore, Mr. Ho’s argument that, as the written resolution was invalid, the ratification was also invalid, does not hold water.  As for the issue regarding the authority of the solicitors firm, Chu J has analyzed it in detail in paragraphs 35 to 46.  The Notice of Appeal does not in my view disclose any ground upon which Chu J’s findings in this respect can realistically be challenged, so that I should make an exception by not imposing an order for security for costs.’

19. We respectfully agree with Yuen JA’s decision.

Conclusion

20. In our judgment, the debtor has failed to put forward any ground of appeal which justifies setting aside the order made by Yuen JA and exercising the discretion anew.  This being the case, we dismiss the debtor’s appeal with costs.