BILLION STAR DEVELOPMENT LTD v. WONG TAK CHUEN AND OTHERS

CACV 49/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 49 OF 2012

(ON APPEAL FROM HCA NO. 708 OF 2011)

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REASONS FOR DECISION

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1.  This is the plaintiff’s application for security for costs of an appeal brought by the 8^th defendant, Tsang Kin Shing. The background to the application may first be stated as follows.

2.  The plaintiff, Billion Star Development Limited, is a developer and the registered owner of two pieces of land known as the Remaining Portion of New Kowloon Marine Lot No 25 and Section B of New Kowloon Marine Lot No 25 (collectively “the Property”).  The Property is landlocked and situated within a large residential estate Mei Foo Sun Chuen (“Mei Foo”).  The only direct vehicular access to the Property is via the private road within Mei Foo known as Broadway South-West bound (“the Access Road”).  The plaintiff obtained approval from the Building Authority to build a residential building on the Property.  This has met with strong opposition from some residents of Mei Foo.  Protests were organised by some residents in March and April 2011.  The Access Road was repeatedly blocked to prevent the plaintiff from carrying out construction work on the Property.

3.  The 8^th defendant, a well-known social activist, was invited by some residents to participate in the protests.  He attended a rally on 3 April 2011, on which the plaintiff did not attempt to carry out work as this was a Sunday.

4.  On 20 April 2011, the plaintiff issued a writ against six residents of Mei Foo and other unidentified persons and sought an interlocutory injunction to restrain them from trespassing on the Property and interfering with the plaintiff’s right of way over the private roads in Mei Foo including the Access Road.  At the first hearing of the summons for interlocutory injunction on 29 April 2011, the 8^th defendant and three others claimed to be the 7^th defendant.  The 8^th defendant, who was represented by leading counsel, was allowed to address the court on that basis and successfully opposed the plaintiff’s application for an interim injunction against the defendants pending the determination of the summons for interlocutory injunction.

5.  At the next return date of the summons for interlocutory injunction on 30 May 2011, on the plaintiff’s application an order was made joining Mr Tsang as the 8^th defendant to the proceedings.  Two others were joined as the 9^th and 10^th defendants.

6.  Au J heard the summons for interlocutory injunction and the plaintiff’s application for summary judgment on 19 December 2011.  By then, judgment by consent was entered against the first six defendants and the applications just proceeded against the 7^th to 10^th defendants.  Judgment was given on 10 February 2012 ([2012] 2 HKLRD 85).  Au J found that although the evidence does not show that the 8^th to 10^th defendants had carried out any acts that had infringed the plaintiff’s right over the use of the Access Road, these defendants had evinced an intention they would well carry out such wrongful acts to interfere with the plaintiff’s right for reasonable use of the Access Road and, if not restrained, there is a real risk that they would carry out such wrongful acts in the future.  He granted a final injunction against the 8^th and 9^th defendants and an interlocutory injunction against the 10^th defendant (who had not filed an acknowledgment of service) from entering or in any way trespassing on the Property and interfering with the plaintiff’s use and enjoyment of the Property and its right of way over the private roads in Mei Foo.

7.  The 8^th defendant filed a Notice of Appeal on 8 March 2012 seeking to set aside Au J’s order.  The date for the hearing of the appeal was fixed on 22 March 2012.  The appeal is to be heard on 26 February 2013.

8.  On 26 July 2012, the plaintiff’s solicitors first wrote to the 8^th defendant’s solicitors requesting security for costs on appeal of $1 million.  The 8^th defendant’s solicitors replied on 1 August 2012 refusing to provide security asserting that he has “a very strong case” on appeal and that his appeal involved the exercise of his constitutional right to freedom of demonstration which is of public importance.

9.  This summons for security for costs was issued on 14 November 2012.

10.  This application is made on the basis that the 8^th defendant is impecunious.  He is not gainfully employed.  He has confirmed that his only asset of value is his interest in a property in Chai Wan held by him and another as joint tenants.  Quite apart from the difficulty of levying execution on a property in joint ownership, that property is in a development of the Home Ownership Scheme and is subject to restrictions on the transfer of interest.  I am satisfied that the plaintiff is likely to be put to undue delay and expense in enforcing any costs order that may be made in its favour in this appeal.

11.  The principles for ordering security for costs on appeal are well established.  Order 59 rule 10(5) provides that 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.”  The overriding consideration that the rule requires is whether “special”, not exceptional, circumstances exist making it just to order security (Chung Kau v. Hong Kong Housing Authority & Ors. [2004] 2 HKLRD 650 at 656H, para. 14(4)).

12.  In deciding whether to award security for the costs of an appeal to the Court of Appeal, the court takes into account the fact that the appellant has already had the issue concerned determined in the court below, and it is prima facie an injustice to the respondent to allow an appeal to the Court of Appeal to proceed without security for costs being furnished in circumstances where the respondent will be unable to enforce against the appellant any order for costs made by the Court of Appeal (Hong Kong Civil Procedure 2011, Vol. 1, para. 59/10/28).

13.  Hence, the Court of Appeal will order security upon proof, or in some cases upon a presumption, that the respondent will be likely to encounter undue delay or be put to undue expense in enforcing any order for costs in respect of the appeal.  The court retains an overall discretion not to order security if the appellant could demonstrate countervailing factors which would militate against such an order being made (Chung Kau v. Hong Kong Housing Authority & Ors., at 656D, para. 14(2)).

14.  In view of the impecuniosity of the 8^th defendant, I am satisfied special circumstances do exist here for the court to exercise its discretion to order security for costs on appeal.

15.  Mr Martin Lee, SC advanced three countervailing factors for the 8^th defendant:

(1)   he has a strong and meritorious appeal;

(2)   he has a set-off in costs in that he has been awarded costs against the plaintiff on other occasions; and

(3)   there is substantial delay in applying for security for costs.

16.  I have considered the grounds of appeal in the Notice of Appeal.  The 8^th defendant relies on the same grounds which were advanced before Au J and were rejected.  His primary case is that there was no evidence to justify the conclusion that he had evinced an intention to carry out wrongful acts to interfere with the plaintiff’s use of the Access Road.  It was contended that this conclusion is inconsistent with the judge’s acceptance that the evidence does not show the 8^th to 10^th defendants had carried out any acts that had infringed the plaintiff’s right over the use of the Access Road.  Further, the judge was wrong to hold against the defendants on their defence that their presence on the Access Road was in exercise of their constitutional rights being the right to freedom of expression and peaceful assembly.  And even if the judge was right in holding against the 8^th defendant, the terms of the injunction granted are wider than justified.  There is dispute before me whether the Property which is the subject of the injunction from trespassing (paragraph 1(a) of Au J’s order) would include a strip of the road that can be used for vehicular access.

17.  It is not necessary to go into a detailed examination at this stage of the arguments advanced on behalf of the 8^th defendant.  On a preliminary assessment, I am not persuaded there are sufficient merits in the grounds of appeal such that the court should exercise its discretion against ordering security.  That the appeal would involve consideration of the exercise of the alleged constitutional rights is not a sufficient countervailing factor in the circumstances of this case.

18.  The 8^th defendant obtained two costs orders in his favour on 30 May 2011.  For the plaintiff’s unsuccessful application for leave to appeal the order on 29 April 2011, it was ordered to pay costs to the 8^th defendant.  His solicitors estimated such costs at $350,000.  Further, the plaintiff was ordered to pay 50% of the costs of the hearing on 29 April 2011.  Those costs were estimated at $150,000.  On 30 June 2011, the Court of Appeal dismissed the plaintiff’s application for leave to appeal against the order of 29 April 2011 with costs to the 8^th defendant.  His costs on this occasion were estimated at $390,000.

19.  The total amount of costs awarded in the 8^th defendant’s favour is estimated at about $890,000.  None of these costs have been taxed.

20.  The plaintiff succeeded before Au J in its applications for summary judgment and injunction.  The 8^th and 9^th defendants were ordered to pay costs to the plaintiff with certificate for two counsel.  The plaintiff’s solicitors estimated its costs of the applications before Au J for which the defendants are liable to pay to exceed $4 million.

21.  The 8^th defendant’s appeal is estimated to last for one day.  The plaintiff’s solicitors have put forward a skeleton bill for the purpose of the present application in the total sum of $899,475 (after adjustments to remove the estimated solicitors’ costs of attendance and counsel’s fees for a second hearing of the security for costs summons, and the brief fee of one junior counsel for attending the appeal).

22.  It was contended for the 8^th defendant that the costs awarded in his favour estimated at $890,000 are likely to be sufficient to set off the costs order in the plaintiff’s favour on 10 February 2012 as well as any costs order that may be made against him in his appeal.

23.  I do not think this is likely to happen.  The costs estimate of $890,000 has not been taxed.  Assuming this is to be taxed down on a very conservative basis to $750,000 (about 16% of the total), this is unlikely to cover the costs liability of the 8^th defendant in the substantive hearing heard by Au J in December 2011.

24.  I turn to the delay in taking out this application.  The plaintiff sought to explain why it has not issued its summons earlier in its reply affirmation.  I do not propose to set out the explanation save to say that I would agree with Mr Lee that the reasons do not bear scrutiny.  There is no good reason why the summons should not have been issued in August 2012, at the latest.

25.  The 8^th defendant claimed he is prejudiced by the late application for security in that his counsel have been briefed and preparation for the appeal “has long started”.

26.  The summons was issued in mid November 2011.  It is not clear when counsel have been briefed, but I think it unlikely that counsel’s brief would have been delivered before mid November 2011 for a one-day appeal that is to come up more than three months away.  It is also pertinent to bear in mind that although the summons was issued in mid November 2011, the plaintiff’s solicitors had written to the 8^th defendant’s solicitors in late October 2011 seeking confirmation on his available assets to meet any costs liability on appeal.  There was no indication that an application for security would not be made.

27.  In these circumstances, I am not persuaded that the prejudice alleged to have been suffered should be laid at the plaintiff’s door.  I would not regard the delay factor here as a sufficient countervailing factor.

28.  For the above reasons, I am satisfied it is appropriate to make an order for security for costs on appeal.

29.  As adjusted, the amount sought is $899,475.  The amount of security I would order is $450,000, made up of $100,000 as solicitors’ costs and $350,000 as fees for counsel.

30.  I have made the following orders at the conclusion of the hearing:

(1)   the 8^th defendant do within 42 days hereof give security for the plaintiff’s costs of the appeal in CACV 49/2012 in the sum of $450,000 by making lodgement in court of the said sum by cash or bankers draft, or by provision of a bank guarantee of like amount, which guarantee shall have been approved by the Registrar; and until such lodgement be made and notice thereof given to the Registrar and to the solicitors for the plaintiff (such notice to be given on the same day as the lodgement is made) all proceedings in the said appeal are to be stayed;

(2)   in default of the 8^th defendant making such lodgement as aforesaid within the time specified, or within such further time as the court may for special reasons allow, the said appeal do (upon the solicitors for the plaintiff certifying such default to the Registrar) stand dismissed out of this court without further order;

(3)   in the event that the appeal is dismissed in the circumstances provided for above, the 8^th defendant do pay to the plaintiff its costs occasioned by the said appeal, such costs to be taxed if not agreed; and

(4)   the costs of this application be costs in the appeal.