CACV 254/2015
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 254 OF 2015
(ON APPEAL FROM HCA 719/2009 & 947 OF 2009)
________________________
BETWEEN
QUANG XIN LEE (李廣欣)
Plaintiff
and
JNC DATUM TECH.
INTERNATONAL LIMITED
1st Defendant
MARKUS F. JEBSEN
2nd Defendant
________________________
Before: Hon Kwan and Chu JJA in Court
Date of hearing and decision: 14 April 2016
Date of Reasons for Decision: 15 April 2016
________________________
REASONS FOR DECISION________________________
Hon Chu JA (giving the Reasons for Decision of the Court):
1. By summons issued on 2 February 2016, the 1st and 2nd defendants applied for security for costs in this appeal brought by the plaintiff against the judgment of Deputy High Court Judge Robert Pang SC (“the Judge”) given on 12 October 2015. At the hearing, we granted the application with costs to the 1st and 2nd defendants. Our reasons appear below.
HCA 719/2009 and 947/2009
2. The plaintiff was formerly a director of the 1st defendant. He was summarily dismissed on 6 May 2008.
3. The 2nd defendant is the founder of the MF Jebsen Group. He is the sole shareholder and chairman of the principal company of the group, MF Jebsen International Limited. The 1st defendant is the wholly owned subsidiary of MF Jebsen International Limited.
4. The plaintiff’s claim in the actions below is for damages for wrongful dismissal against the 1st defendant, breach of contract against the 2nd defendant and defamation against both defendants.
5. By way of counterclaim, the 1st defendant seeks repayment of various unauthorized reimbursements and an outstanding director’s loan. The 2nd defendant also counterclaims for the repayment of an $8 million loan.
6. In his judgment handed down on 12 October 2015, the Judge found for the plaintiff on part of the defamation claim and awarded $80,000 as general damages. All the rest of the plaintiff’s claim was dismissed. As for the counterclaim, the Judge allowed the 1st defendant’s claim for director’s loan in the sum of $2,900,957, and the 2nd defendant claim on the $8 million loan. The 1st defendant’s counterclaim for repayment of disbursements was dismissed.
7. By his notice of appeal served and filed on 6 November 2015, the plaintiff appeals against the quantum of damages on the defamation claim, the dismissal of the rest of his claim and the judgment on the counterclaim. The defendants have filed a respondents’ notice on 27 November 2015 to affirm the judgment on additional or alternative grounds.
The defendants’ applications
8. By summons filed on 2 February 2016, the defendants applied for security for their costs in the appeal in the sum of $559,460.
9. The applications was made on the basis that the plaintiff is impecunious and would be unable to pay the costs of the appeal should it be unsuccessful. The defendants relied on two assets tracing investigation reports which show the plaintiff to have no substantive assets, and the fact that despite demands and the issuance of garnishee proceedings, a substantial part of the judgment against the plaintiff remains unsatisfied.
10. The plaintiff, in his written submission, did not dispute the defendants' assessment of his financial position. He contested the application on the basis that he has a meritorious appeal.
Applicable legal principles
11. Under Order 59 rule 10(5) of The Rules of the High Court, Cap. 4A, 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.
12. The Court will order security for costs if satisfied that the appellant would be unable through impecuniosity to pay the costs of the appeal if unsuccessful, or that the respondent would be likely to encounter undue delay or put to undue expense in enforcing any order for costs in the appeal: see Hong Kong Civil Procedure 2016 Vol.1 §§59/10/26 & 59/10/27. Once a case of difficulty or expense in enforcing a costs order is demonstrated, it is generally up to the appellant to demonstrate countervailing factors militating against an order being made: Chung Kau v. Hong Kong Housing Authority & Others [2004] 2 HKLRD 650, and Hong Kong Civil Procedure 2016 Vol.1 §§ 59/10/28.
Impecuniosity of the plaintiff
13. On the materials before the court, we are satisfied that the defendants have made out a case of impecuniosity against the plaintiff and/or that they will likely be put to undue difficulty and delay in enforcing costs order against the plaintiff. Accordingly, there exist special circumstances for ordering security for costs against the plaintiff.
The merits of the plaintiff’s appeal
14. We next turn to the merits of the plaintiff’s appeal with a view to seeing whether this may amount to countervailing factor militating against making an order for security for costs.
15. Briefly stated, the Judge’s findings and reasons for his judgment are these:
(1) The plaintiff’s wrongful dismissal claim
The plaintiff’s summary dismissal was justified by reason of his conduct in causing ,without authorization from the board or the shareholders, the 1st defendant to borrow from HSBC and thereafter to make available to his own personal use a loan of AUD$735,803.39 (“AUD Loan”).[1]
(2) The plaintiff’s breach of contract claim
The Judge rejected the plaintiff’s case that he and the 2nd defendant had reached an agreement to raise funds by resorting to the Jebsen family trust, under which the plaintiff would be rewarded with 10% of the ownership of any company formed with such funding and 10% of the incremental value on disposal. The Judge considered there was a total lack of documentation to support the existence of the alleged agreement, and that there was inconsistency in the plaintiff’s case as to the terms of the agreement.[2]
(3) The plaintiff’s defamation claim
The Judge found: (i) the emails and voice messages to the plaintiff himself could not constitute a claim in defamation, and those to his wife fell short of being defamatory; (ii) the unparticularized allegations of slander were not proved; and (iii) the words “unethical business practices” in the email dated 9 May 2008 to the defendants’ solicitor, Mr Billy Ma, constituted defamatory statement.[3]
On quantum, the Judge considered the gravity of the defamatory statement in the 9 May 2008 email is mitigated by reading the whole statement together, the extent of publication was very limited and the defendants did not act oppressively or unreasonably in defending the claim. The Judge held that $80,000 is an appropriate award for general damages. The Judge further did not accept a case for aggravated damages had been made out.[4]
(4) The 1st defendant’s counterclaim on director’s loan
The Judge rejected the plaintiff’s defence that the loan should be set off against the dividend/ bonus due to him, holding that there was no such dividend/ bonus in light of his rejection of the existence of an agreement between the plaintiff and the 2nd defendant (see §(2) above).[5]
(5) The 2nd defendant’s counterclaim on the $8 million loan
The Judge held that, as a matter of construction of the 18 October 2005 loan agreement, the plaintiff’s defence that the loan did not have to be repaid when he ceased to be employed by the MF Jebsen Group was untenable.[6]
16. The plaintiff indicates in the notice of appeal that he wishes to appeal on four grounds, namely, (1) Important and pertinent documentary evidence supporting the plaintiff’s case has been ignored and not been given reasonable consideration; (2) Important and pertinent witness evidence given by the defendants supporting the plaintiff’s case has been ignored and not been given reasonable consideration; (3) The Judge contradicted his own rulings in allowing new evidence to be introduced without warning; and (4) The Judge was wrong and contradictory in his findings of fact.
17. The plaintiff elaborated on his grounds in the subsequent part of the notice of appeal that runs to 60 paragraphs. The plaintiff’s 20-page skeleton argument opposing the present application also sets out his arguments for the appeal at length. For the present purpose, it is neither necessary nor desirable for us to embark upon a detailed examination of the arguments in the appeal. We need only make a preliminary assessment of the strength of the grounds of appeal: see Chung Kau v. Hong Kong Housing Authority & Ors at 656D-G.
18. We observe at the outset that the thrust of the plaintiff’s appeal is directed at disputing the Judge’s factual findings underlying the decision on the claim and counterclaim. It is well established that the threshold for challenging a trial judge’s finding of facts is high. It has to be demonstrated that the judge is plainly wrong in the sense that his findings cannot reasonably be explained or justified: Ting Kwok Keung v. Tam Dick Yuen (2002) 5 HKCFAR 336, §42.
19. We have carefully considered the plaintiff’s arguments. Having regard to the Judge’s reasoning, the matters set out in the respondents’ notice and the submissions of Miss Lau who appeared for the defendants, we do not think the plaintiff has a strong case for arguing that the Judge’s factual findings are plainly wrong.
20. In connection with the AUD Loan which eventually brought about the plaintiff’s summary dismissal, the plaintiff complained that the land search on his Braemar Hill property, on which he was cross-examined, had taken him by surprise. However, the land search is merely a record of the transactions on the property, including the mortgage for securing the SIBOR loan from HSBC. The execution of the mortgage and when this was done, which was what the Judge took into account, are matters well within the plaintiff’s own knowledge. His complaint that he had not seen the land search before is irrelevant and misses the point.
21. The plaintiff also complained that the financial statements of the 1st defendant for the year 2007 prepared by KPMG, which did not state the AUD Loan was authorized or not, had been ignored. This argument will have to be considered together with the matters set out in paragraph 3 of the respondent’s notice, which suggest that the effect of the 2007 financial statements may not be crucial.
22. Similarly, the plaintiff’s further complaint that the Judge, in finding that the director’s loan has to be repaid, had ignored the 2nd defendant’s evidence that the outstanding bonuses cancelled out the loan, will have to be considered against paragraph 4 of the respondents’ notice which suggests that the 2nd defendant was not talking about the director’s loan owed to the 1st defendant, but was referring to the 2nd defendant’s $8 million loan.
23. With regard to the defamation claim, the plaintiff appears to have overlooked paragraph 55 of the Judgment when he said that the Judge had ignored the recording and emails. His criticism of the quantum of damages must be viewed against the Judge’s reasons for confining the claim to the email dated 9 May 2008 and not awarding aggravating damages. We do not consider the plaintiff’s arguments enjoy a high prospect of success.
24. As for the $8 million loan claim, the plaintiff’s challenge to the Judge’s construction of the loan agreement will have to be seen against the documentary evidence set out under paragraph 5 of the respondents’ notice, which show it was not the plaintiff’s stance prior to the commencement of the proceedings that the loan need not be repaid. And insofar as the plaintiff suggests that the 2nd defendant should be ordered to pay out dividends, from which he loan could be repaid, this has never been a relief sought by the plaintiff.
25. Finally on the breach of contract claim, it would appear from the notice of appeal that the plaintiff, in making the various complaints against the Judge’s findings and reasoning, has misread the Judgment and the Judge’s reasoning.
26. In short, we are not convinced that the merits of the appeal are such as would amount
Quantum of the security
27. We turn finally to the amount of security to be ordered. The defendants asked for $559,460 as security for the costs of the appeal, and had provided an estimated bill of costs showing the breakdown. We noted that the issues in the appeal are essentially factual and not complex, involving basically the same documents and arguments canvassed in the trial below. Taking a broad brush approach, we consider HK$250,000 will be a sufficient security for the defendants’ costs in the appeal, including the application for security for costs. The plaintiff will have 35 days to provide the security.
Costs of the applications
28. The defendants had succeeded in their applications and the normal rule of costs follow event should apply. We ordered the plaintiff to pay the 1st and 2nd defendants the costs of the applications for security for costs in any event.
Dispositions
29. Accordingly, we made the following orders:
(1) The plaintiff shall within 35 days from the date of the order give security for the 1st and 2nd defendants’ costs of the appeal in the sum of HK$250,000, either by making payment into court of the said sum or by provision of a bank guarantee of like amount, which guarantee shall have to be approved by the Registrar of High Court;
(2) Until the plaintiff has given the security ordered in (1) above and notice thereof given to the Registrar of High Court and to the solicitors for the 1st and 2nd defendants (such notice to be given on the same day as the security is provided), all proceedings in this appeal are to be stayed;
(3) In default of the plaintiff giving security as ordered in (1) above, the appeal do (upon the solicitors for the 1st and 2nd defendants certifying such default to the Registrar of High Court) stand dismissed out of this court without further order;
(4) In the event that the appeal is dismissed in the circumstances provided for in (3) above, the plaintiff shall pay the 1st and 2nd defendants their costs of the appeal, such costs to be taxed if not agreed; and
(5) The plaintiff pays the 1st and 2nd defendants their costs of the application for security for costs in any event, to be taxed if not agreed.
(Susan Kwan)
(Carlye Chu)
Justice of Appeal
Justice of Appeal
Miss Queenie Lau, instructed by Anthony Siu & Co, for the 1st and 2nd defendants.
[1] Judgment §§42 to 45.
[2] Judgment §§73 to 75.
[3] Judgment §§53 to 65.
[4] Judgment §§66 to 68.
[5] Judgment §§80 and 81.
[6] Judgment §§82 to 87.