BRIAN NICOLAS GAY v. YIP SHUT YUEN

HCA 3064/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3064 OF 2002

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REASONS FOR DECISION

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1. This is an appeal from the dismissal by Master Raymond Ho of the Defendant's application for security for costs on the 17 December 2002. The Plaintiff is ordinarily resident out of the jurisdiction. He lives in Dubai, in the United Arab Emirates. He is suing the Defendant for the return of $1.5 million which he alleges he loaned to the Defendant in May 1999 (as to $1 million) and October 1999 (as to $500,000). The Defendant contends that the sums were not loans but monies invested by the Plaintiff in a joint venture and utilized by the Defendant as expenses and costs of one form or another in setting up the joint venture.

2. Although the Statement of Claim indorsed upon the Writ is not as precise or as detailed as one would wish, it is nonetheless consistent with the Plaintiff's case, as set out more particularly in his Reply to the Defence and his affidavits. The Plaintiff's address did not appear on the Writ. This fact has proved to be somewhat contentious as will be seen more readily when I review the arguments.

3. Mr. Walker Sham, who appeared for the Defendant, takes two main points. The first is that the Plaintiff is deliberately lying about his residential address in Dubai. He bases this on the fact that the address given shortly after proceedings were commenced, was a Post Office Box number in Dubai and on the Plaintiff's assertion that residential addresses are so styled in Dubai. The Defendant's solicitors have made no inquiry at all of any consulate or other avenue as to whether this is or is not the case. The allegation of lying therefore has no basis. It is a point without merit.

4. The second is that the Plaintiff's claim is not such that his prospects of success are good and that in any event there should not be an examination of the merits of the case. This point I also reject despite Mr. Sham's able argument and forensic examination of certain aspects of the contending cases. The judgment of Le Pichon, J. (as she then was) in Lauria v. Le Salon Orient (Hong Kong) Ltd and Another 1996 2 HKLRD 37 (at page 40D-E) is a succinct statement of the guiding approach in these applications:

"Under Order 23 Rule 1(1), the Court has a real discretion whether or not to order security for costs. It is no longer an inflexible or rigid rule that a plaintiff resident abroad should provide security for costs. The Court may order security for costs "if, having regard to all the circumstances of a case, the Court thinks it just to do so ..." In my judgment, the Court has to assess the prospects of success of this Plaintiff as in any other action and exercise its discretion having regard to all the circumstances of the particular case."

Applying this I should look at the prospect of the Plaintiff succeeding in the action. Of course, as is correctly stated, the issue is whether the Plaintiff or the Defendant is to be believed. Put more strictly it is whether the Plaintiff can establish that the sums of money were loans.

5. There is no dispute as to when the Defendant received the sums of money. There is a complete absence of any documentation from the Defendant showing the bank accounts into which the two sums were paid, when, and in what sums, drawings or transfers were made from these accounts, the ledger or book entries showing expenses or costs incurred for the alleged joint venture, trading accounts showing expenditure, and any account showing what remained of the $1.5 million after such costs and expenses. In other words the Defendant has not provided discovery in relation to the issues.

6. Mr. Sham conceded that discovery appeared far from complete and he would have advised fuller discovery. However I have to assess the situation is it appears before me. This action is close to being set down for trial. Statements have been exchanged. Solicitors for the Defendant should know about discovery. I am entitled to assume that there is no documentation to support the Defence case. The Plaintiff's case is accordingly stronger. I think that there are very good prospects of success.

7. In August 2002 the Defendant's solicitors raised the matter of security for costs, shortly after the Writ was issued. They sought $100,000. The Plaintiff's solicitors said that they would seek instructions and asked for further time in which to do so. They never received a reply. Correspondence continued between the two firms on other aspects. Suddenly, without warning, the Defendant's solicitors issued the Summons for security for costs in the sum of $272,000 on 6 December 2002 returnable on the 17 December. I find that action peremptory, as events turned out unnecessary, and probably motivated by a desire to generate costs, as, so I find was this appeal. Subsequent to the Master's decision, the Defendant's solicitors indicated that they would appeal that decision. The Plaintiff's solicitors sought to compromise matters in a practical way to avoid unnecessary risks as to costs, by asking the Defendant's solicitors to consent to an order for the Plaintiff to pay into court the sum requested with an order for costs to be in the cause. The Defendant's solicitors rejected this unless it included an order that the costs of the hearing before the Master, and the costs of the Notice of Appeal were also paid by the Plaintiff. Their reaction was uncompromisingly unrealistic.

8. I inquired of Mr. Sham whether he was arguing that the Master exercised his discretion wrongly. In reminding me that this appeal was by way of a rehearing Mr. Sham was correct but it seems to me that he had to go further than that and identify where the Master had wrongly exercised his discretion. His argument nonetheless remained advanced upon the two points with which I have dealt.

9. Although such an appeal is a repetition of argument upon facts or documents advanced before the Master, I do not think it sufficient to limit the argument on appeal to the same material. It ought to identify where the Master was wrong in exercising his discretion in the way he did. Mr. Chan for the Plaintiff was able to tell me on instructions, that the Master had indicated that a telling point against the Defendant's case was the latter's failure to show how the $1.5 million had been disposed of and what remained as the balance. He regarded that factor, rightly in my view, as one which entitled him to exercise his discretion in the Plaintiff's favour. It added strength to the Plaintiff's case and weakened the Defendant's case - in seeking security for costs the Defendant had failed completely to account for the substantial sum at issue.

10. I have no hesitation in dismissing this appeal. Despite Mr. Sham's fair and clear argument, the grounds are without merit.

11. I should add my comment on one matter which seems to have excited the Defendant's solicitors and given rise to some peripheral issue involving an allegation by the former of professional misconduct on the part of the Plaintiff's solicitors in that they misled the Court. The basis for this is that the Plaintiff's solicitors made reference at the hearing before the Master to one item in a Second Affidavit from the Plaintiff which could not be filed because there was some defect in the jurat. The reference was to the Plaintiff's explanation for the Post Office Box number as the address of his residence in Dubai. It may be that the solicitors appearing for the Plaintiff should not have made such reference at all in view of the defect on the affidavit. The Defendant's solicitors complaint is that the Plaintiff's solicitors did not reveal to the Master a paragraph in which the Plaintiff said that he had instructed his solicitors to pay into court the requested sum for security for costs, in order to save time and costs, but to resist the application for costs in the Defendant's Summons. The Plaintiff had not however put his solicitors in funds to enable the payment in to be made because of the mechanics and time involved. He later but before the hearing instructed his solicitors to contest the hearing issue fully.

12. It seems to be a thoroughly bad point for the solicitors for the Defendant to take. The Plaintiff's solicitor was in no position to make the payment in. He was in no position to tell the Master that he had such instructions. There was in any event an issue as to costs because the Defendant's solicitors, in their Summons, sought an order for the Defendant's costs in any event.

13. Finally the draft bill of costs prepared by the Defendant's solicitors totals $272,000. This is a grossly excessive sum to claim as costs of an action in which the potential evidence, oral and documentary, is so limited, with a trial length of one day possibly extending to a second.

14. The Appeal is dismissed with costs to the Plaintiff to be paid forthwith. I will assess these as a gross sum under Order 62 Rule 9(4)(b) on receipt of a one-page statement of such costs from the Plaintiff's solicitor and a one-page statement of any objection thereto from the Defendant's solicitors. I will deal with the costs below similarly. This material should be sent to the Court within 14 days.

Remarks: