CHENG, HENRY v. IMPERIAL SIERRA GROUP HOLDINGS LTD AND ANOTHER

DCCJ 5318/2019

[2020] HKDC 977

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5318 OF 2019

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DECISION

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1.  By Notice of Appeal dated 17 August 2020, the 1^st defendant seeks to appeal against the decision of Master B Mak on its summons for security for costs dated 19 May 2020. The master refused to order the plaintiff to give any security for costs and ordered the 1^st defendant to pay him his costs. The master’s reasons appear in the transcript provided to this court.

2.  It is agreed that an appeal from the master is to be dealt with way of an actual rehearing of the application: see Hong Kong Civil Procedure 2021 Vol. 1 para 58/1/2.  Hence, I am entitled to exercise my discretion under Order 23 r.1(1) afresh.

3.  The 1^st defendant relies on the indisputable fact that the plaintiff put in an incorrect address in the writ issued on 27 September 2019. The address wrongfully stated is Unit 805, 139-141 Wai Yip Street, Kwun Tong, Hong Kong (“the Kwun Tong Address”).

4.  Mr So, counsel for the 1^st defendant, argued that security for costs should be ordered against the plaintiff pursuant to either Order 23 r.1(1)(c) or (1)(d), Rules of the District Court.

5.  Order 23 r.1(1)(c) provides that subject to paragraph (2) of Order 23 r.1, when it appears to the court that the plaintiff’s address is incorrectly stated in the writ, that if, having regard to all the circumstances of the case, the court thinks it just to do so, it may order the plaintiff to give such security as it thinks just.

6.  Paragraph 2 provides that the court shall not require a plaintiff to give security by reason only of paragraph (1)(c) if he satisfies the court that the failure to state his address or the misstatement thereof was made innocently and without intention to deceive.

7.  Order 23 r.1(d) provides another situation which gives rise to the court’s discretion to order security. It is when the plaintiff has changed his address during the course of the proceedings with a view to evading the consequences of the litigation.

8.  The 1^st defendant relies on the fact that the plaintiff provided another address in in other litigation involving the same parties under HCSD 37 of 2019. There, the plaintiff stated his address to be 4/F, 14-16 Wo Fung Street, Fanling, New Territories (“the Fanling Address”). It says the plaintiff has changed his address in these proceedings from the Fanling Address to the Kwun Tong Address. This can hardly fulfill the requirements of r.1(1)(d). Mr So fairly abandons this limb in this appeal.

9.  The controversy between the parties revolves around the Kwun Tong Address and the purported reasons of its use given by one Mr Jim on behalf of the plaintiff, who is allegedly being grounded in the Mainland China because of the Covid-19 situation.

10.  The master, among other things, accepted the explanation given by Mr Jim. Mr Jim was a former partner of Jim & Co., which was intervened by the Law Society on 20 June 2019. As a result, Mr Jim could no longer handle the litigation of the plaintiff and could only refer the same to the plaintiff’s present solicitors. He, however, continues to assist the plaintiff and give instructions to the plaintiff’s present solicitors on behalf of the plaintiff, who is very often in the Mainland China.

11.  Mr Jim alleges that he has known the plaintiff since late 2013 and had handled certain conveyancing matters for him and his related company. In such matters, the plaintiff used the Kwun Tong Address.

12.  At the commencement of these proceedings, Mr Jim simply used the Kwun Tong Address without any confirmation or enquiries made with the plaintiff on the assumption that it remained valid. He only came to realise that plaintiff had changed his address when this was raised by the 1^st defendant in its affirmation. Therefore, it was only an innocent oversight without any intention to deceive.

13.  The master indicated that he saw no reason to disbelieve Mr Jim. The 1^st defendant does not share this observation. It continued to make enquiries with the present occupier of the Kwun Tong Address, namely, Great Top Engineering Ltd (“the Company”), after the master dismissed its application. For the purpose of this appeal, it applied to adduce the evidence of its enquiries by way of an affirmation exhibiting a letter of the Company dated 6 August 2020. By the said letter, the Company confirmed that it had started to occupy the Kwun Tong Address since 12 September 2014 and it did not know the plaintiff at all, let alone allowing the plaintiff to use or stay in its premises.

14.  The plaintiff did not oppose the application to adduce this piece of new evidence. This court allowed the application accordingly and granted leave to the plaintiff to file evidence in reply. Eventually, Mr Jim made his second affirmation dated 22 October 2020.  

15.  Mr Jim came up with the following explanations in his second affirmation. He alleges that the plaintiff’s partner Mr Pau Kam Man Angelo allowed the plaintiff to use the Kwun Tong Address for the plaintiff’s company Glory Bright Enterprises Limited (“Glory Bright”). Mr Pau is the minority shareholder of Glory Bright whereas the plaintiff is the controlling shareholder. Mr Pau told the plaintiff that he owned the premises and could make it available for the use of the plaintiff.  Thus, Mr Jim used this address in his handling of the plaintiff’s legal matters. He gives two examples.

16.  First, he exhibited a writ of summons issued by Glory Bright in another civil action against another individual under DCCJ 918/2019 (“the Other Action”) where the Kwun Tong Address was used by the plaintiff. The writ of summons was dated 22 February 2019.

17.  Second, he exhibited the letters and notices dated 20 January 2020 sent by the Planning Department to Glory Bright at the Kwun Tong Address (“the Letters/Notices”). He alleges that they show that the plaintiff could still receive letters from the Planning Department up to the said date.

18.  Mr Jim went on to say that Mr Pau did not tell the plaintiff that he had subsequently sold the premises and hence the plaintiff continued to use the Kwun Tong Address even after the sale.

19.  Mr So has made a forceful submission on the inadequacy of the evidence of the plaintiff. I accept his submission.

20.  First and foremost, I agree that the plaintiff should have made an affirmation himself. The 14-day mandatory quarantine could not be a valid reason why the plaintiff has been unable to return to Hong Kong if he takes a serious view of this matter. Even if he is being grounded for whatever reason in the Mainland, there is no reason why he could not have made a statement duly notarized in the Mainland for the present purposes.

21.  There is also no reason why Mr Pau did not give supportive evidence. Allegedly he was the owner of the Kwun Tong Address. However, in the land search record, which for unknown reasons is not exhibited to the evidence of Mr Jim, his name does not appear. The latest assignment recorded is one dated 12 September 2014 whereby one Madam Choi assigned the premises to E-mate Engineering Solutions Limited.

22.  I do not intend to surmise the relationship between Mr Pau and Madam Choi. It is the duty of the plaintiff to make good the allegations of Mr Jim with cogent evidence. The plaintiff should have produced the land search record in the first place and properly explained the material transaction.

23.  Equally alarming is the failure of Mr Jim to exhibit any conveyancing documents in which the plaintiff used the Kwun Tong Address as his or his company’s correspondence address as alleged in his first affirmation. He did not mention such alleged conveyancing cases in the second affirmation.

24.  The fact that the plaintiff used the Kwun Tong Address in the Other Action is neither here nor there. Two wrongs do not make a right and can be no evidence of innocence.

25.  Moreover, the Letters/Notices could not show that the plaintiff could receive mails at the Kwun Tong Address on or around 20 January 2020.  They were actually sent to two different addresses of Glory Bright. One was the Kwun Tong Address and the other one was the registered address of Glory Bright. There is also no reason why the plaintiff could still have access to the Kwun Tong Address after the change of ownership of the property thereat.

26.  All in all, I am not satisfied by the plaintiff’s evidence that he has any reasonable explanation for his use of an incorrect address in the writ of summons though it is clear that he had also used the Kwun Tong Address elsewhere.  

27.  However, I do not think that an order for security for costs is intended to be a sanction against the use of an incorrect address without a proper explanation. There should be an element of deception in the mis-statement in order to justify an order for security for costs. This is why the plaintiff can avoid giving security by showing that he did not have the intention to deceive under r.1(2).

28.  I cannot see how the incorrect address could serve any deceptive purposes. As mentioned above, the parties have been engaged in different litigations. The plaintiff served a statutory demand dated 29 July 2019 on the 1^st defendant in respect of an amount which the plaintiff says is due arising from the same transaction in the present action. In the statutory demand, the plaintiff used the Fanling Address.

29.  The 1^st defendant applied to set aside the statutory demand in the High Court under HCSD 37/2019. The plaintiff then applied to withdraw the statutory demand. His application was granted but he was ordered to pay costs summarily assessed at HK$45,000 to the 1^st defendant on 23 October 2019 within 14 days therefrom (“the HCSD Costs Order”).

30.  The plaintiff refused to pay the HCSD Costs Order. The 1^st defendant eventually obtained a charging order absolute against a luxurious property located on Tai Lam Reservoir Road registered in the name of the plaintiff (“the Tai Lam Property”) on the strength of the HCSD Costs Order.

31.  Mr Zhu, counsel for the plaintiff, draws to the attention of this court that the 1^st defendant made an O.88 application in the High Court under HCMP1433/2020 to sell the Tai Lam Property to enforce the HCSD Costs Order on 11 September 2020.

32.  There is no evidence as to how and when the 1^st defendant managed to identify the Tai Lam Property. There is no allegation that the plaintiff has ever concealed his ownership of the Tai Lam Property. I further note that the 1^st defendant did not challenge the validity of the Fanling Address.  If the plaintiff did not state an incorrect address in his statutory demand and did not hide the Tai Lam Property, I see no reason why he wanted to deceive the 1^st defendant by the use of the Kwun Tong Address in the present action. More likely than not, the mis-statement was a mistake albeit a reckless one on the part of Mr Jim.

33.  Mr So urges this court to take into account the unreasonable refusal of the plaintiff to comply with the HCSD Costs Order and the potential difficulties in obtaining an order for sale by reason of the relatively modest amount being due in contrast to the substantial value of the Tai Lam Property. Mr So confirms that he takes no issue with the worthiness of the Tai Lam Property.

34.  In my view, the plaintiff’s refusal to pay the HCSD Costs Order cannot be equated with any prima facie evidence of his attempt to evade liability to pay any costs order in these proceedings by his use of the Kwun Tong Address.  One has to look at the overall picture. 

35.  The purported potential difficulties in the 1^st defendant’s application for an order for sale is, with respect, quite irrelevant. The purpose of an order for security under Order 23 r.1(1)(c) is not to facilitate enforcement of judgments. It is targeted at deceitful plaintiffs only and not those who do not have assets readily amenable to easy execution.

36.  I, thus, come to the conclusion that there was no deception in the mis-statement of the Kwun Tong Address in the writ of summons and it was merely a grave mistake. I do not believe that discretion should be exercise in favour of a grant of an order for security for costs. The master was right in refusing the application of the 1^st defendant and I uphold the master’s decision in this regard.

37.  On the question of costs, I have heard the parties’ submissions. Mr So impresses upon me that in case that I conclude that an order for security should not be granted by the master, at least the 1^st defendant should not be ordered to pay all the costs of the plaintiff because of the accepted incorrectness of the Kwun Tong Address. He relies on Re Like Grand Holdings Ltd, unreported, HCCW603/2001, 11.7.2003 in which Kwan J (as she then was) only allowed the petitioners half of their costs in the application in light of her finding that both parties were indeed at fault.

38.  The situation here is not dissimilar in that the plaintiff has failed to give a proper explanation for his mis-stated address. The evidence adduced by the plaintiff is unsatisfactory and somewhat misleading. However, against the background of this case, the 1^st defendant could hardly make a complaint of deception and should not have made the application and this appeal. It appears to me to be a sheer tactical move premised on a bad mistake of the plaintiff. The lame excuses put up by the plaintiff subsequently cannot justify the application.

39.  To mark my disapproval of the conduct of the plaintiff in the application and the appeal, I depart from the general principle of costs following the event. The master did not have the full picture before him when he made the costs order. I order that the 1^st defendant do forthwith pay to the plaintiff one quarter of his costs of the application before the master and this appeal, to be taxed if not agreed, with certificate for counsel. The appeal is only allowed to this extent.

40.  Lastly, I thank Mr Zhu and Mr So for their assistance rendered to this court.