YIP KIM PO v. AIG INSURANCE HONG KONG LTD (FORMERLY KNOWN AS AMERICAN INTERNATIONAL UNDERWRITERS LTD)

CACV 351/2021

[2022] HKCA 464

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 351 OF 2021

(ON APPEAL FROM HCSD NO. 1 OF 2020)

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JUDGMENT

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Hon Poon CJHC (giving the judgment of the Court):

1.  In the proceedings below, the applicant applied to set aside a statutory demand issued by the respondent dated 19 December 2019 in respect of a debt in excess of HK$18.7 million arising from a director and officer liability indemnity policy (“the Policy”). By a judgment dated 22 June 2021 ([2021] HKCFI 1795), Deputy High Court Judge Le Pichon dismissed the application with costs to be summarily assessed. The applicant appealed, prompting the respondent’s present application for security for costs of the appeal in the sum of HK$600,000. Having considered the papers, we are of the view that it can be determined without an oral hearing pursuant to Order 59, rule 2A and rule 14A of the Rules of the High Court, Cap 4A.

2.  The background leading to the proceedings below has been succinctly summarized by the Judge, which we would respectfully adopt and do not propose to repeat as the judgment, given the nature of the proceedings below, is not open to public. The only issue before her was whether, on a proper interpretation of the relevant provisions of the Policy, the respondent’s cause of action for the debt was already time-barred when it issued the statutory demand, as the applicant contended. Applying the well-established principles of contractual interpretation as restated by the Court of Final Appeal in Eminent Investments (Asia Pacific) Limited v DIO Corp (2020) 23 HKCFAR 487, the Judge found the applicant’s construction unarguable as it was strained, artificial, internally inconsistent and lacked commercial common sense.

3.  The principles for an application for security for costs are so well settled that it is not necessary for us to repeat them. Applying them here, we agree that we should exercise our discretion to order security against the applicant.

4.  First, on the evidence before us, we are satisfied that the applicant has been shown to be impecunious. He did not really dispute that but contended that an order for security for costs would prevent him from pursuing the appeal. However, he has not discharged the burden, which is squarely on him, to show that he is unable to furnish security from his own resources or other sources because he has made no disclosure of his assets in Hong Kong or elsewhere and has not adduced any evidence as to whether he could raise fund elsewhere.

5.  Second and more importantly, contrary to the applicant’s contention, there is little merit in the appeal. The Judge had applied the principles of contractual interpretation set out in Eminent correctly and her analysis in rejecting the applicant’s interpretation is sound. In arguing that the Judge had erred, counsel for the applicant in substance regurgitated the same arguments below, which does not really assist. He also sought to rely on some American cases on what he said to be “an almost identical phrase deployed in exactly the same context”, without, however, explaining why they were not cited to the Judge and more cogently, elaborating on how they supported the applicant’s case.

6.  As to quantum of security, having considered the matter in the round, we find HK$600,000 excessive. A reasonable sum is HK$300,000.

7.  The respondent shall have the costs of the application as costs should follow the event. Having considered the statement of costs, we will summarily assess it at HK$100,000.

8.  Accordingly, we make the following orders:

(1)  The applicant do pay into court within 28 days from the date of this judgment HK$300,000 as security for the respondent’s costs of the appeal;

(2)  The appeal proceedings be temporarily stayed pending the provision of security by the applicant as aforesaid;

(3)  In the event that the applicant fails to provide security as aforesaid, the appeal be dismissed automatically forthwith without any further order with costs to the respondent to be taxed if not agreed; and

(4)  Costs of this application be to the respondent, summarily assessed at HK$100,000.