PINE ENTERPRISES LTD v. CYBER STRATEGY LTD AND ANOTHER

CACV116/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 116 OF 2008

(ON APPEAL FROM HCA NO. 1221 OF 2006)

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D E C I S I O N

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1.  This is an application for security for costs in respect of an appeal.

2.  The action in the court below took 23 days.  The judgment is extensive.

3.  It suffices to say that the grounds of the appeal appear to me to really revolve around questions of fact, apart from one matter, to which I will refer in a moment.

4.  They are dressed up as questions of law, but they really amount to questions of fact, and in that respect I have to refer to what the judge said when he was dealing with the question of costs between the plaintiff and the 1st and 3rd parties’ costs, because at paragraph 164 he said:

“It was not until the twelfth day of the trial when the conduct of the defence was taken over by leading counsel that the defence progressed more regularly.  Despite that, there is really no defence for the plaintiff’s action.  Defences raised by the defendants are concocted.  They are based on concocted evidence which the defendants’ then controlling mind and principal witness, Gary Ho, knew full well were false.  The defence was conducted in a most scandalous and vexatious manner, with the principal witness lying all the way for nine days in the witness box.  One of the defences raised was non-disclosure arising out of fiduciary duties of partners to the joint venture.  That defence must now boomerang.  The parties were in a fiduciary relationship.  I do feel a strong sense of indignation at the defendants’ conduct.  This is a case which cries out for costs to be awarded on indemnity basis.”

5.  Well, those are very strong words and, when it is considered that the appeal is now sought to be brought against the findings of fact, one can only say that it does not start off on a very optimistic note.

6.  One matter which has been raised during the course of argument this morning is the question as to whether the 51 per cent of the shareholding in UR Limited was, in effect, charged equitably.  The short answer to that, as was pointed out by Ms Chan on behalf of the plaintiff and the 1st Third Party, was that were the defendants to succeed on their main case or on their main defence, they would end up without any shares anyway, so this particular defence, or this particular point, cannot really affect the total outcome of the case.

7.  In my view, the main question to be decided this morning is whether the defendants should be required to give security on the basis that they are impecunious, and it does seem to me that, on what little I have seen of this case, there are grounds for it to be considered that the defendants have no ready assets available for the payment of costs.  It is said that the land in question, which is in Beijing, may be very valuable.  Well, that may be the case; but, on the other hand, that is a question of satisfaction of the judgment, and Ms Chan challenges the allegation on the basis that there are many other debts which also have to be paid out of that amount or the proceeds of sale of any land.

8.  But in any event, that does not indicate that the defendants would be in a position to pay the costs.  What would have to happen is there would have to be some sort of liquidation or sale.

9.  In my view, this case therefore is one where security should be required from the defendants, and the question is how much.

10.  I have looked at the estimate of the costs, and I approach this case really on two bases.  If the matter were in this court, I consider that probably, on the basis of the notice of appeal, I doubt that it would go more than about two days.  It is possible that the case could go longer, and therefore I approach it on that basis.  I have looked at the scale of fees which are charged, and what I have to do is not to consider the particular counsel who are involved or particular legal representatives who are involved, and I make no criticism of their fees whatever.  What I have to consider is what representation the plaintiffs might be able to obtain and the cost of it.

11.  All in all, based on a two-day hearing in this case or a longer hearing, I consider an appropriate amount of security would be about $1.2 million in this case, and I propose to make an order that security for that amount should be provided.

12.  The order that I will make is that:

“the 1st and 2nd defendants do on or before 15 August give security to answer costs in case any should be awarded to be paid by the 1st and/or 2nd defendants to the plaintiff or the 1st third party by making lodgement in court of a sum of $1.2 million by cash or bankers draft or by the provision of a bank guarantee of the 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 and the 1st third party, such notice to be given on the same day as the lodgement is made, all proceedings in the said appeal are to be stayed.

In default of the 1st and 2nd defendants or either of them making such lodgement as aforesaid within the time specified above or within such further time as the court may for special reasons allow, the said appeal do, upon the solicitors for the plaintiff and the 1st Third Party certifying such default to the Registrar, stand dismissed out of this court without further order.

In the event that the appeal is dismissed in the circumstances provided for above the 1st and the 2nd defendants do pay to the plaintiff and the 1st Third Party their costs occasioned by the said appeal, such costs to be taxed and the costs of this application be costs in the appeal.”