LIN MAN YUAN v. KIN MING HOLDINGS INTERNATIONAL LTD

HCA 216/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 216 OF 2008

BETWEEN

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DECISION

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The application

1.  This is the application for security for costs under RHC Order 23 rule 1 by the defendants in the Main Action on the ground that the plaintiff Lam Moon Yuen (also known as Lin Man Yuan) is:

(i) ordinarily resident out of the jurisdiction; and/or 

(ii) the plaintiff (not being a plaintiff who is suing in a representative capacity) is a nominal plaintiff who is suing for the benefit of Xiamen Fuman Holdings Ltd (廈門福滿集團有限公司) (“Fu Man”) and there is reason to believe that she will be unable to pay the costs of the defendants if ordered to do so;

(iii) and the circumstances  are such that the Court should exercise its discretion to make such an order.[1]

2.  Miss B. Wong, counsel acts for the defendants and Mr. Fung, senior counsel and Miss F. Lok counsel act for the plaintiff.

Factual background

3.  In short, this is a case about a dispute between the parties over the development rights on a piece of land in Xiamen, PRC.  The central issue in this case is whether an oral agreement exists alongside a written agreement.[2]  It is a valuable piece of land for development of residential / commercial units amounting to a total building area of 335,192.16 sq. m.  The plaintiff had paid RMB125 million as deposit, which was subsequently returned by the defendants to the plaintiff for the reason that the written agreement had terminated, which the plaintiff disputes and argues that the written agreement still remains binding upon the defendant.  This is the main issue for the trial.  However, apart from the interlocutory applications in these proceedings between the parties, the defendants had, at one stage raised the issue that the plaintiff and her husband, the 2^nd defendant in the counterclaim, had employed third parties to threaten Mr. Jose Kho, the 2^nd defendant in the main action, which gave rise to the defendants’ application for an injunction and their application to join Mr. Kho as the 2^nd plaintiff in the counterclaim.  All these are only side issues, which are, in my view, having no direct bearing on the present application, a statutory provision for a specific purpose at the discretion of the court.

The law

4.  Order 23 rule 1 provides:

“(1) Where, on the application of a defendant to an action or other proceeding in the Court of First Instance, it appears to the Court -

(a) that the plaintiff is ordinarily resident out of the jurisdiction, or

(b) that the plaintiff (not being a plaintiff who is suing in a representative capacity) is a nominal plaintiff who is suing for the benefit of some other person and that there is reason to believe that he will be unable to pay the costs of the defendant if ordered to do so, or

(c) subject to paragraph (2), that the plaintiff's address is not stated in the writ or other originating process or is incorrectly stated therein, or

(d) that the plaintiff has changed his address during the course of the proceedings with a view to evading the consequences of the litigation, then 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 for the defendant's costs of the action or other proceeding as it thinks just.

(2) 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.

(3) The references in the foregoing paragraphs to a plaintiff and a defendant shall be construed as references to the person (howsoever described on the record) who is in the position of plaintiff or defendant, as the case may be, in the proceeding in question, including a proceeding on a counterclaim.

5.  For this application to succeed, the defendants have to show:

a. The plaintiff is ordinarily resident out of the jurisdiction or she is a nominal plaintiff who is suing for the benefit of some other person; or

b. The plaintiff has changed her address during the course of the proceedings with intention of evading the consequences of the litigation; and

c. The plaintiff will be unable to pay the costs of the defendants if ordered to do so; and

d. In the circumstances, the court considers that it is just and fair to make an order that the plaintiff should give the security for the defendants’ costs.

Discussion

6.  This morning, Mr. Fung has confirmed to me that the emphasis of his argument will be on the quantum of the defendants’ costs.  However, Mr. Fung submits that he will also rely upon his argument of delay and enforcement of the costs order, if granted by the court in favour of the defendants.

7.  Mr. Fung agrees that it is not necessary to consider the merit of the plaintiff’s case for this application.[3] The plaintiff’s grounds of objection are:

a. Madam Lin is not a nominal plaintiff.

b. The Defendants have failed to prove that the Plaintiff is unable to pay costs.

c. On the contrary, the Plaintiff has assets within the jurisdiction for costs.

d. The application is made very late, way after all the facts on which the application is based became known to the Defendants, without any explanation, and causes prejudice to the Plaintiff.

e. The amount of security sought (to the tune of HK$17.9 million) is exaggerated, excessive, illusory and oppressive.

8.  Mr. Fung submits that it is trite law that a nominal plaintiff under RHC Ord. 23, r.1(1)(b) means a plaintiff suing for the benefit of some other person, and has no interest in the action.  A nominal plaintiff is “nothing but a puppet for some third party, a mere shadow, in the sense that he has parted with any right he may have had in the subject matter”: Andrews v Caltex Oil (Aust) Pty Ltd (1982) 40 ALR 305.[4]

9.  Mr. Fung submits that the plaintiff owes 38.17% of the shareholding of Fu Man, which carries on property investment in China.[5]

10.  Miss Wong’s reply to the above argument is that the plaintiff was the agent of Fu Man.

11.  It seems that the plaintiff is not a nominal plaintiff.

12.  However, Mr. Fung does not dispute that the plaintiff is ordinarily resident outside the jurisdiction.[6]  He argues that the defendants are unable to show that the plaintiff is unable to pay the costs.  It is not disputed that she has $3 million cash available for costs.  The defendants’ argument is that the 3 million is not sufficient to meet their costs if the court orders her to pay their costs.

13.  This will bring the argument on the quantum of costs for the defendants for the proceedings, including trial. Mr. Fung has also raised the issue of delay in the defendants’ application.  He relies on BBMB Finance (Hong Kong) Ltd v. China Underwriters Life and General Insurance Co. Ltd (In Liquidation) & Anor [1991] 1 HKLR 617, 626G-627C, 627J-628E that it is incumbent upon the defendants to explain the delay.  He refers to A Co. v. K Ltd [1987] 1 WLR 1655, 1657 and approved by the Court of Appeal in the BBMB Finance case at 628, that the delay amounts to very real prejudice and indeed, potential injustice.  This issue of delay was also considered in Wing Fai Construction Limited (in liquidation) v. Cheng Kit Yin Kelly & Others CACV249/2010, Le Pichon JA, 3 March 2011, where the learned Justice of Appeal said:

“6. I agree that applications for security for costs must be made promptly but in exercising its discretion, the court is to have regard to all relevant circumstances. In the present case, the plaintiff could not have been taken by surprise given the earlier written request... The fact that there has been delay in making the application is a relevant and important consideration but it is not necessarily conclusive or dispositive.”

14.  Given the intervening contested interlocutory applications between the parties, this application for security for costs should not give the plaintiff any surprise.  BBMB Finance case concerned about the liquidator distributing the company’s assets to the creditors, which is not an issue in this case.  Having considered the relevant factors, and there being no prejudice to the plaintiff, I shall not give too much weight to this factor of delay in the circumstances.

15.  The remaining issue for consideration is whether the defendants are able to show that the plaintiff will be unable to pay the costs if ordered to do so, which concerns with the quantum of costs for the defence. However, before the discussion on this issue, Mr. Fung has raised the issue of enforcement of the costs order under Cap. 597 for the reciprocal enforcement of judgments between Mainland China and Hong Kong to support his argument that security for costs should not be provided for. I shall therefore discuss this issue below before coming to the quantum of the defendants’ costs.

16.  Mr. Fung submits that the rationale or objective underlying Ord. 23, r.1(1)(a) is to alleviate the difficulty that may be faced by a successful defendant in seeking to recover costs against a foreign plaintiff.  Importantly, there has already been put in place a well-designed mechanism under Cap. 597 for the reciprocal enforcement of judgments between Mainland China and Hong Kong.  This may be true. However, there is no authority to support that, given all other factors in support of the application are satisfied, an order for security for costs should not be granted.  This factor alone, though may be one of the factors for consideration, should not, in my view, be conclusive or dispositive, to borrow Madam Justice Le Pichon’s words in Wing Fai Construction Limited (in liquidation) v. Cheng Kit Yin Kelly & Others CACV249/2010, supra.  See also the discussion on the court’s approach on weight that should be given to enforcement of the costs order at §§52-55 of Lim Yi Shenn v Wong Yuen Yee [2012]3 HKLRD 505by Recorder H. Wong SC, in which the learned Recorder discussed the approach as recommended by HH Judge Lok in the case of  Izumo Mokko Co Ltd v TS Lines Ltd [2007] 2 HKLRD 363 that the court should focus its attention on the issue of enforcement of the costs order in determining whether an order for security for costs should be imposed, reference having been made to the UK case Nasser v United Bank of Kuwait [2002] 1 WLR 1868, taking into account of the human rights issue of access to court.  The learned Recorder refused to adopt HH Judge Lok’s approach and decided that the conventional approach, without taking the human rights issue into account, should be adopted.  The learned Recorder, however, recognized that enforcement of the court order should be one of the factors for the court’s consideration for its determination whether an order for security for costs should be made.

17.  The Court of Appeal in Montgomery Ward & Co Incorporated v Evergo Trading Company Limited and Evergo Holdings Company Limited, unreported, CACV 32/1996, 31 May 1996, where Nazareth VP held (paragraph 8):

‘Given that there are no proper factors weighing in favour of the foreign plaintiff or at least either way, it seems to me that [the judge 's] discretion plainly had to be exercised in conformity with the position set out in the judgment of Lord Denning in AeronaveSPA v Westland Charters [1971] 3 All ER 531 at 533 where he said this:

"I agree with the note in the Supreme Court Practice that the rule does give a discretion to the court.  In 1984 in Crozai v Brogden Lopes J said that there was an inflexible rule that if a foreigner sued he should give security for costs.  But that is putting it too high.  It is the usual practice of the courts to make a foreign plaintiff give security for costs.  But it does so, as a matter of discretion, because it is just to do so.  After all, if the defendant succeeds and gets an order for his costs, it is not right that he should have to go to a foreign country to enforce the order." (emphasis added). Parker LJ observed in the case of Berkeley Administration Inc v McClelland [1990] 2 QB 407 at 418F: "....... it is, I accept, common for orders to be made on little if anything more than fact of residence outside the jurisdiction, but this is because it is also commonly the case that it is obvious from the pleadings that enforcement of any judgment for costs in the event of the plaintiff's action being dismissed would be difficult and costly to enforce.

18.  On balance, following the above authorities, the issue of enforcement of the costs order should not be given much weight.  After all, the fact that the costs order will have to be enforced in the Mainland does not alleviate the difficulty in the defendants’ enforcement of the costs order.

19.  We shall now focus on the quantum.

20.  Mr. Fung submits that even if the plaintiff were to be responsible for the defendants’ costs, the defendants’ skeleton bill with an estimated amount of $17.9 million is excessive and oppressive.[7]  He has pointed out in his written submissions the exaggerated costs charged by the solicitors for the consideration of the consent summons, the senior counsel’s drafting of pleadings, which he had to spent another 10 hours at his rate of $4,000 per hour, which is obviously unnecessary in the circumstances etc.  Miss Wong seems to have raised no substantive argument over the criticisms raised by Mr. Fung, except that for some of the time for consideration by the senior partner, the time should be minutes instead of hours.  She confirms that the total amount of $17.9 million was calculated on the basis of hours instead of minutes.

21.  Apart from the skeleton bill, Mr. Fung also argues that the defendants’ counterclaim is a separate issue unrelated to the main issue in the main action, although Miss Wong argues that there will be common issue of credibility of the factual witnesses.  On this issue, I tend to agree with Mr. Fung. According to Miss Wong, there will be three factual witnesses and two expert witnesses for the counterclaim alone.  In fact, the court has found that the plaintiff had appointed agents to assist her in the mediation.  There should not be very much factual dispute over this issue.  The most vigorous contest will be over the expert evidence.  The defendants’ counterclaim amounts to 1,600 million US dollars against the plaintiff.  Mr. Fung submits, which I believe to be true, that both liability and quantum of the counterclaim will be hotly contested.  This will lead his argument over the length of the trial for the counterclaim, which he estimates to be not less than half of the whole length of the trial of 17 days.  Miss Wong argues that it will only take 4 days.

22.  Having taken into account of the amount involved and the number of witnesses, both factual (3 for the defendants and 2 for the plaintiffs) and expert witness (2 from each side) for the counterclaim vis-à-vis the factual witnesses for the main trial with 2 for the plaintiffs and 8 for the defendants, I agree with Mr. Fung that at least half of the trial will have to go to the counterclaim.

23.  Mr. Fung submits that assuming that half of the trial will be for the counterclaim, the defendants’ costs for the main action as per the skeleton bill will be $8.9 million.  With the reduction of the inflated items and duplications of the works done as set out in the skeleton bill, the estimated amount should be $4.45 million.  The court should take a broad brush approach and, taking into account of the possibility of settlement without a trial or shortening of the trial, there will be a reduction of at least 30%, the net amount being roughly $3.1 million.  I agree.  Taking a broad-brush approach of the estimated costs for security, I am prepared to adopt $3 million, less the costs of this application, which will be awarded to the plaintiff as will be dealt with below.

24.  It is not in dispute that the plaintiff has $3 million cash deposited in the bank available for the costs of the defendants’, if so ordered by the court. There is no evidence to show that the plaintiff will remove the cash outside the jurisdiction.

25.  Under those circumstances, I find that the defendants have failed to show that the plaintiff will be unable to pay the defendants’ costs, if so ordered by the court under Order 23 rule 1(b) and their application for an order for security for costs fails.

26.  As to the costs of this application, including the costs reserved, Miss Wong does not argue that they should follow the event.  Mr. Fung asks for two counsel’s certificate, which Miss Wong disputes.  I have been referred to their schedules of costs and Mr. Fung says that the defendants have also instructed senior counsel, who is not here today. He also refers to 62/App/48 of the White Book 2013 on the factors that the court should consider certificate for counsel, in particular, that the matter is important to client and the amount involved is huge.  I have considered these factors. In my view, this application is not of the complexity that requires two counsel for argument.  I am only prepared to allow one counsel for the argument.  Taking a broad-brush approach for summary assessment under Order 62 rule 9B RHC, the costs for the application, including the costs reserved and for today’s hearing, are $140,000.00, which is to be paid by the defendants to the plaintiff within 14 days from the date hereof.

27.  I shall make an order in terms as follows:

a. The defendants’ application be dismissed; and

b. Costs of this application be as per paragraph 26 of this Decision.

 

 

(K.W. Lung) Registrar, High Court