STANDARD CHARTERED BANK v. LI WAI PING AND OTHERS

CACV73/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 73 OF 2011

(ON APPEAL FROM HCA 10587/2000 & HCA 3575/2003 (consolidated))

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COURT OF FIRST INSTANCE

ACTION NO. 10587 OF 2000

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DECISION

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1.  By summons filed on 6 September 2011, the plaintiff (“the Bank”) applies for an order that the 2^nd defendant provides security for its costs in her appeal from the Judgment handed down on 17 February 2011. The application was made under Order 59 rule 10 of Rules of the High Court, Cap.4A.

The Judgment

2.  In HCA10587/2000, the Bank claimed against the three defendants as guarantors of the liabilities of Peace Hill Development Limited and obtained summary judgment against the 1^st defendant, who is respectively the husband and father of the 2^nd and 3^rd defendants.  The 2^nd and 3^rd defendants denied liability.  They both raised the defence of undue influence. Additionally, the 2^nd defendant pleaded non est factum and misrepresentation on the part of the 4^th defendant (“the Solicitors”), who was instructed by the Bank to deal with the guarantee given by the 1^st to 3^rd defendants (“the Guarantee”).  Both the 2^nd and 3^rd defendants counterclaimed against the Bank for an order of rescission of the Guarantee with the 2^nd defendant further counterclaiming for damages for misrepresentation.

3.  In light of the pleaded case of the 2^nd and 3^rd defendants, the Bank commenced HCA3575/2003 against the Solicitors for breach of contract and/or negligence, in the event the Court found in favour of the 2^nd and 3^rd defendants.  The 2^nd defendant also claimed against the 4^th Solicitors for an indemnity or damages in respect of the Bank’s claim against her, relying on the misrepresentation allegedly made by the handling solicitor.                 

4.  The two actions were consolidated by the order of the Registrar dated 9 May 2005.  The trial was heard by Mr Justice J Poon.

5.  By Judgment handed down on 17 February 2011, Poon J found in favour of the Bank on the Guarantee and rejected the defences of undue influence, non est factum and misrepresentation.   He entered judgment for the Bank’s claim against the 2^nd and 3^rd defendants for the sum of HK$23,175,752.26 together with interest.  He dismissed the 2^nd and 3^rd defendants’ counterclaim against the Bank as well as the Bank’s and the 2^nd defendant’s respective claim against the Solicitors.

6.  By his Decision handed down on 7 June 2011, Poon J ordered the 2^nd and 3^rd defendants to pay the Bank’s costs in HCA10587/2000, the costs of the Bank and of the Solicitors in HCA3575/2003 as well as the Solicitors’ costs of defending the 2^nd defendant’s claim for damages, the last of which is on indemnity basis.

7.  By her Notice of Appeal dated 27 April 2011, the 2^nd defendant appeals against the main Judgment of 17 February 2011.  Consequently, the Bank filed a Respondent’s Notice seeking judgment against the Solicitors in the event the 2^nd defendant’s appeal was allowed.

8.  By another Notice of Appeal dated 30 June 2011, the 2^nd defendant appeals against the Decision on costs handed down on 7 June 2011.

The application for security for costs

9.  The Bank’s present application relates only to the costs of the appeal against the Judgment of 17 February 2011.

10.  The principal ground on which the application is made is that the 2^nd defendant is impecunious in that she has no visible means of her own to meet the Bank’s costs of her appeal in the event such an order is made against her.

Relevant legal principles

11.  Under Order 59 rule 10(5) of Rules of the High Court, the Court of Appeal may, in special circumstances, order that security be given for the costs of an appeal as may be just.

12.  It is settled practice to require security for costs to be given by an appellant who would be unable through impecuniosity to pay the costs of the appeal, if unsuccessful. The court, however, has a discretion and is entitled to consider other relevant factors such as the strength of the appeal to determine whether or not it would be just to order that security for costs be provided.  Once a case of impecuniosity is demonstrated, it is generally up to the appellant to demonstrate countervailing factors militating against an order being made: See Chung Kau v. Hong Kong Housing Authority & Others [2004] 2 HKLRD 650 and Hong Kong Civil Procedure 2011 Vol.1 para.59/10/29.

13.  In deciding whether to order security for costs of an appeal, the court takes into account the fact that the appellant has already had the issue concerned determined in the court below, and it is prima facie an injustice to a respondent to allow an appeal to the Court of Appeal to proceed without security for costs being furnished in circumstances where the respondent will be unable to enforce against the appellant any order for costs made by the Court of Appeal: Hong Kong Civil Procedure 2011 Vol.1 para.59/10/28.  

Impecuniosity of the 2^nd defendant

14.  In contending that the 2^nd defendant is impecunious, the Bank relies on: (i) the fact that the 2^nd defendant was on legal aid in the two actions below; (ii) the 2^nd defendant admittedly was throughout financially dependent on the 1^st defendant, who was adjudicated bankrupt on 27 February 2002; and (iii) the 2^nd defendant’s financial position could not have improved since the conclusion of the trial below.

15.  The 2^nd defendant has not filed any evidence to contest the application.  She confirms at this hearing that she has no money and that she has throughout relied on the 1^st defendant financially.  Accordingly, there is no dispute, and I accept, that the 2^nd defendant is impecunious and does not appear to have the means to satisfy an order for costs against her in the event such an order were to be made.

Merits of the appeal

16.  In deciding on how to exercise my discretion under Order 59 rule 10, I have regard to the grounds on which the 2^nd defendant mounts her appeal.  In her Notice of Appeal, the 2^nd defendant raises two main grounds.  They are: (i) the trial Judge erred in finding that the 2^nd defendant was a “hidden” director assisting the 1^st defendant in the business; and (ii) the trial Judge erred in his findings on what happened at the meeting on 8 October 1997 at which the Guarantee was executed by the 1^st to 3^rd defendants.

17.  When considering the merits of the appeal, a detailed examination of the case and arguments is neither necessary nor desirable. All that the court needs to do is to form a preliminary view: Chung Kau v. Hong Kong Housing Authority & Others, supra.

18.  It is evident from the Judgment that the crucial issue underlying the disputes and the main issues is the credibility of the 1^st to 3^rd defendants, Mr Pang, the handling solicitor, and Mr A Chan, the bank officer.  It is also trite that the 2^nd and 3^rd defendants bear the burden of proving their respective defences.  In order to succeed in their defence and counterclaim, they have to demonstrate their evidence of the relevant events is truthful and reliable.  The trial Judge had the benefit of seeing and hearing the witnesses and their evidence.  He concluded that the 2^nd and 3^rd defendants and their witness, the 1^st defendant, were not truthful and their evidence was not credible.  He rejected their evidence on the important issues as to whether the 2^nd and 3^rd defendants signed the Guarantee under the undue influence of the 1^st defendant and/or in ignorance of its terms and effect, whether there was misrepresentation by the handling solicitor as well as what in fact happened at the October meeting.  On this basis, he concluded that the 2^nd and 3^rd defendants had failed in making good their case against the Bank and the Solicitors.

19.  The challenges that the 2^nd defendant seeks to raise in her appeal are directed at the factual findings of the trial Judge and in turn his assessment and conclusions on the credibility of the witnesses, including that of the 2^nd defendant herself.  It is trite that unless an appellant can demonstrate that the trial judge was plainly wrong in the conclusions he reached on the facts, the Court of Appeal would not disturb his assessment on witnesses’ credibility and findings of fact: Ting Kwok Keung v. Tam Dick Yuen & Others [2002] 3 HKLRD 1, at para.42.      

20.  Mr Wong who appears for the Bank on this application submits that, despite the grounds set out in her Notice of Appeal, the 2^nd defendant has not shown that the trial Judge was plainly wrong on the two findings of fact that are in issue in the appeal.  I agree. It should be noted that the trial Judge came to these findings of fact because he considered the defence case and evidence incredible and the witnesses of the Bank and the Solicitors credible, having regard to the contemporaneous documents and the objective circumstances.  The several arguments set out in the Notice of Appeal to challenge the trial Judge’s findings had in fact been considered by the trial Judge and were rejected for reasons that he gave in the Judgment. 

21.  I am not convinced that the 2nd defendant’s appeal has substantial chances of success and/or that there are other circumstances justifying exercising my discretion against making an order for security for costs of the appeal.

Security to be ordered

22.  I turn finally to consider the amount of security to be ordered. The Bank asks for HK$770,154.66 and has provided a skeleton bill of costs showing the breakdown.  Having gone through the items, I am of the view that the appropriate amount of security to be ordered is HK$ 300,000.  As a general observation, I note that the handling partner is a very senior and experienced practitioner.  Further, the present application and the appeal are not complex and do not raise difficult points of law.  And the papers involved in the appeal would all have been considered in the trial below.  Specifically on the items in the skeleton bill of costs, I consider: (1) the amount of time charged by the handling partner (both already incurred and to be incurred) and by the trainee solicitor (to be incurred) is too long.  Examples include the time for communicating with client, counsel and the 2^nd defendant, conference(s) with counsel, perusal and preparation of documents, especially when the papers for the present application were drafted by counsel who is separately charging for the work, and the preparation of appeal bundle, submissions and authorities.  I also consider the brief fee of counsel for the appeal is very much on the high side, having regard to the papers involved (which are unlikely to be voluminous) and also the issues involved (which are limited and not complex).     

Conclusion

23.  For the reasons set out above, the bank’s application is allowed.  There is an order in terms of the summons save that the amount of security to be furnished by the 2^nd defendant is revised to HK$300,000 and the time for providing the security is 60 days.

24.  The costs of the present application for security of costs are to be paid by the 2^nd defendant to the Bank, assessed at HK$35,000.