ZLL AND ANOTHER v. CBC

FCMP 33/2022

[2023] HKFC 95

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 33 OF 2022

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DECISION
(SECURITY FOR COSTS)

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Application

1.  This is a hearing of the Respondent (“R”)’s summons dated 10 October 2022 applying for security for costs in the sum of HK$900,000 or such sums as directed by the court, which application was opposed by the 1^st Applicant (“A1”)  and 2^nd Applicant (“A2”).

2.  R was represented by Mr. CY Li, SC leading Miss Ann Lee.  A1 was represented by Ms. Ferrida Chan of counsel.  A2 was represented by Miss Chan, solicitor of Messrs. Chan & Chan on instructions from the Director of Legal Aid.

Background

3.  The Deceased passed away in Hong Kong on 8 January 2021, survived by his 4 children.  According to Mr. Li, and which I accept, the Deceased was a well-known businessman and philanthropist in his lifetime.  In his will dated 18 March 2013, the Deceased bequeathed all his estate to his 4 children and such charitable bodies as may be agreed among them.

4.  A1 was and still is a Mainland resident. There is no dispute that A1 was the girlfriend, or at least one of the many girlfriends of the Deceased during his life time. A1 gave birth to A2 on 21 August 2007 in Hong Kong by the arrangement of the Deceased.  In A2’s birth certificate, the Deceased was named as the father, giving rise to the rebuttal presumption of paternity under the Parents and Child Ordinance, Cap. 429. However, upon a DNA test done shortly afterwards, it was confirmed that A2 was in fact not a biological child of the Deceased.  Despite this finding, the Deceased continued his intimate relationship with A1 and from the evidence I could see, he continued to maintain a close relationship with A2.  According to the Applicants, they had been financially maintained by the Deceased since 2005.  Since there were no financial provisions being made in the will to cater for their needs, the Applicants instituted the present action for reasonable financial provisions from the estate under sections 4 and 7 of the Inheritance (Provision for Family and Dependents)  Ordinance, Cap. 481.

5.  The Applicants’ claims were defended by R on the basis that they were not such persons who immediately before the death of the Deceased being wholly or substantially maintained by him.

6.  As both Applicants are residing ordinarily out of Hong Kong, R issued the present summons for security for costs on 10 October 2022, in which he asked A1 and A2 to pay a sum of HK$900,000 as security for costs, or such sum to be directed by the court.  But as A2 has been granted legal aid on 8 March 2023, R now accepts that A2 is no longer liable to furnish security for costs after the grant of legal aid certificate. But for the costs incurred before 8 March 2023, R still insists A2 to pay security in the sum of HK$60,000, and the balance of the security in the sum of HK$840,000 to be paid by A1 who has been refused legal aid. 

The Law

7.  An application for security for costs is governed by Order 23 of the Rules of District Court, Cap. 336H (“RDC”), and the relevant rule to the present application is rule 1 (1)(a):

“Security for Costs

1.  Security for costs of action, etc. (O. 23, r. 1)

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

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

(b)  …

(c)  …

(d)  …

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)  …”

8.  At the hearing, I was referred to various authorities by counsel but I do not think they have serious dispute on the applicable legal principles.  Instead of rehearsing their respective submission on the authorities, I would repeat what I have said in an earlier similar case of LX v CWC, the Administratrix of the Estate of WTFP [2021] HKFC 58:

“9. It is abundantly clear that the court is exercising a discretion in granting (or not granting)  an order for security for costs. But the prima facie position is that such an order should be granted against a foreign plaintiff unless there are considerations justifying otherwise.

10.  If a plaintiff is claiming that such an order for security would stifle his claim, the burden is on him to adduce credible evidence to show that funds are not available from any source to provide or support security: per Yuen JA in Po Hio Chua v Hang Seng Bank Limited, at §23.

11…  

12.  It is also important to note that for an application for security for costs, the court will not make a preliminary run on the merits of the case: per Rogers VP in Sunchase Internal Group (China)  Ltd & Ors v Vincor Group of Companies (investment)  Ltd & Ors., at §5 therein; unless it is a case of high probability of success one way or the other: per DHCJ Leung in J. S. P. Pacific Limited (in liquidation)  v Ngan Chung Por & Ors., at §15 of the Judgment.”

9.  Despite the authority that a defendant is prima facie entitled to have security on his costs against a foreign plaintiff, the court is still bound to consider all the circumstances of the case in the exercise of its broad discretion.  In particular, 2 specific factors could be considered, namely, the merits of the plaintiff’s claim and whether such a security for costs order will stifle a genuine claim of the plaintiff.

10.  For merits, the court will approach it in a broad-brush manner.  If the case of the plaintiff is genuine and strong, no order for security would be granted.  On the other hand, an order for security would usually be granted if the plaintiff cannot clearly demonstrate that it has a high degree of probability of success at trial: HKCP (2023), § 23/3/3.

11.  When a plaintiff makes an assertion that an order for security will stifle his genuine claim, he should be candid with the court as to his financial resources and he has the burden of adducing evidence to show that funds are not available from any source to provide or support security: LX v CWC, supra, at §10.

12.  I shall bear the above principles in mind when I come to consider the present application of R.

Discussion

High Probability of Success?

13.  As both Applicants were not ordinarily resident in Hong Kong, the starting point is that the R is entitled to have an order for security for costs against them, unless there are factors justifying otherwise.  If the court is satisfied that the Applicants’ case against the estate is genuine and strong, and thus enjoying a high probability of success, no order for security for costs should be granted against them: HKCP (2023), § 23/3/3.  

14.  In order to succeed in their claims for maintenance against the estate, the Applicants have to prove that immediately before the death of the Deceased, they were being maintained, either wholly or substantially, by the Deceased.  Therefore, in the context of the present application, whether the Applicants are having a strong case proving such maintenance by the Deceased has become a central issue. 

15.  Before we go on discussing whether the Applicants are having such a case enjoying a high probability of success, it would be useful to set out the following undisputed or indisputable facts:

(1)  A1 became an intimate girlfriend of the Deceased when she was still in her teens, most probably in the year of 2005, when she was only 19.  I note that this fact was not admitted by R but there was no contrary evidence to prove otherwise.

(2)  When A1 was found pregnant in 2007, the Deceased arranged her to give birth to A2 in Hong Kong.  Apart from adopting the surname of the Deceased, A2’s given Chinese name was 「煒X」 and Christian name starting with a “V”. There can be no dispute that most of the Deceased’s children’s Chinese name contains the word 「煒」and their Christian name starting with a “V”.

(3)  The Deceased was named as the father of A2 in her birth certificate.

(4)  Despite the fact that a DNA test done shortly afterwards showed that A2 was in fact not the biological child of the Deceased, nothing was done to change the name of A2.

(5)  Not only that A2 was allowed to continue to use a name related to the Deceased, she was actually treated as a close member to the Deceased. There were numerous photographs showing that the Deceased and both Applicants were staying together in a family like setting.

(6)  The close relationship between the Deceased and the Applicants continued up to his death in January 2021.  There was evidence to show that after the Deceased’s hospitalization in 2020, A1 came to Hong Kong to take personal care of him in the hospital.

(7)  There was clear evidence that prior to his death, the Deceased had paid various sums of money to A1 either by himself or through his staff, including his body guard and secretary. On 15 December 2020, i.e. about 3 weeks before his death, the Deceased directed a payment of RMB 1,390,000 to A1.  On 7 January 2021, i.e. 1 day before his death, another sum of RMB 300,000 was paid to A1. R tried to explain that all payments made by the Deceased to the Applicants were somehow related to A1’s service in holding two Mainland companies on behalf of the Deceased. I do not see any credible evidence to support such contention.  On the contrary, there was ample evidence to show that the payments made by the Deceased were for the maintenance of the Applicants. Just to name a few examples, in the WhatsApp message on 20 January 2017 (C2/499), the payment of household expenses (家用)  for January and February 2017 were made and A1 was asked to sign receipt.  These payments of household expenses (家用)  lasted at least up to April 2020 (C2/521).  On 13 August 2020 (C2/419), another sum of $60,000 was paid to A1 as living expenses (生活費).

16.  Based on the above facts, I have come to the conclusion that, at least at this preliminary stage, both Applicants do have a very strong, if not overwhelming, case in proving the Deceased’s substantial maintenance of both Applicants prior to his death.  With this in mind, I would also conclude that the Applicants’ case against the estate for reasonable maintenance under Cap. 481 does enjoy a high probability of success as far as liability is concerned.  With this finding, R’s application for security for costs fails.

Will the Case of the Applicants be stifled?

17.  In determining whether an order for security would stifle the Applicants’ genuine claim, the financial circumstances of A1 are important considerations.

18.  In her Form E dated 29 December 2022¸ A1 stated that she had no employment but had the following assets:

(1)	A self-owned flat in Zhongshan (中山)	RMB1,400,000
(2)	Bank deposit	RMB1,500,000
(3)	Insurance policy value	RMB 100,000
(4)	A car and some jewelries	RMB 300,000
		RMB 3,300,000

19.  According to A1, the monthly expenses of both herself and A2 amounted to about RMB 66,000, but that has already been reduced to RMB 50,000.  Since March 2022, a sum of RMB 400,000 has been spent on their monthly expenses, and so her remaining assets stood at about RMB 2,900,000, out of which only about RMB 1,100,000 is in liquid form and the remaining being her Zhongshan flat, car and other items. If HK$900,000 has to be paid as security for costs, that would leave very little money for her and A2 to live on, not to mention that she still has to fund for her own legal expenses in order to proceed with the present litigation.

20.  At one stage, it was suggested by R’s side that a second mortgage could be obtained in order to ease A1’s financial difficulties.  But I do accept that this so called option is not viable before the full repayment of the first mortgage.  After all, A1’s difficulty in securing further mortgages or loans is understandable in view of the fact that she has no reliable source of income. Therefore, I accept that the only financial resource both Applicants could rely on in the near future is the liquid cash of about RMB 1,100,000 now standing in A1’s bank account.  A payment of HK$900,000 as security would have a serious negative impact on their financial wellbeing rendering them unable to carry on their genuine claim for reasonable maintenance from the estate. Based on this finding, I am satisfied that the Applicants’ genuine claim for reasonable maintenance would be stifled by a security for costs order.

Security for Costs against an Infant or his Parent

21.  A2 is a minor of 16 years old.  She is a student living with her mother (A1)  in the Mainland.  There is strong evidence to suggest that the Deceased had maintained her during his life time, and had even treated her akin to a family member.  I asked Senior Counsel how the granting (or not granting)  of a mere sum of HK$60,000 as security against A2 would have any significant prejudice against the estate. There was not a satisfactory answer. This has cast a serious doubt on whether R’s application for security is a genuine attempt to protect the estate on costs.

22.  At the hearing, there was also no submission on how the court should approach an application for security for costs against the parent of an infant.  It has been held in Re B (Infants) [1965] 1 WLR 946, being applied in Hong Kong in RM v SRM (Security for Costs: Child Relocation) [2019] 2 HKLRD 1094, that in a minor’s case, security for costs against a party who is a parent would only be ordered in the most exceptional circumstances.  This was based on the general principle that in proceedings concerning minors that either parent should be entitled to put forward before the court his or her view on what was for the welfare of the minor, and only in the most exceptional circumstances would the court prevent a parent from doing so by means of an order for security for costs.  Although the 2 cases cited above were not Cap. 481 applications, I am of the view that such general principle should also apply to the present case.

Conclusion and Order

23.  Based on the above considerations, it would only be natural for me to exercise my discretion in not granting R’s application for security for costs.  The R’s summons dated 10 October 2022 is dismissed.

Costs

24.  Costs to follow event.  R failed in his application for security for costs.  The Applicants should have the costs of the summons, including all costs reserved, on a party to party basis, with certificate for counsel, to be taxed if not agreed.  A2’s own costs to be taxed in accordance with Legal Aid Regulations.  This will be in the form of an order nisi, to be made absolute if no application is made on the expiry of 14 days from the handing down of this Decision.

Way Forward

25.  I direct that a call-over hearing on the Originating Summons to be held on 3 August 2023 2:30 p.m. at Court 2 with 1 hour reserved.  All parties are to attend the next hearing personally.

Representation: