CHUNG KAU v. THE HONG KONG HOUSING AUTHORITY AND OTHERS

CACV122/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 122 OF 2003

(ON APPEAL FROM HCA NO. 3397 OF 2002)

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REASONS FOR DECISION

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Hon Ma CJHC :

The application

1. By a Notice of Motion dated 2 April 2004, the Defendants applied to have the Plaintiff's appeal from the decision of Recorder Edward Chan SC dated 6 May 2003, dismissed; alternatively, for an order that security for costs be provided by the Plaintiff. At the conclusion of submissions from the Defendants and the Official Receiver (the Plaintiff was absent), we ordered that the Plaintiff should within 28 days provide security for costs in the sum of $110,000 by payment into court, failing which his appeal would be dismissed without further order.

2. The learned Recorder's decision dealt with an application by the Defendants to strike out the Plaintiff's claim. The claim with which the appeal is concerned (HCA 3397/2002) was connected to an earlier claim that had been brought by the Plaintiff and a company called Phoon Lee Piling Company Limited ("Phoon Lee") against the Hong Kong Housing Authority, the 1st Defendant in the present proceedings (this other claim is HCA 119/2001). Recorder Chan SC's order, which is the subject matter of the present appeal, was that essentially the claim against the Defendants should be struck out. I say "essentially" because the form of the order made was somewhat complicated by the fact that the strike out was made dependent on events in HCA 119/2001 which materialized subsequent to the Recorder's decision.

3. As stated in the judgment of Recorder Chan SC handed down on 9 May 2003, the earlier proceedings (HCA 119/2001) involved a claim brought by the Plaintiff and the company he controlled, Phoon Lee, against the Hong Kong Housing Authority for, among other claims, defamation and malicious falsehood. These claims were struck out by Master Wong (on 17 April 2002), whose decision was upheld by Deputy Judge Andrew Cheung (as he then was) on 11 July 2002. Deputy Judge Andrew Cheung's decision was in turn upheld by the Court of Appeal by a judgment handed down on 20 May 2003. The Plaintiff and Phoon Lee now seek leave to appeal to the Court of Final Appeal and that application has still to be determined. Immediately following the hearing of the present Notice of Motion was an application made by the Hong Kong Housing Authority in relation to that appeal.

4. The present action is a derivative litigation from HCA 119/2001. The Plaintiff's claim is far from easy to understand (the Statement of Claim is apparently drafted by the Plaintiff himself) but in essence involves an assertion that by a series of alleged frauds, the Defendants succeeded in having the Plaintiff's claims in HCA 119/2001 struck out. Reference is made to alleged lies in affidavits and even in instructions to counsel. The logic behind the claim seems to be that if the Plaintiff succeeds in the present action, he should then be permitted to pursue his defamation action against the Hong Kong Housing Authority in HCA 119/2001 or he should have damages. The damages that are claimed are compensatory, aggravated and exemplary.

5. Mr Jonathan Harris, who represented the Defendants in this application, eventually accepted that the present appeal could go ahead and therefore only asked that an order be made for the provision of security for costs. This, however, was not the position of the Official Receiver, who (through Miss Elsie Yiu) maintained that the present action and appeal were proceedings that he had the right to control. The Official Receiver's position was that either the appeal should be dismissed (since he did not support it) or, if it was to go ahead, he would want an indemnity from the Plaintiff (see here Koh Kee Suan Andrew v Ip Kay Lo Vincent [2001] 2 HKC 161).

6. Initially, the position taken by the Defendants (as reflected in that part of the Notice of Motion seeking an order for the appeal to be dismissed) was that as the Plaintiff is now bankrupt (he was declared bankrupt on 5 May 2003) and as the Official Receiver has refused to support both his claim in the present action and the appeal, the appeal should be dismissed. This, it was originally contended, was by reason of sections 12, 58 and 61(b) of the Bankruptcy Ordinance, Cap.6.

7. The practical effect of these sections is that upon an adjudication of bankruptcy, the Official Receiver takes charge of a bankrupt's property and as far as rights of suit are concerned, subject to one exception to which I shall return, it is the Official Receiver who determines whether or not a right of action vested in the bankrupt, should proceed. Rights of suit or action are choses in action thus coming within the definition of "property" in section 2 of the Bankruptcy Ordinance.

8. The one exception is this. A bankrupt retains the right, without any interference from the Official Receiver as trustee in bankruptcy, to bring or continue any proceedings (including appeals) relating to claims which are personal to him: see Heath v Tang [1993] 1 WLR 1421, at 1423. By "personal" are meant claims which relate to the bankrupt's body, mind or character without immediate reference to his rights of property:- see Beckham v Drake (1849) 2 HL Cases 579, at 604; Wilson v United Counties Bank Limited [1920] AC 102, at 130; Heath v Tang at 1423A-B. Thus, personal claims include claims for damages for personal injuries and defamation. The rationale here is that compensation awarded for personal injuries or defamation will represent, in monetary terms, that part of a person (for example, his limbs or the use of them) or his reputation that has been lost or harmed. These types of claim do not involve his property. And where a bankrupt seeks, for example, to appeal against an injunction against him to curtail a nuisance said to have been committed by him, he can do so: this would be a claim against him personally in contradiction to one that involved his property (such as, for example, an injunction to prevent a breach of contract).

9. I recognize there may of course be many situations in which it may not always be easy to draw the distinction. Equally difficult are those hybrid claims involving both a bankrupt's person and his property (see for example in this context Ord v Upton [2000] a All ER 193; [2000] BPIR 104). Which side of the line, however, does the present case fall?

10. For his part, as I have mentioned, Mr Harris accepted that the present appeal is one that involved the personal rights of the Plaintiff. This was because HCA 119/2001, to which action the present action is connected, involved, as stated above, a claim made by the Plaintiff against the Hong Kong Housing Authority based on defamation (a personal claim) and the present action is a satellite derivative of that action. Recorder Chan SC recognized the connection and with respect, so do I. On the assumption that the Plaintiff has a viable cause of action in the present proceedings, the logical consequence were he to succeed would be the setting aside of the strike out orders in HCA 119/2001 and/or obtaining an award of damages in relation to it. The present claim is truly a derivative of the Plaintiff's defamation claims in the earlier action and, whatever its true basis in law, represents in my view a personal claim.

11. Miss Yiu, while accepting that HCA 119/2001 did involve a personal claim, nonetheless submitted that the claim in the present case was either not a personal one or was one that represented an indivisible hybrid claim involving both the Plaintiff's person and his property, in which case the whole claim vested in the Official Receiver as trustee in bankruptcy:- see Ord v Upton. Her argument was essentially that the Plaintiff's claim against the Defendants, being in the nature of a claim of a judgment (the strike out order in HCA 119/2001) obtained by fraud, was not a personal claim. In further support of this contention and in support of the argument that the Plaintiff's claim was at least a hybrid one, Miss Yiu highlighted the existence of the claim for aggravated and exemplary damages. I regret I am unable to agree. These arguments, albeit attractively presented, fail to recognize the derivative nature of the present action as I have earlier described. Furthermore, nothing is added by the claims for aggravated or exemplary damages. These claims were intended to bolster the defamation claim and in the circumstances of the present case, are personal claims rather than claims going to the Plaintiff's property. Whether or not these types of damages in the context of bankruptcy law can sometimes be said to be claims that relate to a bankrupt's property rather than his person, is not a question that arises in the present appeal for determination.

12. For these reasons, I am of the view that the Plaintiff's claims in the present action relate to his person, not to his property. Accordingly, these claims do not belong to the Official Receiver and his opposition to the present appeal does not make it liable to be struck out or dismissed at this stage.

13. I now turn to the alternative application for security for costs.

Security for Costs

14. The power of the Court of Appeal to order security for costs in an appeal derives from RHC Order 59 rule 10(5). This Rule reads :

"The Court of Appeal may, in special circumstances, order that such security shall be given for the costs of an appeal as may be just."

The relevant principles, in particular the treatment of impecuniosity as a special circumstance are summarized in Hong Kong Civil Procedure 2004 Volume 1 at paragraphs 59/10/28 - 59/10/29. In this context, however, I would emphasize the following :-

(1) The fact that an appellant is impecunious does not lead automatically to an order that security for costs must be provided. The court 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.

(2) That said, as a matter of practice, once an applicant for security can demonstrate that impecuniosity (or some other factor such as difficulty or expense in enforcing a costs order) exists, while the court retains an overall discretion whether or not to make the order, it would then generally be up to the party resisting the application for security to demonstrate countervailing factors which would militate against such an order being made. A common countervailing factor to resist applications for security are the merits of an appeal.

(3) On a consideration of the merits of the appeal, while a detailed examination is not required (or desirable, even if possible on the materials before the court at this stage), the court should form some sort of preliminary, even instinctive, view. Where the merits appear to go strongly one way or the other, this may by itself be a decisive factor. Thus, an appeal which is very strong would often be a very good reason not to order security. The converse of course also applies. A hopeless appeal may even by itself justify an order for security. However, if the court takes the view that the appeal could really go either way, then generally it will look to the existence of any other factors to tilt the balance, in the absence of which security will be ordered. This is of course on the assumption that a factor such as impecuniosity has already been demonstrated.

(4) As I have said above, the overriding consideration for the court is to consider, as the rule requires, whether "special" (not exceptional) circumstances exist making it "just" to order security.

15. In the present case, the Plaintiff is bankrupt and is therefore impecunious. Accordingly, prima facie, sufficiently exceptional circumstances exist to give the court jurisdiction to order security. Nothing has been demonstrated before us to indicate why an order for security should not be made in the present appeal. As far as the merits of the Plaintiff's appeal are concerned, the highest that the Plaintiff can realistically put his case is that he has an arguable appeal and I will assume this for present purposes.

16. I now turn to quantum. The Defendants' skeleton bill of estimated costs in the present appeal quotes the figure of $140,900. Doing the best I can on the material at present before me, I took the view that security should be ordered in the sum of $110,000. It seemed to me in particular that two solicitors putting in 18 hours work in relation to this appeal was perhaps a little on the generous side, particularly on a party and party basis.

Hon Yeung JA :

I agree.