SIU WAI MING v. SHIU WAI HONG AND OTHERS

CACV 84/2020

[2021] HKCA 1802

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 84 OF 2020

(ON APPEAL FROM HCA NO 290 OF 2014)

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JUDGMENT

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Hon Chow JA (giving the Judgment of the Court):

INTRODUCTION

1.  This is the Defendants’ application for security of costs in respect of the Plaintiff’s appeal against the judgment of Madam Justice B Chu dated 5 March 2020 (“the Judgment”) dismissing the Plaintiff’s claims against the Defendants.

2.  Having read the evidence and submissions filed by the parties, we consider that it is appropriate to determine the Defendants’ application on paper without an oral hearing pursuant to Order 59 rule 14A(1) of the Rules of the High Court, Cap 4A.

BRIEF BACKGROUND

3.  The Plaintiff and the 1^st Defendant are brothers.  They were, until an alleged oral surrender (denied by the Plaintiff) during a telephone conversation in May 1998, the beneficial owners of a property referred to in the Judgment as the Scenic Garden Property, which was registered in the sole name of the 1^st Defendant.  It is the Plaintiff’s case that the 1^st Defendant sold the Scenic Garden Property in 2009 without his agreement or consent, and failed to account to him the proceeds of sale of the property.  By this action, commenced in 2014, the Plaintiff seeks to recover, inter alia, his share of the sale proceeds of the Scenic Garden Property.  The Plaintiff has also mounted a tracing claim against another property purchased in the name of the 4^th Defendant (owned by the 2^nd and 3^rd Defendants, being the 1st Defendant’s son and daughter-in-law) in 2011.

4.  The judge found in favour of the 1^st Defendant on the issue of oral surrender (see §271 of the Judgment), and dismissed the Plaintiff’s claim for a share of the proceeds of sale of the Scenic Garden Property and other claims against the Defendants.  The judge also ordered the Plaintiff to pay the Defendants’ costs of the action, to be taxed on the party and party basis if not agreed, with certificate for 2 counsel.  The facts of this case, and the judge’s reasoning for her conclusions, are fully set out in the Judgment which it is not necessary to repeat here.

5.  The Plaintiff appealed against the Judgment by a Notice of Appeal dated 2 April 2020, which has since been amended on 13 September 2021.

6.  In the meantime, the Defendants’ costs were taxed in the amount of HK$3,366,564.92 (“the Taxed Costs”), as stated in an Allocatur (Bill No 1) dated 5 May 2021.  The Plaintiff failed to pay those costs, leading to the court, upon the Defendants’ application, making charging orders nisi/absolutedated 28 June 2021 and 28 July 2021 respectively against the Plaintiff’s property referred to by the parties as the “Aegean Coast Property”.

THE APPLICATION FOR SECURITY FOR COSTS

7.  On 15 July 2021, the Defendants took out the present application for security for costs of the appeal, in the amount of HK$1,540,367.30.  Three grounds are relied upon by the Defendants in support of the application, as can be seen from the Written Submissions of the Defendants/Respondents dated 17 September 2021:

(1)  difficulty or expense in enforcing costs order;

(2)  impecuniosity; and

(3)  hopelessness of the appeal.

8.  The Plaintiff opposes the application, arguing that (i) no special circumstances exist in the present case for making an order for security for costs of the appeal, (ii) the appeal is meritorious, and (iii) the Defendants’ delay in making the application.  Both parties have filed affirmations and lodged written submissions.

DISCUSSION

9.  Under Order 59, r 10(5) of the Rules of the High Court, the Court of Appeal may, in special circumstances, order that such security shall be given of the costs of an appeal as may be just.  The principles for the exercise of this jurisdiction are well settled.  For this purpose, “special circumstances” include cases of insolvency or impecuniosity, and difficulty or expense in enforcing costs order (see Hong Kong Civil Procedure 2022, Vol 1, at §§59/10/26 and 59/10/27).

10.  Mr Lee argues that the Defendants will likely encounter difficulty or delay in enforcing any order for costs in respect of the appeal, as shown by (i) the Plaintiff’s failure to pay the Taxed Costs, (ii) the Plaintiff’s lack of response to the Defendants’ demand for payment of those costs, and (iii) the fact that the Defendants had to incur costs to apply for charging orders nisi/absolute against the Aegean Coast Property.

11.  As for (i), it was held by Greer LJ in Hills v London Passenger Transport Board [1937] 4 All ER 230, that “it ought generally to be known that the mere failure by an appellant to pay the costs of an action is not, in the absence of facts showing his inability to pay them, sufficient grounds for making an order for security”.  The matters in (ii) and (iii) above do not add much to the point that the Plaintiff has failed to pay the Taxed Costs.

12.  In relation to “impecuniosity”, Mr Lee argues that the Plaintiff has not refuted or directly responded to the “suggestion” that “he may be impecunious” (see §18 of Mr Lee’s written submissions dated 17 September 2021).  However, the burden is on the Defendants seeking security for costs to produce evidence of the Plaintiff’s impecuniosity.  It is insufficient for the Defendants to make a suggestion that the Plaintiff “may be” impecunious and then ask the court to find or infer that the Plaintiff “is” impecunious by reason of his failure to refute or directly respond to the suggestion.  Such approach is wrong in principle, and turns the application on its head.  Anyhow, the Plaintiff has produced evidence that he is the owner of the Aegean Coast Property, with a net equity of HK$5,318,086.81 (based on a valuation of HK$9,930,000 by the Bank of China dated 6 August 2021, and the outstanding mortgage debts of HK$4,611,903.19 in July 2021).  Even if the Taxed Costs are taken into account, the net value of the Aegean Coast Property would still be sufficient to pay the Defendants’ estimated costs of the appeal (HK$1,540,367.30).  See §§6-9 of the Plaintiff’s Affirmation filed on 18 August 2021.  Further, as pointed out by Ms Lau in her Skeleton Submissions for the Plaintiff/Appellant, at §10, the Plaintiff is still repaying the mortgage loans.  This fact demonstrates that (i) the net value of the Aegean Coast Property is increasing since the outstanding mortgage debts are diminishing, and (ii) the Plaintiff has sources of income to service the mortgage loans.

13.  Mr Lee argues that even assuming the Plaintiff’s valuation of the Aegean Coast Property at HK$9,930,000 to be accurate, the (alleged) net equity of HK$5,318,086.81 exceeds the total sum of (i) the Taxed Costs of HK$3,691,654.28, and (ii) the Defendants’ estimated costs of the appeal of HK$1,540,367.30 by only HK$85,065.23, and thus even a 1% dip in the value of the Aegean Coast Property would result in the net equity being insufficient to cover the Defendants’ costs.  It needs to be emphasised, however, that an order for security for costs should aim to provide reasonable, but not absolute, protection of the costs of a party which the court considers should be given by the other party.  Further, as can be seen from the Amended Notice of Appeal, the Plaintiff’s appeal raises mainly issues of fact, and those issues are not complicated.  The Defendants’ estimated costs of the appeal seem to us to be obviously excessive.  There is also no justification to allow the fees of 3 counsel.  Thus, even if we were minded to grant an order for security, we would not have awarded an amount of more than HK$800,000 (based on party and party assessment).

14.  We do not attach much weight to the Defendants’ delay in making the application (which was made more than 15 months after the date of the original Notice of Appeal), in view of the Defendants’ explanation that the grounds for making the present application only became clear in late May 2021 when the Plaintiff failed to pay the Taxed Costs and respond to the demand for payment.

15.  Also, we do not consider the merits, or lack of merits, of the appeal to be such as would be decisive on the issue of security for costs either way.

16.  Overall, we decline to exercise our discretion to order the Plaintiff to give security for the Defendants’ costs of the appeal

DISPOSITION

17.  The Defendants’ summons dated 15 July 2021 is dismissed with costs, to be taxed if not agreed (the Plaintiff having failed to lodge any statement of costs).