CH'NG POH v. CHINA EVERBRIGHT LTD.

CACV 3805/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 3805 OF 2001

(ON APPEAL FROM HCA NO. 427 OF 1998)

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J U D G M E N T

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Application for security

1. This is an application by the defendant for security for costs in the sum of $232,250.00 in respect of the plaintiff's appeal against the judgment of Deputy High Court Judge Longley dated 31 October 2001. The learned judge dismissed the plaintiff's action against the defendant for the sum of $28,480,000.00 together with interest.

Jurisdiction

2. The court's jurisdiction to order security for costs of the appeal is well established. An order can be made if there are special circumstances which include, among other things, the appellant's inability to pay for the costs of the unsuccessful appeal through impecuniosity.

Basis of application

3. The defendant relies on two matters in support of its application. First, the parties were involved in another litigation in which the defendant obtained judgment on 27 February 2001 against the plaintiff for, among other things, damages in the sum of $127,617,747.88 less credit of $58,574,315.00 together with compound interest from 17 August 1985. As of 26 April 2001, the judgment debt with accrued interest was $341,238,825.40. The plaintiff had paid part of the judgment sum of $270,918,527.52, leaving $70,320,297.88 unpaid. The plaintiff had lodged an appeal to the Court of Final Appeal in respect of this judgment.

4. Second, the plaintiff had failed to pay costs made against him in that action in the sum of $37,500.00. This sum was recently paid by the plaintiff after the present application was issued. The plaintiff explained why he did not pay the costs. He said it is because he considered the orders were unjustifiably made against him. The costs orders were made as a result of the adjournment of the defendant's application for examination of the plaintiff. The plaintiff did not attend the hearings due to health reasons. The explanation was only given on 29 August 2002 in his affirmation filed in opposition to this application.

The real issue

5. In my view, the question of the costs orders was really a side issue. In the other action, the plaintiff had complied with the Court of Appeal order to pay security for costs of the appeal in the sum of $1.8 m. and further paid $400,000.00 as a condition for the appeal to the Court of Final Appeal.

6. The real issue is clearly that the plaintiff's inability to pay for the balance of the judgment debt in the other action is a matter from which the court can infer that the plaintiff may be unable to pay for the costs of the present appeal due to his impecuniosity. No explanation was given by the plaintiff on this issue.

7. In relation to the enforcement of the judgment, the defendant had obtained an order for the examination of the plaintiff. The actual examinations were aborted due to the adjournment caused by the plaintiff's absence. In my view the defendant has clearly discharged the burden imposed on it on the issue of special circumstances.

Delay

8. The plaintiff argued that the security should not be ordered because of the delay in bringing the application. The appeal was set down by the plaintiff on 4 December 2001. Application to fix the hearing date of the appeal was made on the same date. On 19 December 2001, the appeal was fixed to be heard in June 2001. A few days after the hearing date was fixed on 19 December 2001, the defendant applied to adjourn the hearing date due to counsel's schedule. The hearing was refixed on 8 January 2002 to be heard on 27 September 2002. On 8 August 2002, the defendant requested the security by letter. The summons was issued on 15 August 2002.

The explanation

9. The defendant's explanation for the delay was that it was really caused by the plaintiff's refusal to pay for the costs ordered by the master in respect of the examination.

The English position

10. In A. Co. v. K. Ltd. [1987] 1 WLR 1655, the English Court of Appeal refused an application for security for costs which was only made 20 days before the hearing of the appeal, when the appeal had been going on for about 14 months. Sir John Donaldson MR held that while the trial division may order the security at a late stage, the position is different in the Court of Appeal. He held that:

"The duty of the Court of Appeal is in a sense a supervisory duty. It has to ensure that the trials are conducted correctly and that the result is in accordance with law. But it is a jurisdiction which has to be exercised with the maximum possible expedition, as otherwise successful parties, like the plaintiffs in this case, might well be deprived of the fruits of their judgments. Therefore this court has always taken the line that there must be strict compliance with timetables laid down, in stark contrast to the attitude taken by the trial courts."

As to the prejudice, his observation was that:

"Quite apart from the answer that this is not a matter of prejudice but a question of strict complaince with timetables and that it is well known that the proper time to apply for security is at an early stage, there must be prejudice. An appellant has to decide whether he is going to appeal. At that stage he is entitled to know whether an application is going to be made requiring him not only to pay his own costs of the appeal but to give security for the other side's costs. An appellant is entitled to know that his position is. He already knows whether he has to get leave to appeal. He is entitled to know at an early stage whether he is going to have to give security for the other side's costs. Quite apart from that, within 14 days of the hearing of the appeal, the appellant is deeply involved in preparation. He has already either paid or secured his solicitors' costs, or at any rate his solicitors were very ill-advised if he has not been required to do so. He is suddently told, 'Abandon all this or put up security for costs,' an entirely uncovenanted and probably unexpected piece of expenditure. I think that is very real prejudice and, indeed, potential injustice."

My view

11. I would fully adopt what the learned Master of Rolls said. However, it is clear from the judgment that the court was still very much concerned with the question of prejudice to the appellant as a result of the late application. This must be right because otherwise one would be a slave to the rules. The rationale behind the directions on strict compliance on procedural steps is to ensure that the appellant's pursuit of his appeal is not unfairly hindered or prejudiced. Ultimately one has to consider all the circumstances of the case in an application of this kind.

12. While the present request was only made at a late stage of the proceedings, it was, however, first raised about two months before the hearing of the appeal. This clearly gives ample time to the plaintiff to respond to the request. Further, this is not a case where the plaintiff had indicated resolutely that he would press on with the appeal. As of 14 August, his solicitor was still suggesting to the defendant's solicitors that the present appeal should be adjourned to a date to be fixed after the hearing of the appeal by the Court of Final Appeal. In fact, the plaintiff threatened to seek an adjournment of the appeal if the defendant pursued with the present application. Mr. Kenneth Chan, counsel for the plaintiff, submitted that the suggestion must be considered in the context of a compromise being put forward by the plaintiff. The fact remains that the present appeal was initiated by the plaintiff and at this late stage, he was still prepared not to have the appeal being heard on the scheduled date.

The order

13. In my view, these two factors clearly justify an order being made despite the rather late application taken by the plaintiff. I will order security to be given. As to the quantum, I think, $160,000 is a reasonable sum for a one-day appeal. Accordingly, the order I would make is as follows:

(1) The plaintiff do within 14 days give security in the sum of $160,000.00 for the costs of its appeal;

(2) Until such security be given, the appeal be stayed;

(3) In default of such security being given, the appeal do stand dismissed without further order with costs of the appeal to be taxed and paid by the plaintiff to the defendant; and

(4) The plaintiff do pay the defendant the costs of this application.