INDIAN OVERSEAS BANK v. SEABULK SYSTEMS INC. AND OTHERS

CACV 48/2018

[2022] HKCA 908

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 48 OF 2018

(ON APPEAL FROM HCA NO. 846 OF 2012)

________________________

________________________

________________

D E C I S I O N

________________

Hon Cheung JA (giving the Decision of the Court) :

I.  Application for security for costs

1.  B Chu J handed down a judgment against the defendants on 29 January 2018. The defendants lodged their notice of appeal against the judgment. The defendants are at all times after the trial below separately represented. The 1^st and 3^rd defendants are represented by YTL LLP and the 2^nd defendant by Addleshaw Goddard (Hong Kong) LLP. However, they have retained the same counsel who has lodged a written submission for the purpose of this application.

2.  On 18 May 2021, the 2^nd defendant applied by summons in the Court of First Instance for a stay of execution of the judgment.

3.  On 18 October 2021, the plaintiff issued the present summons for security for costs of the appeal against the defendants on the ground that the defendants are foreign defendants, it is unable to locate if they have any assets in Hong Kong and it has incurred significant costs and expenses to try to enforce the judgment in Singapore against the 2^nd defendant who is a Singapore resident. The 2^nd defendant has applied to the Singapore High Court to set aside the registration of B Chu J’s judgment. On 31 May 2022, the Singapore High Court ordered, amongst other things, an adjournment of the application and a stay of the order granting the registration of B Chu J’s judgment until after the determination of the appeal in Hong Kong. The 2^nd defendant is required to update the Singapore High Court the status of the appeal by 31 August 2022.

4.  In respect of the issue of security for costs, the defendants by letter dated 19 November 2021 indicated they agreed to accept the plaintiff’s offer that they will jointly and severally pay into Court $3.6 million as security for the costs of the appeal within 14 days. However, they disagreed on the other terms of the draft order submitted by the plaintiff. In particular, they disagreed on the costs of the application. The defendants contended that costs of the application should be borne by the plaintiff or be in the cause of the appeal or that there should be no order as to costs. The plaintiff asked for costs in its favour. The Court is now asked to determine the summons. We will deal with the matter on paper.

5.  The defendants submitted that the plaintiff should bear the costs of the application on the basis that the quantum claimed is excessive. They relied on what Lam VP said in First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd & Anor [2021] HKCA 122 at [29] that ‘This Court may consider penalizing the party putting forward wholly unrealistic bill to support an application of this nature by ordering the party to pay the costs of the application if the other side has acted reasonably in contesting quantum’. They submitted that the present case warrants such a robust treatment. From as early as June/July 2021, the defendants had already indicated in no uncertain terms that they were in principle prepared to provide security for costs of the appeal. It was only the quantum that was in dispute. The defendants submitted that the plaintiff adopted a vacillating and unconstructive approach to quantum. The total quantum sought by the plaintiff vacillated from $4.9 million (24 June and 7 July 2021) to $5.25 million (27 July 2021) to $4.4 million (5 and 6 August 2021) to $6 million (in the summons) to $3.6 million (on a joint and several basis). They submitted that the $6 million which is based on a four‑day appeal is excessive and the time estimate is excessive. They have consistently offered to furnish security of $3 million and have accepted the plaintiff’s offer of $3.6 million made in Mr. Fung’s affirmation filed in support of the present application. They submitted that on any rational view, they can only be described as reasonable and constructive and the plaintiff, unrealistic and exorbitant. They submitted that since the parties have reached an agreement, the plaintiff should have withdrawn the present summons.

II.  Our view

1)  Order for security for costs of the appeal

6.  In view of the fact that the defendants are foreign residents with no known assets in Hong Kong, this is a suitable case to order security for costs of their appeal. As the amount of quantum is now agreed, we no longer need to address the matter further.

2)  Costs of the present application

7.  The award of costs is in the discretion of the Court. A successful party is usually entitled to have its costs. Whilst the Court may deprive a successful party of its costs, it is wholly exceptional for a successful party to be ordered to pay costs to the unsuccessful party. What was envisaged in First Laser Ltd must be based on some exceptional situation where the amount sought is blatantly inflated and unmeritous. No such order was made in First Laser Ltd itself.

8.  What happened in this case is that the plaintiff had invited the defendants to furnish security before the present summons was issued. The defendants indicated that they were willing to do so but payment was to be made separately by the 2^nd defendant himself and by the 1^st and 3^rd defendants as a group. The figures that the plaintiff had suggested prior to the present application consisted of separate sums for the 2^nd defendant on the one hand and the 1^st and 3^rd defendants on the other hand. Hence, for example, the offer on 24 June 2021 was $2.2‑$2.4 million for the 2^nd defendant and on 7 July 2021, $2.5 million for the 1^st and 3^rd defendants.

9.  The ‘consistent’ counter offers of $3 million by the defendants had always been on the basis of separate payment of $1.5 million by each the two groups of defendants. The defendants have lodged separate supplementary notice of appeal drafted by different counsel. There may well be implications where the payment is made by all the defendants jointly and severally on the one hand and by them severally on the other hand. The defendants only agreed to accept joint and several liability after the summons was issued. In view of the different modes of payments that were suggested by the defendants previously, we do not consider what had transpired before the acceptance by the defendants to pay $3.6 million jointly and severally should have any bearing on the issue of costs that we have to address. In any event, this is not a case where the previous offer by the defendants of $3 million exceeded the quantum that is now agreed. The fact remains that the plaintiff has achieved what it seeks in the application, namely, security for costs in the sum of $3.6 million to be furnished by the defendants.

10.  The plaintiff’s estimate of costs in July 2021 was $3.9 million. Mr. Fung explained in his affirmation how the estimate rose to $4,672,700 when the application was issued. The increase was due to the fees quoted by three senior counsel. On the basis that the defendants are to pay the security separately, the plaintiff asked for $3 million from each of the two groups of defendants and $3.6 million if the payment is to be made by them jointly and separately. The assertion by the defendants that the plaintiff had increased the amount to $6 million must be considered in its proper context. The trial below lasted six days. The judgment was 110 pages. With separate counsel for the defendants advancing different grounds of appeal, we do not regard the costs estimate of $4,672,700 and the time estimate to be so overly inflated which should attract the imposition of a costs order against the plaintiff.

11.  There were also arguments on the form of the order for the security. It was the defendants who suggested payment into an escrow account held by the plaintiff’s solicitors before they eventually agreed to pay the money into Court. Nothing turns on this issue. As an order has to be made by the Court on the application, it is unrealistic to require the plaintiff to withdraw the summons. We also do not consider it appropriate to make no order as to costs or order costs be in the cause of the appeal as suggested by the defendants. The nature of the application and the appeal is different. Whilst a costs order in the cause of the appeal was made in Wong Chung Chi v Yuilley Building Materials Co Ltd [2019] HKCA 949, it is not the usual order recently imposed in this type of application. In our view, this is an appropriate case that costs should follow the event.

III.  Conclusion

12.  Accordingly we will make the following orders :

1)  The 1^st, 2^nd and 3^rd defendants do jointly and severally pay into Court the sum of $3,600,000 as security for the plaintiff’s costs of this appeal within 14 days from the date of this order;

2)  Until 1^st, 2^nd and 3^rd defendants provide security for costs as aforesaid and written notice thereof given by the defendants to the Registrar of Civil Appeals and to the plaintiff’s solicitors, all proceedings in relation to the appeal be stayed against the defendants and the defendants be debarred from proceeding with any application to stay the judgment of B Chu J dated 29 January 2018;

3)  In default of the 1^st, 2^nd and 3^rd defendants paying $3.6 million into Court according to 1) above, and upon the plaintiff’s solicitors notifying the Registrar of Civil Appeals of the same, this appeal does stand dismissed without further order against the defendants with the plaintiff’s costs of and occasioned by the appeal be paid by the defendants on a joint and several basis forthwith, to be taxed if not agreed; and

4)  The plaintiff is to have the costs of this application, summarily assessed at HK$220,000.