ASIA-PAC INFRASTRUCTURE DEVELOPMENT LTD. v. ING YIM LEUNG, ALEXANDER AND OTHERS

CACV 192/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 192 OF 2000

(ON APPEAL FROM HCA NO. 16778 OF 1999)

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J U D G M E N T

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1. On 15 March, Deputy Judge To ordered that a Mareva injunction against the 7th Defendant be continued until further order, and that the 7th Defendant's application for the injunction to be discharged should be dismissed. The 7th Defendant is appealing against those orders to the Court of Appeal. The Plaintiff now applies for security for its costs of the appeal. It does so on three grounds. The first is that the 7th Defendant is impecunious, and for that reason the Plaintiff would not be able to recover its costs of the appeal if the appeal fails and the 7th Defendant is ordered to pay the Plaintiff's costs of the appeal. The second is that the Plaintiff is likely to encounter undue difficulty and delay, and is likely to incur undue expense, in enforcing any order for such costs. The third is that the 7th Defendant's appeal is hopeless or at best has little chance of success.

2. I do not need to consider the first or third grounds, because I am satisfied that the Plaintiff's costs of the appeal should be secured on the second ground. It is not disputed that the 7th Defendant is an overseas corporation incorporated in the British Virgin Islands. If an overseas corporation does not have any assets in Hong Kong, the court's normal practice is to order security. The incorporation of a corporate appellant overseas with no assets in Hong Kong is usually regarded as justifying security for the respondent's costs because of the undue difficulty, delay and expense in enforcing an order for costs abroad, and because of the possibility that the order might not be enforced at all. Mr Benjamin Chain for the 7th Defendant conceded, with his usual realism, that a prima facie case for ordering security had been made out.

3. The evidence is that the 7th Defendant does have assets in Hong Kong. Those assets consist of the balance standing to its credit in its account with the HongKong Bank. However, since that account is subject to the Mareva injunction, sums can only be withdrawn from that account with the permission of the Plaintiff's solicitors. The Plaintiff's solicitors have recently given permission for two sums to be withdrawn from that account to enable the 7th Defendant to pay legal fees. The credit balance in the account is now in the region of $365,000.00. However, that sum, together with the interest which is accruing on it, would not be available to pay the Plaintiff's costs of the appeal if the appeal is dismissed and the 7th Defendant is ordered to pay the Plaintiff's costs of the appeal, because if the appeal is dismissed, that sum will still be the subject of the Mareva injunction which was granted to "secure" the damages which the Plaintiff is claiming against the 7th Defendant in the action. If this money was treated as being available for the Plaintiff's costs of the appeal, the "security" which the Mareva injunction was intended to give the Plaintiff for the damages which it is claiming in the action against the 7th Defendant would be rendered nugatory.

4. Mr Chain contends that it is the imposition of the Mareva injunction itself which has had the effect of causing the other party to the joint venture with the 7th Defendant to decide no longer to proceed, and that that has created the impecuniosity which has resulted in the 7th Defendant's assets in Hong Kong and elsewhere being limited to the current balance in its bank account in Hong Kong. However, according to the Supreme Court Practice 1999, Vol. 1, para. 59/10/33:

"... there is no absolute rule security that will not be awarded where the appellant contends that his insolvency or impecuniosity has been caused by what he alleges to be wrongful acts committed by the respondent(s). The Court has a discretion. The question is whether awarding security would amount to a denial of justice to the appellant... In assessing that issue the Court takes into account the merits of the appeal."

5. I have three comments to make on the application of that principle. First, one of the factors which I take into account is that the judge found that the 1st Defendant is the alter ego of the 7th Defendant. Mr Chain himself described him as "a crook" in the sense that he acted in breach of the fiduciary duties which he owed to the Plaintiff. Secondly, in the 1st Defendant's affirmation filed in support of the 7th Defendant's opposition to the application for security, the 1st Defendant did not state that it was the Mareva injunction which had caused the other party to the joint venture to pull out of the joint venture, but simply the fact that the 7th Defendant was being sued by the Plaintiff. Thirdly, I have not been persuaded that the merits of the appeal are so strong as to justify refusing to secure the Plaintiff's costs of the appeal simply on the ground that the 7th Defendant's impecuniosity is said to have been caused by the Mareva injunction.

6. I turn to the amount of security sought. The Plaintiff's solicitors' calculations are said to be based on the party and party basis, which is the appropriate basis for deciding the amount of security to be ordered. They have itemised in outline the work which needs to be done, the hours required to do it, the hourly charging rate of the fee earners assigned to the case, and the estimated disbursements and photocopying charges. That estimate comes to $616,900.00. A number of the individual components of that calculation are questioned by the 7th Defendant. There is, I believe, merit in some of its criticisms but not in others. I do not intend to lengthen this judgment by a detailed analysis of the differences between the two sides, but I have reached the conclusion that the appropriate figure for security is $425,000.00. I therefore direct that all proceedings in the appeal be stayed until the 7th Defendant pays the sum of $425,000.00 into court as security for the Plaintiff's costs of the appeal. I further direct that if the 7th Defendant fails to pay that sum into court by 4.30 p.m. on 19 October, its appeal be dismissed, and I order that in that event the 7th Defendant do pay to the Plaintiff its costs of the appeal to be taxed if not agreed, though I give the 7th Defendant liberty to apply for an extension of time to provide that security if it finds itself in genuine difficulties in raising the $425,000.00 by 19 October.